What happened

Shares of Intra-Cellular Therapies (NASDAQ:ITCI) fell as much as 13.6% today after the company announced the pricing of a public stock offering. The pharmaceutical company will offer up to 11.5 million shares at $29.50 apiece, which will raise up to $339.5 million in gross proceeds. 

While the business ended September with $255 million in cash, it reported an operating loss of $112 million in the first nine months of 2019. After receiving a surprise approval for Caplyta in the final week of December, the company is simply padding the balance sheet as it prepares for market launch.

As of 10:26 a.m. EST, the pharma stock had settled to a 11.3% loss.

A steadily rising chart that suddenly declines.

Image source: Getty Images.

So what

Today's news isn't too surprising. Shares of Intra-Cellular Therapies gained 253% last month after the U.S. Food and Drug Administration (FDA) approved the company's antipsychotic drug Caplyta as a treatment for schizophrenia in adults. Considering operating losses, the soaring stock price, and the need to prepare for market launch and ramp-up activities, the public offering is a wise move by management.

Now what

Although the stock price has tumbled below the offering price, investors need to be cautious. Analysts think Caplyta could generate $60 million in revenue in 2020, but it would need to have a smooth launch in the first half of the year to have a shot at that level of early success. If Intra-Cellular Therapies can gain approval in additional psychiatric indications, analysts think the drug could reach peak annual sales of $400 million. Before getting carried away with the possibilities, though, investors should wait to see if the company can execute. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.