Shares of Prima BioMed Limited (ASX: PRR) have come under selling pressure today after the biotechnology junior announced a capital raising worth up to $10 million.
So What: Many investors will remember Prima BioMed as the company that surged a remarkable 764% in the space of just three days during May.
More specifically, Prima BioMed is a leading immune-oncology company which experienced a short-term surge following promising results from its ovarian cancer clinical trial. The shares retreated heavily in the month that followed but went nuts again yesterday, soaring 44% after European authorities endorsed the development of a treatment for breast cancer.
The company said in an update: "Encouragingly, the planned Phase IIb study, to be called AIPAC (Active Immunotherapy PAClitaxel) is considered well designed by the (European Medicines Agency). AIPAC is now expected to initiate in Europe during (Q4)of 2015. While the EMA never endorses any statement on the likelihood of future regulatory decisions, the Agency's communication has suggested that the achievement of certain clinical endpoints may lead to Marketing Authorization in the EU based on this one pivotal study."
As is all too often the case with biotechnology hopefuls however, the excitement has worn off just as quickly as it came on. It's down 70% since hitting 19 cents in May, including a 33% plunge today, to trade at just 5.7 cents.
Today's plunge can be attributed to a separate announcement made by the group just shy of 7pm yesterday evening, announcing a share purchase plan.
The company intends to offer up to 100 million new fully-paid shares, issued at 5 cents each, to raise up to $5 million (or $10 million at the discretion of the board).
Eligible shareholders can subscribe for up to $15,000 worth of new shares, with acceptances expected to be on a first-come, first-served basis.
Now What: Ignoring the impact of the capital raising, investors are clearly excited by the prospects of Prima BioMed's trials. However, as other big-name companies such as Sirtex Medical Limited (ASX: SRX) and ResMed Inc. (CHESS) (ASX: RMD) have demonstrated in the past, poor trial results can lead to enormous losses.
Given the nature of Prima BioMed's business, the stock is by no means for the faint of heart. 'Foolish' investors should look at other small-cap opportunities for a better risk/reward payoff.
