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Mizuho said Friday that the market “doesn’t understand” Wave Life Sciences’ (NASDAQ:WVE) latest capital raise, news of which triggered a major selloff in the shares Thursday.
“There are a couple of new details out this morning that strongly suggest this downward move can reverse this morning and continue over the course of the day,” the bank said in a note released Friday morning.
Mizuho highlighted that GSK (GSK) was part of the financing round, which the prospectus said was to advance development of its INHBE program into clinical testing. Mizuho noted that INHBE program has been targeting metabolic disease and obesity.
“The implied to us is that if GSK wants the potential upside from WVE’s INHBE program, which it likely did not even know about at the time the collaboration was formed last year, then the only way to participate now is to buy the WVE equity.”
The bank added that GSK’s equity interest may have been a trigger for a broader raise that brought in new investors, including those of the “blue chip variety.”
Mizuho also doesn’t think the deal was priced at a “massive discount, as suggested by the market yesterday.”
The bank maintained its buy rating on the stock, with a price target of $10.