What happened

Shares of RedHill Biopharma (NASDAQ:RDHL) were falling 12.5% lower as of 11:32 a.m. EST on Tuesday. The decline came after the specialty biopharmaceutical company announced that it was increasing the size of its previously announced public stock offering. RedHill now plans to offer nearly 3.2 million American depositary shares (ADSs) at a price of $7.84 per share. On Monday, the company said that it intended to offer close to 1.3 million ADSs at the same share price.

So what

There's good news and bad news with RedHill's decision to increase the size of its public stock offering.

Red line trending down in front of a $100 bill

Image source: Getty Images.

The bad news is that the valuation of existing shares of the biotech stock will be diluted even more than initially expected. RedHill's upsized offering represents a little under 9% of its current outstanding shares. Investors are rightly focused on the near-term impact of this added dilution.

The good news, though, is that RedHill will build its cash stockpile more than originally planned. Instead of $10 million in gross proceeds from the stock offering, the company will now generate $25 million. This extra cash will enable RedHill to fund its clinical programs and commercialization efforts for antibacterial drug Talicia and opioid-induced constipation drug Movantik.

Now what

RedHill expects to close the offering later this week. Its next major catalyst might not be too far away. The company is evaluating opaganib in a phase 2/3 study targeting pneumonia in COVID-19 patients. Results from this study are expected to be announced in the first quarter of 2021. 

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