Key Highlights

  • Vaxcyte slipped to around $71.04 after launching a combined $1 billion Capital raise a day after soaring on Phase 3 Vaccine data.
  • The offering consists of $500 million of common stock and pre-funded warrants plus $500 million of convertible notes due 2032.
  • VAX-31 met all prespecified co-primary immunogenicity endpoints in adults 50 and older, according to the prospectus supplement.
  • The company expected to have about $2.3 billion in cash as of September 30.

Vaxcyte (NASDAQ:PCVX) slipped in premarket trading on Tuesday, October 6, to around $71.04, after the vaccine developer launched a combined $1 billion capital raise. The offering consists of $500 million of common stock and pre-funded warrants plus $500 million of convertible notes due 2032.

The company is a member of the Russell 1000, the benchmark of large and mid-sized US companies. Its move came one session after the stock soared on Monday, October 5, following positive Phase 3 results for its pneumococcal vaccine candidate VAX-31 from the OPUS-1 study.

The prospectus supplement, dated October 5, states that VAX-31 "met all prespecified co-primary immunogenicity endpoints in adults 50 and older." It lists a last reported sale price of $73.82 on October 5 and says the company expected to have about $2.3 billion in cash as of September 30. Jefferies, Leerink, BofA, Evercore ISI, Goldman Sachs and Guggenheim are bookrunners.

Why Stocks Often Dip on Offerings

It is common for a company's shares to ease when it sells new stock. Issuing more shares spreads ownership across a larger base, and new stock is typically priced at a discount to attract buyers. Convertible notes add another layer: they are bonds that can later be turned into shares, so investors Factor in the possibility of further dilution down the road.

Companies often choose to raise money right after good news, when their share price is higher and Demand from investors is strong. For a biotech preparing for the costly work of late-stage trials, regulatory filings and potential manufacturing, locking in funding while sentiment is positive can reduce the need to return to the market at a less favorable moment.

Health Care Lagged the Market

Vaxcyte's dip fit a weak day for health care, which was the only major sector to decline. On October 5 after hours, Vaxcyte, Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) were trending on reports of a suspected pneumonic plague outbreak in Russia. By Tuesday, the World Health Organization had downgraded the outbreak risk to low, and Moderna and Novavax fell as some of those earlier gains unwound.

Life-science tools stocks were also under pressure, with Danaher (NYSE:DHR), Thermo Fisher (NYSE:TMO) and Agilent (NYSE:A) among the decliners.

The broader market told a different story. The S&P 500 rose 44.98 points to a record 7,818.93 and the Nasdaq Composite closed at a record just under 27,600, while the Dow Jones Industrial Average added 253.38 points to 51,521.28. Treasury yields eased, which typically helps sentiment toward companies that depend on outside funding, after a $58 billion 3-year note auction cleared at the highest yield since 2006.

Final Pricing Will Show the Demand

Investors will look for the final pricing and size of the stock and convertible offerings, which will show how much demand the deal attracted. Further details from the OPUS-1 study and any word on next steps with regulators will be in focus for VAX-31.