Drugmaker Citius Pharma sells off after new direct offering announced

Quotes on small-cap drugmaker Citius Pharmaceuticals plummeted almost 20% to a record low yesterday, April 1, after the company announced a direct offering at a steep discount to the current share price.

Yesterday, Citius Pharma tumbled 19.5% on the Nasdaq to close at $1.20 per share, its lowest closing price ever, before extending the losses in premarket trading today, when it has dropped another 6%.

Earlier in the day yesterday, the company announced a direct offering of over 1.7 million common shares — or pre-funded warrants in lieu thereof — at $1.15 apiece, almost 23% below the stock’s closing price on March 31, the day before.

As Freedom Finance Global senior analyst Sergey Glinyanov has previously pointed out, a company may set a below-market offering price when it needs to urgently raise capital.

Citius Pharma expects to raise about $2 million (before deducting offering expenses), which it plans to use to support the commercial launch of LYMPHIR, its T-cell lymphoma drug that received FDA approval last year.

LYMPHIR's commercialization rights have been acquired by Citius Oncology, a former subsidiary of Citius Pharma that was spun off and went public in August via a SPAC merger. This triggered a sharp decline in Citius Pharma stock, which has plunged almost 95% since the SPAC deal was announced on August 5.

Following the spinoff, Citius Pharma was left with two drugs still in development. One, a treatment for catheter-related infections, has completed the final, phase III clinical trials, while the other, designed to relieve hemorrhoid symptoms, has wrapped up phase II trials. The company says it is working with the FDA to determine the next steps for both programs.

According to MarketWatch, the single analyst who covers Citius Pharma has a “buy” recommendation, with a target price of $9 per share, 7.5 times the last closing price.