Race Oncology share price soars 16% on buyback news

The pharmaceutical company’s shares are receiving a welcome boost today.

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Key points

  • The Race Oncology share price is rocketing by almost 16% to $1.96
  • The company today announced it is conducing an on-market buyback of its shares
  • The program will run over the next 12 months and up to four million Race Oncology shares could be purchased

The Race Oncology Ltd (ASX: RAC) share price is surging today after the specialty pharmaceutical company made an announcement regarding an on-market share buyback.

At the time of writing, Race Oncology shares are swapping hands at $1.96, up 15.68%.

Race Oncology set to commence share buyback

In today’s statement, Race Oncology advised that the board has approved an on-market share buyback over the next 12 months.

The maximum amount the company is willing to take off the market is four million Race Oncology shares.

Based on valuation metrics, the buyback represents around 2.5% of the current total issued capital.

Management noted that the on-market buyback is an efficient capital management option available to maximize shareholder value.

It also allows Race Oncology to take advantage of the share price weakness when it doesn’t reflect the underlying value of the business.

Traditionally, when a company looks to purchase its own stock, this pumps up the earnings per share (EPS) metric.

Furthermore, the value of each individual share also increases as there are fewer shares on the company’s registry.

Shareholders won’t need to do anything as there is no approval required.

However, the board stated that it will execute the on-market buyback at its own discretion.

Race Oncology CEO Phillip Lynch commented:

The Board believes Race is currently undervalued due to a range of factors external to the company’s fundamentals.

We believe a share buyback is an appropriate use of capital at this point in time, and that the quantum involved will not compromise pre-clinical and clinical programs as committed under our recent Share Purchase Plan.

What else has been happening at Race Oncology?

The Race Oncology share price could also be benefiting from an announcement yesterday that the company is expanding a clinical trial of its anti-cancer drug candidate Zantrene to Europe.

The company is expanding the BISECT (RAC-006) phase 1b/2a clinical trial in extramedullary acute myeloid leukaemia and myelodysplastic syndromes patients to include five additional trial sites in Spain and Italy.

Furthermore, to support the additional trial monitoring activities, Race has signed a new clinical support agreement with global clinical research organisation Parexel International.

The Race Oncology share price climbed 3% yesterday on the back of the news.

Race Oncology share price snapshot

Despite soaring today, it’s been a disappointing 12 months for the Race Oncology share price, which has fallen almost 50%.

Year-to-date, its shares are also heavily down by 46%.

Race Oncology commands a market capitalisation of roughly $339.78 million and has approximately 159.52 million shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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