What happened

Shares of Omeros (OMER -0.49%) fell as much as 13.3% today after the company announced the pricing of a public offering of common stock and more details about a debt offering. 

The biopharma will offer up to 7.9 million shares of common stock at $14.50 apiece, which would haul in gross proceeds of roughly $115 million. Investors are displeased that the offering price is far below the $20-plus mark shares soared to after the company reported encouraging results from a six-patient study in COVID-19-associated acute respiratory distress syndrome (ARDS).

In addition to the stock offering, Omeros Corporation is issuing up to $241.5 million in convertible debt that bears 5.25% interest and comes due in 2026. As of 11:51 a.m. EDT, the small-cap stock had settled to a 12.4% loss.

A scientist looking through a microscope.

Image source: Getty Images.

So what

Investors cannot fault Omeros for taking advantage of favorable news recently, especially considering the business ended June with just $16 million in cash. But these transactions are relatively enormous for a company with no track record of commercial success. The biopharma has only been valued above $1 billion for a handful of days in the last five years.

Recent results from a six-patient study in COVID-19-associated ARDS were encouraging. All patients required mechanical ventilation, but were removed from ventilators, survived, and were discharged from the hospital after receiving the company's monoclonal antibody narsoplimab.

However, the study was not a clinical trial (it was a compassionate-use study) and involved just six individuals. Although Omeros Corporation announced it was in discussions with U.S. government agencies to broaden the use of the drug candidate, the U.S. Food and Drug Administration (FDA) will almost certainly require the company to conduct a larger, placebo-controlled clinical trial first. Investors who doubt that should consider Capricor Therapeutics and Mesoblast each had similarly promising results in small compassionate-use studies, but are now conducting controlled clinical trials with hundreds of individuals in an attempt to replicate the results. 

Now what

If the stock and debt offerings proceed without a hitch, then Omeros Corporation will be loaded with cash to plow into a larger clinical trial for narsoplimab in COVID-19-associated ARDS, among other things. But designing and completing such a study will take months -- and it isn't guaranteed to replicate the results of the smaller study. For now, investors should take a wait-and-see approach.