Young, upstart pharmaceutical and biotech companies do one thing that almost no other industry does. They go years without generating any revenue. Thanks to investors, they can periodically issue shares to raise cash while their drugs are in development. Companies in this space like to raise capital when it reaches an inflection point like a successful clinical trial or FDA approval. We saw a textbook example of this back in January. Keryx Biopharmaceuticals (NASDAQ:KERX) (NASDAQ:KERX)‘ successful phase 3 trial of Zerenex resulted in an share price jump of 136%, which the company immediately followed up with a $55 million secondary offering to replenish its coffers.
Between those inflection points, though, investors need to keep a keen eye on how these companies are spending their cash. Today, let’s check in with MannKind Corporation (NASDAQ:MNKD), Dynavax Technologies Corporation (NASDAQ:DVAX) , and Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) to see how they are managing their cash.
While MannKind Corporation (NASDAQ:MNKD) has several products in its pipeline, it has suspended much of the work on these projects in order to make a big push with its inhalable insulin drug, Afrezza. Hopefully this move can accomplish two things: (1) It can help reduce overall expenditures so the company can prolong the lifetime of its cash on hand, and (2) it can focus the company on Afrezza’s clinical trials. Results for Afrezza’s phase III clinical trials should be ready sometime in August. For the past several conference calls, the company has been saying that it is discussing the possibility of a partner, but according to fellow Fool Max Macaluso, don’t expect any news on that front until after the clinical trials.
Perhaps MannKind Corporation (NASDAQ:MNKD) executives should take cues from some of its peers in the space and do a share issuance large enough to keep the company afloat for more than a couple of months. Last year, the company did issuances in January and October for about $86 million. At the end of the fiscal year 2012, the company has about $61.8 million left in cash on hand. With the company spending on average just under $30 million per quarter, it’s only a matter of time before another share issuance.
Going back to the drawing board
Luckily, Dynavax Technologies Corporation (NASDAQ:DVAX) has a decent amount of liquid assets on its books, because it will probably need every dollar of them. Last week, the FDA sent a double blow when it rejected its Hepislav vaccination on the grounds that further study was needed to test the safety of the drug and that it was raising some questions regarding links to rare autoimmune diseases . In order to provide evidence to the FDA, it will need to reevaluate the data in its clinical trials in hopes that it can gain approval with a more restricted target audience . Making the market even tighter for the drug will not help its case much, though — especially considering that there are already a couple drugs on the market for hepatitis B.
According to Dynavax Technologies Corporation (NASDAQ:DVAX)’s recent earnings release, the company went through about $23 million of its cash pile in the past quarter, and it has about $125 million in cash and marketable securities left on its balance sheet. With only about $1.8 million coming in from research contracts and grants, the company will need to rely heavily on its cash to keep up its work on both Hepislav and its other two vaccinations in the product pipeline. Hopefully, there will be some good news along the way, because as its stands the company’s share price has dropped over 60% since its last issuance of shares.