Please ensure Javascript is enabled for purposes of website accessibility

Here's Why OPKO Health Stock Fell on Thursday

By Cory Renauer - Updated Oct 24, 2019 at 5:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A minor clinical trial success has been followed by a big share offering.

What happened

Shares of OPKO Health (OPK 0.39%), a diagnostics and biopharmaceutical company, fell hard today after the company announced a secondary share offering. Investors unhappy about dilution of the value of their shares pushed the stock 14.2% lower on Thursday.

So what 

After losing $141 million in the first half of 2019, the company finished June with $111 million in cash on its balance sheet and $68 million of high-interest debt that's due in 2020. That leaves it without a lot of options at the moment. Today the company announced a plan to raise $100 million by creating heaps of new shares that will dilute the shares investors have been holding.

Man drawing a downward sloping chart.

Image source: Getty Images.

OPKO hasn't announced pricing for its upcoming offering, but the dilution will be significant. The stock has fallen to just $1.63 per share. If it gets lucky and sells 50 million shares at $2 each, the outstanding share count will swell by around 14%.

Now what

OPKO announced its impending share offering shortly after announcing success in a non-inferiority test with somatrogon, a once-weekly growth hormone injection for children who don't produce enough on their own. The current standard, Genotropin from Pfizer (PFE -0.63%), is just as effective, but parents need to inject their children every day.

OPKO developed somatrogon in partnership with Pfizer and will receive a tiered royalty percentage that tops out in the mid-20s if it's approved. Somatrogon approval could push this biotech stock much higher in the short term, but anyone hoping the royalties will allow the company to finally stop losing money should prepare for disappointment. In the first half of 2019, Genotropin sales sank 15% to just $232 million.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

OPKO Health, Inc. Stock Quote
OPKO Health, Inc.
$2.55 (0.39%) $0.01
Pfizer Inc. Stock Quote
Pfizer Inc.
$48.96 (-0.63%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.