A significant discount tied to the offering of 5.5 million ordinary shares has caused the share price of Rosetta Genomics Ltd. (NASDAQ: ROSG) to plummet on Friday, dropping as low as 4.66. On Thursday shares had been moving as high as 7.17 and on July 30, 2012 they were trading at 8.75 but ROSG’s announcement yesterday that the public offering price for 5.5 million ordinary shares would stand at 5.00 per share.
Friday’s collapse should come as no surprise given the public offering price and it would be surprising to see ROSG’s share price climb above that 5.00 level prior to August 8, 2012, the day the offering is expected to close. That offering is expected to generate gross proceeds of $27.5 million, before deducting underwriting discounts and commissions and other offering expenses.
ROSG, which develops and commercializes a full range of microRNA-based molecular diagnostics, stated they would be using the net proceeds from the offering “primarily to fund its operations and for other general corporate purposes, including, but not limited to, repayment or refinancing of future indebtedness or other corporate borrowings, working capital, intellectual property protection and enforcement, capital expenditures, investments, acquisitions or collaborations, research and development and product development.”
It has been an incredibly ugly past 30 days for ROSG and their shareholders as they started July off with shares trading as high as 12.45 before the slide began. Those shares fell as low as 9.85 on July 23 before a nice little bounce to 11.47 the following day after ROSG announced they had entered into a co-marketing agreement for their miRview® mets2 assay for the accurate identification of the tumor of origin in Cancers of Unknown or Uncertain Primary (“CUP”) with Precision Therapeutics Inc. That bounce didn’t last long and now they find themselves below the 5.00 level and facing tough questions from investors.
The reality may be that ROSG is exactly where they should be. ROSG hasn’t put together any kind of meaningful revenue to date, they generated just $103,000 in 2011 and that came after reporting revenues of $279,000 in 2010. How that kind of revenue, along with a substantial accumulated deficit, could push share prices as high as they did reach is beyond reason.
None of this is to say that what ROSG has isn’t valuable. The miRview® mets2 assay is just one of the company’s microRNA-based molecular diagnostics; they also have the miRview® meso which diagnoses mesothelioma, a cancer connected to asbestos exposure, the miRview® lung which accurately identifies the four main subtypes of lung cancer using small amounts of tumor cells, and the miRview® kidney which accurately classifies the four most common kidney tumors: Clear Cell Renal Cell Carcinoma (RCC), Papillary RCC, Chromophobe RCC and Oncocytoma.
Looking at the numbers that ROSG provided in their press release detailing the co-marketing agreement with Precision Therapeutics there are approximately 200,000 CUP patients in the U.S who could benefit from the miRview® mets2. They have also said 60,000 patients could benefit from miRview® meso, 54,000 from miRview® kidney and 226,000 patients from miRview® lung.
The trick for ROSG is to get those tests to patients, something they have obviously had a difficult time doing up to this point. While ROSG has had some problems of their own making their sudden slide has more to do with their share price matching reality. That being said, RSOG shares could quickly climb back up to those high marks if their marketing agreements can start producing revenues.