Should OvaScience Inc. (NASDAQ: OVAS) Shareholders Be Worried?


OvaScience Inc. (NASDAQ: OVAS) is in the process of raising additional capital through the issuance of fresh common shares to the public. But the steep discount at which the company priced the new shares didn’t impress existing shareholders, causing a massive pullback in the stock’s price in the recent session.

OvaScience Inc. (NASDAQ: OVAS) is selling 7.15 million shares in the secondary public offering, but the underwriters have been granted the opportunity to buy additional 1.1 million shares in case of over subscription to the offering.

The additional shares that OvaScience is pouring into the market are priced at $7 apiece, but the underwriters will get them from the company at $6.58 apiece. The secondary offering price is about 28% lower than the stock’s closing price a day before the company priced the latest securities offering.

The secondary offering is expected to inflate OvaScience’s outstanding shares by 26%, thus diluting the position of the existing shareholders.

What’s the money for?

According the management of OvaScience Inc. (NASDAQ: OVAS), the equity fundraiser is designed to generate cash for the company to spend on certain commercial and pre-commercial activities. In particularly, the funds will go into financing commercial expansion of the company’s AUGMENT treatment. The company is targeting Japan and Canada for the expansion of the products market, according to CEO, Michelle Dipp.

A portion of the proceeds will be funneled to finance pre-commercial programs relating to OvaPrime and OvaTure treatments, the management said. If there are still more funds left, they will be used for working capital and other general corporate purposes.

How much exactly does OvaScience Inc. (NASDAQ: OVAS) expect?

If everything goes according to plan, OvaScience Inc. (NASDAQ: OVAS) expects to get about $46.8 million in net proceeds from the secondary equity offering, assuming that underwriters do not exercise their rights to purchase additional shares.

What transpired in 1Q2016?

OvaScience Inc. (NASDAQ: OVAS) generated revenue of $146,000 in 1Q2016, indicating a sharp rise from revenue of $15,000 in the like quarter in 2015. Net loss for the latest quarter was $21.8 million or $0.80 per share. That compared with net loss of $17.2 million or $0.65 per share in the corresponding quarter a year ago. The management explained that the jump in net loss in the latest quarter relative to a year ago was caused by stock-based compensation expenses that hit $3.6 million.


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