Coronado Biosciences (NASDAQ: CNDO): A master puppeteers folly?

by Sonya Colberg, Senior Investigative Reporter, 7/15/2013 10:19:08 AM

Coronado Biosciences (NASDAQ:  CNDO ) is tangled amid a bizarre whipworm therapeutic candidate, jail birds, cozy relationships, crazy financing, decimated companies controlled by a master puppeteer - and just now a brand new $200 million shelf registration.

And it’s all precisely timed. The company is rolling out public stock offerings - and filed the new S-3 that will further dilute the stock with millions upon millions of additional shares - just before clinical trial results are released.

Is this because CNDO suspects its key candidate - live pig whipworm eggs - won’t work? Does the company suspect that it will never even reach phase III?

Despite several negative study results, CNDO is testing its pig whipworm eggs to treat auto-immune diseases, a medical area populated by fierce pharma companies with deep pockets.

Independent investigators recently conducted trials based on batches of 2,500 parasitic eggs, culled from pig manure, that hatched out in patients’ guts. The parasitic egg cocktails caused three to 19 times more incidences of pain and other  severe side effects - typically lasting for weeks - than in patients on a placebo.

In fact, the results were so bad that over a dozen patients stopped gulping down their worm egg drinks before the study ended.

Similar risks turned up in three separate studies - all apparently ignored by Burlington, Mass-based CNDO. And even though independent study authors urged fewer eggs per dose in future testing, some patients will slurp down three times more -  7,500 worm eggs - in each dose every two weeks, under a new study that CNDO is resolutely conducting.

Set up for dilution

Despite the negatives, the stock more than tripled over the last year to reach an all-time high of  $12.70 on April 23.

Days later, CNDO filed an ongoing at-the-market  offering on April 29 to sell $45 million worth of stock at the company’s whim.

Was that enough? No. According to the  newest S-3 , the company amended the ATM offering so it could sell up to $70 million worth of stock.

And was that enough? No, still not enough. This  bleeding company with a highly debatable product in fact quietly filed this  new shelf registration after market close July 12. Once effective, CNDO will be able to distribute $200 million worth of stock or warrants from time to time over three years, as determined by market conditions. This represents tremendous dilution and overhang for a company with a market cap of about $234 million.