What happened?

Shares of Osmotica Pharmaceuticals (NASDAQ:OSMT), a small-cap biopharmaceutical company, are down by 20.4% as of 11:26 a.m. EDT on Tuesday, following the company's announcement on Monday evening of the pricing of a public offering of common stock. Investors aren't thrilled with the prospect of Osmotica resorting to dilutive forms of financing. 

So what

Osmotica said it would offer 5 million shares to the public for $6.55 per share. Also, the company is giving underwriters a 30-day option to purchase an additional 750,000 shares. The company expects this public offering of common stock to close on July 16. Note that Osmotica's stock ended the previous trading session at $7.72 apiece. Thus, it isn't surprising that investors responded to this news by selling off the company's stock. At writing, Osmostica's shares are worth $6.15 apiece. 

Man holding his head in panic behind falling stock chart.

Image source: Getty Images.

Now what

Osmotica's decision to raise funds by selling shares shouldn't come as a surprise. Last week, the U.S. Food and Drug Administration approved the company's Upneeq, a treatment for acquired blepharoptosis (a condition that affects a patient's upper eyelid). This approval was great news for Osmotica since many of its products have been posting declining revenue figures.

During the first quarter, Osmotica's total revenue came in at $48.6 million, compared with $57.1 million recorded during the prior-year quarter. Also, the healthcare company recorded a net loss of $3.1 million, and it had $125.8 million in cash and cash equivalents as of March 31. Osmotica will likely use the proceeds from this public offering of common stock to support the commercial launch of Upneeq, among other things. 

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