Bionomics Ltd (ASX: BNO) saw its share price sink 14.6% today to 41 cents after the company announced a US$12 million private placement to four US institutional investors.
The biotech company is issuing 40.2 million shares at A$0.408 per share with attached warrants to purchase shares at A$0.5938 per share.
Shareholders will need to vote to approve the issue of 16 million of the warrants at a meeting in early 2016. But they have every right to feel ignored by management, given the issue of new shares to the institutions will dilute their holdings, and particularly with the large price discount. The company may have been better advised to have conducted a renounceable rights issue, which is fairer for existing shareholders.
Bionomics will use the proceeds to launch a Phase II trial of its anxiety drug BNC210 as a treatment for post-traumatic stress disorder (PTSD). The trail is expected to begin in the first half of 2016, with patients recruited from several trial sites in Australia and New Zealand.
The company estimates that approximately 8 million Americans, or 3.5% of the population, suffer from PTSD at any given time. An estimated 1 million Australians experience PTSD in any year, and 12% of Australians will experience PTSD during their lifetime.
BNC201 is currently undergoing a Phase II trial in Generalised Anxiety Disorder patients and expects to report results in the third quarter of next year.
Bionomics' share price is highly volatile, hitting a 52-week high of 58 cents in October this year, but also falling as low as 38 cents per share in February 2015.
Foolish takeaway
Results may look promising and the company is obviously highly optimistic about the potential results of the trials, but even if they are successful, Bionomics is likely to have to conduct phase III trials for both PTSD and anxiety. There's a long way to go before investors know whether Bionomics has a winner on its hands.
