Why Synta Pharmaceuticals Shares Stumbled


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Synta Pharmaceuticals , a biopharmaceutical company focused on developing drugs to treat cancer and other inflammatory diseases, sank as much as 17% after reporting its fourth-quarter earnings results and filing a mixed shelf offering.

So what: For the quarter, Synta reported no revenue (remember, it is still a clinical-stage company) and a loss of $18.1 million ($0.29 per share), up from a loss of $10.7 million in the year-ago period. Synta ended the year with $100.6 million in cash, which includes the $59.8 million it raised from a direct stock offering in December to its directors, and anticipates it has sufficient cash to get through the second quarter of 2014. In addition to this report, Synta filed a mixed shelf offering, which would allow it to sell up to $300 million worth of stock or other financial instruments from time to time.

Now what: Despite the earnings report which attempted to focus on the advancement of its Hsp90 inhibitor, ganetespib, as a second-line treatment for non-small-cell lung cancer, investors chose to focus on Synta's continued dash for cash. Synta's really only managed to buy itself another six-to-eight months of cash burn with its December offering. Today's mixed-shelf offering signals that Synta will continue to issues shares as it sees fit to keep its operations running. Although that could be a good thing is ganetespib excels in trials, it likely means more dilution is on the way for shareholders.

Craving more input? Start by adding Synta Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

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