Egalet Corp (NASDAQ:EGLT) Financial Health In Doubt

Egalet Corp (NASDAQ:EGLT)

Egalet Corp (NASDAQ:EGLT)

Shares of Egalet Corp (NASDAQ:EGLT) plunged to record lows in Thursday’s trading session after shedding 35.83%, to end the day at $1.63 a share. The sell-off came after the company announced a public offering of its common stock as part of a cash-raising effort.

Financial Health Concerns

Egalet Corp (NASDAQ:EGLT) bills itself as a specialty pharmaceutical company focused on the development, manufacturing, and commercialization of innovative treatments. The company has three approved products in addition to its pipeline of clinical-stage product candidates. Its lead candidate drug, Egalet-002, is a novel treatment for the management of severe pain that may require opioid treatment.

The company appears to be facing financial challenges if the reaction by investors to a proposed public offering of common stock is anything to go by. Egalet plans to issue 16,666,667 shares of its common stock at a public offering price of $1.80 a share. In addition, the company plans to issue warrants for the purchase of its common stock at an exercise price of $2.70 a share.

Egalet Corp (NASDAQ:EGLT) has also granted underwriters a 30-day option for the purchase of an additional 2,500,000 shares of common stock. The company had 25 million outstanding shares as of May 10. Gross proceeds from the offering are expected to be about $30 million before deduction of underwriting discounts, commissions among other expenses.

Egalet Corp (NASDAQ:EGLT) plans to use proceeds from the offering in addition to cash in hand for marketing of its lead drugs ARYMO ER, nasal spray SPRIX and OXAYDO. Part of the funds is also to be used for general corporate purposes among other business development activities.

The stock’s sell off adds fuel to what has been a disappointing year for Egalet. The stock is already down by more than 60% for the year as it closes in on its 52-week low of $1.54 a share.

FDA Complete Response Letter

Compounding the stock’s bearish sentiments among investors is a recent complete response letter from the FDA for the company’s supplement Oxaydo tablets. Approved in 2015, the drug is designed to discourage intranasal abuse. However, the agency has raised concerns over the drug’s inactive ingredients that may cause nasal burning if abused.

Some of the adverse reactions associated with Oxaydo include nausea, constipation vomiting, and headache. Concerns that the drug can lead to addiction if abused or misused with opioids appears to have triggered the FDA Complete Response letter.

“The FDA has requested more information regarding the effect of food on OXAYDO 15 mg and the intranasal abuse-deterrent properties of OXAYDO 10 mg and 15 mg. Egalet will work with the FDA to determine the path forward,” said Egalet Corp (NASDAQ:EGLT) in a statement.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Monica has an undergraduate degree in Accounting and an MBA she earned – with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

Author: Monica Gray

Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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