Onyx Pharmaceuticals, Inc.(NASDAQ:ONXX) stock has been trending southwards for some time now as investors expect the company to engage in a capital raising exercise via debt that they fear might increase the company's leverage.
Deutsche Bank, which has a Buy rating on the stock, however feels that the fears are unfounded and that the fundamentals of the company are strong.
Sometime back Onyx had received FDA approval for Kyprolis and the shares of the company had climbed to new highs on that news. However ever since the company announced its second quarter results the stock has slipped to its pre-Kyprolis levels.
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The management of the company has taken pains to point out to investors and analysts that it has a strong cash position with $590 million in cash reserves. The street however persists in thinking that a capital raising exercise is imminent, which the company has neither denied nor ruled out.
Investors see the non-denial by management as a sign of an upcoming raise.
Deutsche bank analysts feel that the current price of the stock has already factored in the capital raise, if at all.
From a high of $77.73 in the third week of July the shares have slipped to $68.55 in yesterday’s session.
In all likelihood the company will raise capital via equity but the recent trend seems to be to raise funds via debt to take advantage of the prevailing lo interest rate regime.
Deutsche Bank has set a price target of $105 for the stock saying "fundamentals remain strong & see Kyprolis beating Street expectations. We believe near-term performance may be sluggish due to capital raise overhang," they added.