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Athersys to raise $13M in direct offering; shares tumble

Stem cell company Athersys Inc. (NASDAQ:ATHX) has reached an agreement to sell about $13 million of its shares to unidentified private investors.

Stem cell company Athersys Inc. (NASDAQ:ATHX) has reached an agreement to sell about $13 million of its shares to unidentified private investors.

Athersys will raise the cash by selling about 4.4 million shares of its common stock and warrants to purchase up to an additional 1.3 million shares, according to a statement from Athersys. Adding 5.7 million shares would increase the Cleveland company’s number of shares outstanding by 30 percent to about 25 million.

As is typically the case when a company issues new shares, Athersys’ stock price fell sharply after its plans were made public. In early trading Friday, Athersys’ share price was down about 4 percent to $2.84.

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“Shareholder dilution is just kind of a reality for an early stage biotech,” said Lauren Migliore, an equities analyst with Morningstar in Chicago.

The company was vague about its plans for the sale’s proceeds, saying the cash would be used for “working capital and general corporate purposes.”

Here’s how the offering will work: One share of common stock will be bundled together with a warrant to purchase 0.3 shares of common stock at an exercise price of $3.55 per share of common stock. Each “bundle” will be sold at $3. Investors will have five years to exercise the warrants.

When it last reported its financial data, Athersys had about $18 million in cash on its balance sheet.

This likely won’t be the last time Athersys heads to the public markets to raise cash — and further dilute existing shareholders. “Management has been careful to keep expenses low, but lack of revenues and cash flow requires them to tap into equity markets until Athersys can become profitable,” Migliore said.

Migliore projects that Athersys could get a product to market in 2015, which would mean it could be profitable in 2017.

Athersys is working to commercialize its product MultiStem, an off-the-shelf stem cell treatment derived from bone marrow or other non-embryonic sources. The company is pursuing a number of applications of the technology, including treatment of stroke, heart attack and inflammatory bowel disease.