Watch stocks you care about
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
What: Shares of Omeros (NASDAQ: OMER ) , a clinical-stage biopharmaceutical company focused on developing therapies to treat inflammation, coagulopathies, and central nervous system disorders, fell as much as 11% after announcing a share offering of common stock and reporting its fourth-quarter earnings results after the closing bell last night.
So what: For the quarter, Omeros reported revenue of $169,000 and a considerably smaller net loss of just $1.85 million, or $0.05 per share, compared to $7.73 million, or $0.30 per share in the year-ago period. It should be noted, however, that the receipt of a settlement with CCIC, a former insurer, reduced its quarterly loss by $0.41 per share.
The bigger story, though, appears to be the common stock offering of 3,043,479 shares, which priced at $11.50, or 6.5% below yesterday's closing price. Omeros' stock offering should raise a gross of $35 million in funds, which it plans to use for the potential commercialization of Omidria (formerly OMS302) and to further the clinical research of other pipeline products, such as OM824 and OMS721.
Now what: What we're seeing here today is the classic example of the risk of dilution associated with the biotech sector. Because many clinical-stage companies are far too prideful to partner up their lead drugs, they often turn to secondary share offerings to raise the required capital. While this does keep them afloat, it also exposes shareholders to the constant threat of dilution. The simple fact that the share offering priced 6.5% below yesterday's close gives investors a clue that demand simply wasn't there for those shares. Overall, Omeros' share offering will increase the number of shares outstanding by 10% and shares are down by close to 10% today, so it seems like a pretty fair trade-off.
Omeros shares have soared over the past year, but even it could struggle to keep up with this top stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.