What happened

Shares of Theravance Biopharma (TBPH 1.04%) were sinking 10.7% lower as of 11:04 a.m. EST on Wednesday. This decline came after the drugmaker announced the pricing of a public stock offering after the market closed on Tuesday. Theravance plans to sell 5.5 million new shares at a price of $27 per share.

So what

Public stock offerings come with the territory when investing in biotech stocks. The downside to these transactions is that they dilute the value of existing shares. That's the main reason why Theravance's share price fell today.

Man with hands on his head and a stock chart in the background

Image source: Getty Images.

Investors also appeared to have been disappointed by the pricing of the offering. Issuing another 5.5 million shares for public sale represents around 9.7% of Theravance's outstanding shares. The offer price, though, was nearly 12% lower than the drugmaker's share price before it first announced Monday evening that it planned to conduct a public stock offering.

However, there was some good news for Theravance as well. The stock offering is expected to raise around $148.5 million in gross proceeds. The company plans to use the money to fund operations and advance its pipeline. Theravance reported $319.7 million in cash, cash equivalents, and short-term investments as of Sept. 30, 2019. It's losing more than $50 million each quarter on average.

Now what

Theravance has several important milestones on the way. It expects to report results later this year from clinical studies of TD-5202 in treating inflammatory intestinal diseases and TD-8236 in treating asthma. An approval decision from the FDA for Trelegy Ellipta in treating asthma is also expected in 2020. The drug is already approved for treating chronic obstructive pulmonary disease (COPD). Theravance receives royalties from GlaxoSmithKline of between 5.5% and 8.5% of the drug's total net sales.