Weight-loss market innovator Lexaria Bioscience drops after direct offering announced

Shares of Lexaria Bioscience, a company that transforms the delivery of other companies’ drugs using its patented technology, fell more than 6% on Tuesday, October 15, after it announced a raise of around $5 million through a private placement.

Details

On Tuesday, Lexaria stock lost over 6% to close at $2.87 per share. The company unveiled a direct offering of 1.63 million shares at $3.06 per share. It will also issue 4.55 million five-year warrants with the same exercise price.

The offering, expected to close today, Wednesday, October 16, is expected to raise approximately $5 million before expenses. Lexaria intends to use the proceeds to support working capital and for other general corporate purposes. In its latest financials, for the fiscal-2024 third quarter (ended May 31), the company reported an 8% year-over-year increase in revenue to $84,000, while operating expenses dropped 26% versus the previous-year period to $1.82 million.

Context

Lexaria Bioscience, a Canadian company listed on the Nasdaq, owns DehydraTECH, a technology designed to improve the bioavailability of various products, from foods and beverages to drugs. It works by mixing active ingredients with specific fatty acids, which are then processed together.

Lexaria spent a long time searching for its niche as a business before deciding to go into pharmaceuticals, where it is trying to transform the delivery of blockbuster drugs from Big Pharma using DehydraTECH. In particular, it is looking into making weight-loss injections, such as Wegovy by Novo Nordisk and Zepbound by Eli Lilly, into pills without compromising their efficacy. Most recently, the company signed a six-month licensing agreement with an unnamed pharmaceutical company to test DehydraTECH on animals in preclinical trials. In early October, it also began dosing for a human pilot study of a pill containing tirzepatide, the active ingredient in Zepbound.

Analyst insights

Since the start of the year, when Lexaria announced its new business direction, the stock has gained almost 130%. According to MarketWatch, two analysts currently cover Lexaria, both rating it as a “buy.” Their average target price is $10 per share, which indicates upside approaching 300%.