GenMark Diagnostics (GNMK), a leader in multiplex molecular tests systems, has recently priced the secondary offering of its 10 million common shares at $4.20 each in a bid to cover over-allotment. The company has also granted the underwriters a 30-day option to purchase an additional 1.5 million shares. The offering is expected to close on June 26.
The company plans to use the proceeds for research and development expenditure in a planned attempt to enhance its product portfolio as well as to develop its NexGen System. In its most recent earnings release, GenMark stated that it expects increasing expenses over the next few years due to the development of its next-generation platform, the NexGen System.
The increase in R&D expenditure will go directly to fuel growth in test menu expansion and upgrade its technology. The proceeds will also enable the company to focus on its growth strategy in the world market by expanding domestic and overseas commercial organizations.
GenMark earlier asserted that any subsequent public offering might negatively affect the market price of its common stock. However, the contagion of economic problems in Europe as well as challenging global market conditions have resulted in turmoil in the financial service industry and credit market, leading to the company’s limited access to capital.
The book-running manager for the offering is J.P. Morgan Securities LLC, a division of JP Morgan Chase & Co. (JPM). The co-managers are William Blair & Company, LLC and Canacord Genuity Inc.
GenMark’s net loss from operations and failure to achieve profitability remain an overhang. To date, the company has funded its operating activities mainly from the proceeds from common stock offerings, revenues and borrowings. The rigorous efforts to bolster sales and upgrade its technology are expected to yield positive results for GenMark.
The stock currently retains a Zacks #2 Rank, which translates into a short-term Buy.
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