Investors had every reason to be suspicious of today’s news from Sagimet Biosciences (NASDAQ: SGMT) It would arrive sooner or later. However, seeing the official announcement has been clearly inspiring. As of 11:40 a.m. ET on Monday, SGMT shares were up a hefty 45.2%, hitting a high last seen in November.
The news? Following a successful Phase 3 trial in China, the biopharmaceutical company now plans to begin Phase 3 trials of its acne-fighting denifanstat in the United States.
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For the record, it’s not Sagimet’s only drug in development. Its TVB-3567 is also in Phase 1 trials as a treatment for acne, and is currently in preclinical studies as a treatment for solid tumors. Denifanstat also recently completed Phase 1 testing as a combination therapy for metabolic dysfunction-associated steatohepatitis (MASH), and Phase 2 trials for this purpose are expected to be ready in the second half of this year.
However, the main driver of Monday’s optimism is the decision to move forward with the development of denifanstat as a treatment for moderate to severe acne in the United States. Etc. Following the success of the company’s domestic Phase 2 trials of the drug, as well as the efficacy demonstrated by development partner Ascletis Bioscience’s Phase 3 trials conducted in China, Sagimet Biosciences plans to launch a Phase 3 trial in the US sometime in the second half of 2026.
At stake is a market of 10 million acne sufferers in the US alone, although it is certainly much larger beyond US borders. Healthcare industry research team Towards Healthcare estimates that the global acne treatments market is currently worth about $11 billion a year, but could grow to nearly $17 billion by 2034.
The news is understandably exciting, but it has its corresponding downside. That is, Sagimet Biosciences also plans to raise $175 million by issuing more than 29 million new shares of the company at $6 per share, drastically diluting the 32 million shares already issued and outstanding. For more perspective, prior to today’s rise, SGMT’s share price of $5.86 translated into a market capitalization of just under $190 million. Raising this capital – largely to fund the next stage of denifanstat testing – is taking a measurable toll on the value of current and future shareholders’ holdings.