Moderators: Laurence Watts, Stephen Jasper
Participants from Cantor Fitzgerald: Steve Aldridge, Sameer Vasudev
Gilmartin Group’s Managing Directors Laurence Watts and Stephen Jasper hosted a virtual webinar with Cantor Fitzgerald’s Steven Aldridge, Managing Director of Healthcare Investment Banking, and Sameer Vasudev, Managing Director and Head of ATM Capital Markets. The discussion centered around ATM usage by biotechs at a time of depressed valuations. Our key takeaways below:
ATMs are Essential for Public Biotech Companies
ATM stands for at-the-market offering, which describes the issuance of stock shares by a public company to rapidly raise capital. A company can sell at their discretion, taking advantage of rising stock prices and selling incrementally. Offerings are spaced out and can last for as long as a company wants. They tend to have significant advantages over traditional follow-ons because there is no set number of shares sold at a set price, affording the company flexibility. Every biotech company that will need to raise money should have an ATM in place. Greater adoption of ATMs has occurred from small-cap to large-cap companies over the past decade, as management teams begin to understand the ease of creating and using ATMs.
ATM Utilization is Increasing
In the past few years ATM utilization has overall increased, however the past year in particular witnessed a decrease in ATM usage due to the reduced stock prices. While many biotech companies have put ATMs into place, it remains challenging to convince some boards to utilize them. Cantor predicts that as share prices recover and cash balances decrease, ATM utilization will rebound. Previously, they had mostly been used by hedge funds but are now being adopted by other funds, including both domestic and global investors.
Splitting ATMs Across Multiple Banks Should be Approached with Caution
While Cantor will participate in joint ATMs, they do not recommend it. Multiple banks being involved increases the risk of leaked information, which can be negative for a company’s stock price and financing options.
ATMs Provide Flexibility Around Clinical and Corporate Milestones
As most biotechs do not have revenue, earnings are often considered non-material events. Although the management team may have a personal trading blackout around quarter-ends, an ATM can operate through earnings. However, once a company is in possession of data, or far along in corporate partnering discussions, they would likely need to pause their ATM use.
Working with a Bank on an ATM can give the Company Access to the Full Suite of a Bank’s Services
Cantor is willing to provide comprehensive services to the companies they work with on ATMs. For them, ATMs represent an opportunity to build a long-term relationship with the company.
Be Ready to Take Advantage of Financing Options which will Change Rapidly as the Macro Environment Shifts
With an unpredictable and fast-moving capital markets environment, biotechs need to be ready to raise money when given the opportunity. ATMs can help companies take advantage of high-volume trading days. Despite some recent recovery in pricing, small-caps have largely been left out of the bounce back, but with more investors willing to put money to work, the financing strength of biotechs will increase as positive data and value-driving events occur.
Gilmartin Group has deep experience working with both private and public companies in Biotech and across the healthcare space. For more information about how we strategically partner with our clients, please contact our team today.
Authored by: Henry Diamond-Pott, Analyst, Gilmartin Group