Drug development company RedHill Biopharma Ltd. (Nasdaq: RDHL); TASE: RDHL) began an offering on Nasdaq yesterday, but withdrew it after failing to raise money at the company value it was seeking. The company wanted to raise $25 million at $11 per share. Even after reducing the scope of the offering and appealing to investors in the Israel market in addition to investors on Nasdaq, however, Redhill was unable to complete the offering at the price it was seeking. The underwriters for the offering were Roth Capital Partners, FBR, and Canadian underwriter Echelon Wealth.
With $40.5 million in cash, Redhill had no urgent need for the money, but its policy has always been to raise money whenever it was able. More money would enable the company to conduct more advanced clinical trials simultaneously; each trial costs between several million dollars to several dozen million dollars. The company's market cap is NIS 585 million, following a 4.5% rise in its share price this year.
Redhill has no dominant shareholder. Because of the interests of management, such companies usually prefer raising a large amount of money over preserving their share price and avoiding dilution of the shareholders (the investors' interest). The capital market is not particularly conducive to capital raising by biomed companies right now, due to the general uncertainty in the pharmaceutical industry caused by the US elections, in which drug pricing was a significant issue.
Redhill expects to achieve several key milestones over the coming year. Successful achievement of these milestones is likely to enable the company to raise money more easily, while failure would make it more difficult. These milestones include a Phase IIa trial of a multiple sclerosis treatment (by the end of 2016), an intermediate effectiveness trial for the company's treatment for Crohn's Disease (first quarter of 2017), a Phase III trial for an gastroenteritis treatment (mid-2017), a Phase II trial for a treatment for irritable bowel syndrome (mid-2017), and renewed submission of a request for marketing approval of a drug for treatment of migraines (2017).
The company stated that there was also potential for the purchase in the coming months of its digestive tract business, which is already commercial.
Published by Globes [online], Israel business news - www.globes-online.com - on November 3, 2016
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