Botanix Pharmaceuticals Ltd (ASX: BOT) shares are having a difficult session on Tuesday.
At the time of writing, the ASX 300 stock is down 41% to 6.5 cents.
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Why is this ASX 300 stock crashing?
The catalyst for today's decline has been news that the dermatology company is raising capital.
According to the release, Botanix has received firm commitments for a ~$40 million two-tranche placement. It was strongly supported by existing and new institutional and sophisticated investors, with the second tranche subject to shareholder approval.
The ASX 300 stock also intends to offer existing eligible shareholders the opportunity to partake in a security purchase plan underwritten up to $5 million (before costs), with the ability to accept oversubscriptions, subject to shareholder approval.
Why is it raising funds?
The release notes that proceeds from the placement and the security purchase plan are intended to be used towards active pharmaceutical ingredient (API) purchases and manufacturing components, alternate API supplier setup, advertising and marketing initiatives, operating expenses, and working capital and transaction costs.
It believes this strengthens its position to deliver on its strategic initiatives, including delivering continued Sofdra growth, adding new products to the fulfilment platform to accelerate growth and profitability, and elevating its value proposition for mergers and acquisitions.
Commenting on the capital raising, the ASX 300 stock's executive chair, Vince Ippolito, said:
We were pleased to close the bookbuild for this Placement with strong support from our existing and new institutional shareholders, following a successful first year on the market and with continuing strong demand for Sofdra. As we have seen, the Company is experiencing strong quarter on quarter growth since launch.
We are excited by the potential of the recently hired additional 27 sales professionals, bringing our combined sales force to 50 sales professionals. Over the coming quarters we look forward to seeing their impact on the volume of Sofdra prescribed and we are incredibly excited for the future of Sofdra and the Company.
Ippolito also notes that the capital raising will derisk its supply chain. He adds:
We expect the targeted funds raised will allow us to derisk our supply chain, secure API under our current supply contract and put us in a more favourable financial position. The Company is at an exciting stage of development and we look forward to our shareholders' continued support under the security purchase plan and we welcome all the new investors to our register.
