What happened

Shares of Legend Biotech (LEGN 0.49%) rose 11.8% on Wednesday. The company, which specializes in immunotherapy cell therapies, is up a little more than 3% for the year.

So what

There are two reasons for the rise in the stock, both related to the Chinese biotech company's announcement this week that it plans to sell more than 8 million shares at a public offering price of $43 to raise $350 million. Normally, such a move turns off investors because it dilutes the value of the stock. And initially, that was the reaction, as the stock's closing price on Monday was $50.50, and the next day, it closed at $43.49.

However, sometimes investors think such a move is a positive sign if it means the company is raising more money to gear up for drug sales, and that seems to be the case here. Other investors may have piled in when they saw a potential deal.

Legend is partnering with Janssen Biotech, a unit of Johnson & Johnson, on Carvykti (ciltacabtagene autoleucel), a CAR-T therapy to treat refractory multiple myeloma, which is a rare form of blood cancer that affects plasma cells. Carvykti was approved by the Food and Drug Administration (FDA) on Feb. 28 and is the company's first marketed drug. The stock sale will allow the company to transition from a clinical-stage biotech to a commercial biotech.

Legend's finances as of the first quarter were looking up, thanks to collaboration revenue. The company reported revenue of $40.8 million in the quarter, up 198% year over year, while it cut its losses to $40 million, down from $80.9 million in the first quarter of 2021. But the company said it had only enough cash at $796 million to last another 12 months as it ramps up production and marketing for Carvykti. The stock sale will give it a little breathing room.

Now what

Investors will want to see how Carvykti fares in sales against another multiple myeloma CAR-T therapy, Abecma (idecabtagene vicleucel), which was developed by Bristol Myers Squibb and Bluebird Bio and approved by the FDA on March 26.

Caution might be warranted as well because the company faces being delisted over concerns that its books have not yet been opened to U.S. auditors.