Why Aratana Therapeutics Inc. Is Tanking Today

In response to announcing a secondary common stock offering, shares of Aratana Therapeutics (NASDAQ: PETX), a commercial stage biotech focused on pet health, fell 14% as of 11:35 a.m. EST on Tuesday.

Aratana announced that it plans to sell $35 million of its common stock in an upcoming secondary offering. Management also said that the underwriters of the deal will be granted an option to purchase an additional $5.25 million. If everything works out then the company could raise slightly more than $40 million. At current prices, the deal could potentially dilute shareholders by about 15%.

This timing of this deal might have some investors scratching their heads. After all, shares have basically moved sideways from the beginning of the year, so it's not like the company's equity is particularly expensive. Aratana also just reported more than $70 million in cash on its books as of the end of September. On the surface that appears to be enough cash to keep the doors open for quite some time, especially when compared to last quarter's loss of just $8.9 million. What's more, Aratana now boasts three drugs on the market -- Nocita, Galliprant, and Entyce -- that should grow meaningfully in the years ahead. If true, then the company's net loss should shrink considerably from here, which would extend the cash runway even further.

Source: Fool.com