What happened

After skyrocketing by above 68.7% on Friday with no clear catalyst to speak of, Omeros (OMER -10.11%) stock came crashing down to earth, losing more than 33% of its value as of 3:44 p.m. on Tuesday. Given the steep run-up, it's likely that today's crash is a result of traders' taking their profits from last week; the stock is now around 0.8% lower than before its recent blast-off.

And since around 22% of its floating shares are held as short as of June 15, it's also likely that short selling is playing a role in the sharp decline.

So what

Stock prices are important for biotech companies that don't yet have products approved for sale, as management can opt to issue new shares when prices are high to raise money for when it's needed later. On that note, Omeros has a pair of programs in phase 3 clinical trials investigating its antibody narsoplimab for a few different complement-system-mediated diseases, like immunoglobulin A nephropathy and atypical hemolytic uremic syndrome. It's also pursuing a formal dispute process with the Food and Drug Administration (FDA) regarding a third narsoplimab project. 

But getting any of those programs out the door might be a problem. Its trailing-12-month operating expenses are near $163.3 million, whereas it only has around $142.2 million in cash. It already has more than $342.1 million in debt, so it might be hard to take out more loans at an attractive interest rate.

Now what

There's a good chance the company could need to issue new stock to raise cash. And with the brief window of Friday's high share prices firmly shut, it looks like any new issuance won't be at a favorable price. 

Thus, shareholders have a solid chance of getting their holdings diluted if they keep Omeros in their portfolio. But if its dispute process with the FDA resolves in its favor sometime later this year, it'll probably soar once again as it commercializes narsoplimab for what could be the first of several indications.