What happened

One day after moving higher in the market, Aurinia Pharmaceuticals (AUPH 0.09%) stock was deep in the loss column on Thursday. Optimism flowing from good news the previous day was erased by the Canadian biotech's announcement that it's floating a new, $200 million secondary stock issue consisting of slightly over 13.3 million common shares.

So what

Aurinia's motives for this fresh round of capital-raising seem pure. The company says it will utilize the proceeds from the issue chiefly "for pre-commercialization and launch activities, research and development" for its pipeline drug Lupus Nephritis treatment Voclosporin. The company's good Wednesday news was that Voclosporin's New Drug Application (NDA) filing was accepted by the Food and Drug Administration (FDA).

A doctor discussing matters with another person.

Image source: Getty Images.

Voclosporin is now set to be the first approved treatment for the affliction, which is a serious inflammation resulting from systemic lupus erythematosus (an autoimmune disorder).

The problem with the share issue is dilution. According to statistics compiled by Yahoo! Finance, Aurinia currently has slightly over 112.6 million shares of common stock outstanding. As a result, the new issue's dilution will edge into the double digits, at a bit over 10% of the current count.

Now what

Investors might be overreacting to the latest news. The FDA has granted Voclosporin priority review, with a target-action date of Jan. 22, 2021. That's very soon by pharmaceutical-industry standards, so if the drug gets the green light, Aurinia could have a blockbuster product on the market within only a few quarters.