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Gain Therapeutics (GANX) Down 25% on Issue of New Common Stock

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Gain Therapeutics (GANX - Free Report) announced that it is floating a secondary issue of common stock and warrants, partly via a public offering as well as private placement, approximately amounting to $9.4 million.

With regard to the public issue, Gain Therapeutics will issue $2.2 million shares at a price of $2.005 each. Per the terms of the offer, every 2 shares of common stock will be accompanied by a warrant. Each warrant is eligible for the purchase of one share at an exercise price of $2.75 per share. This warrant will be exercisable immediately upon issuance of the common stock and valid for five years from the issuance date.

GANX also granted an option to underwriters of the issue to purchase an additional 15% of shares of common stock and/or warrants at the public offering price.

Alongside the public offering, Gain also plans to concurrently complete a private placement offer of 2.5 million shares of common stock to an accredited investor at a price of $2.00 each. Unlike the public offering, each share issued under the private placement will be accompanied by a warrant. Though each warrant is also eligible for the purchase of one share at an exercise price of $2.75 per share, it will be exercisable beginning six months after the issuance date and valid for five years of issuance.

GANX plans to use the net proceeds from this new issue and its existing cash balance to support the clinical and non-clinical development of its lead pipeline candidate GT-02287 in neurodegenerative diseases. Management also intends to use the proceeds for its general corporate purposes.

Shares of Gain Therapeutics plummeted 24.7% on Nov 21 after the announcement. The fall in share price was likely attributable to the issuance of a large number of shares, diluting the company’s current shareholder base. Per an SEC filing, its common stock outstanding as of Nov 17, 2023, stood at approximately 11.8 million. Notably, the secondary issue accounts for the issuance of common stock representing around 40% of the current outstanding shares, considering a scenario where no warrants are exercised. In case the warrants are exercised, around 70% of stocks are likely to be issued. The issue price per share also did not go well with investors, which was at a discount to the closing price on Nov 20, with the stock closing at $2.72.

Shares on GANX have declined 33.9% in the year so far compared with the industry’s 12.6% fall.

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The secondary offerings are expected to close by Nov 24, 2023.

Gain Therapeutics has only one pipeline in clinical development, GT-02287, which is being evaluated in a phase I study for treating GBA1 Parkinson’s disease (GBA1-PD)

This secondary stock offering will strengthen GANX’s financial position. Earlier this month, management had said its existing cash balance, which stood at $12.3 million as of September 2023-end, would dry out by third-quarter 2024. This new cash inflow will enable management to fund its business plans and extend the existing cash runway.


Zacks Rank & Stocks to Consider

Gain Therapeutics carries a Zacks Rank #3 (Hold) at present. Some better-ranked stocks in the overall healthcare sector include Acadia Pharmaceuticals (ACAD - Free Report) , Allogene Therapeutics (ALLO - Free Report) and AnaptysBio (ANAB - Free Report) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acadia Pharmaceuticals’ loss estimates for 2023 have narrowed from 41 cents to 34 cents per share in the past 60 days. During the same period, the estimates for 2024 earnings per share have risen from 52 cents to 90 cents. Year to date, Acadia Pharmaceuticals’ shares have gained 41.0%.

Acadia Pharmaceuticals beat earnings estimates in two of the last four quarters while missing the mark on the other two occasions, witnessing an earnings surprise of 20.69% on average. In the last reported quarter, ACAD reported an earnings surprise of 6.98%.

In the past 60 days, estimates for Allogene Therapeutics’ 2023 loss per share have narrowed from $2.25 to $2.10. During the same period, the estimates for 2024 loss per share have improved from $2.22 to $2.00. Shares of ALLO are down 55.2% in the year-to-date period.

Earnings of Allogene Therapeutics beat estimates in three of the last four quarters while meeting the mark on one occasion, witnessing an average earnings surprise of 9.87%. In the last reported quarter, Allogene’s earnings beat estimates by 30.19%.

AnaptysBio’s loss estimate has narrowed from $6.57 to $6.08 per share in the past 60 days. During the same period, the loss estimates per share for 2024 have narrowed from $6.93 to $6.38. Shares of ANAB have lost 54.3% in the year-to-date period.

The earnings of AnaptysBio beat estimates in two of the last four quarters while missing the mark on the other two occasions, posting a negative average earnings surprise of 6.48%. AnaptysBio’s earnings beat estimates by 18.02%.

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