What happened

After pricing an equity offering that will dilute current investors but help shore up its balance sheet, shares in Synergy Pharmaceuticals (NASDAQ: SGYP) are tumbling 15.6% as of 1:45 p.m. EST.

So what

Synergy Pharmaceuticals wasn't able to strike a deal with a big biopharma willing to market its first commercial-stage drug, Trulance, so it's been financing the launch on its own. Unfortunately, that's been an expensive undertaking.

In the third quarter, the company spent more than $50 million on operating costs, including $44 million that was spent on sales, general, and administrative expenses.

While the use of Trulance, a drug for chronic idiopathic constipation, appears to be gaining some ground against Allergan (NYSE:AGN) and Ironwood Pharmaceuticals' (NASDAQ:IRWD) competing drug, Linzess, Trulance's sales were only $5 million last quarter. As a result, Synergy Pharmaceuticals reported a net loss of nearly $49 million in the period.

With only $118 million in cash and equivalents on the books at the end of September, and losses stretching out into the future, Synergy Pharmaceuticals' management decided (rightfully so) to sell more shares to give it more wiggle room. On Monday, the company priced 21,705,426 shares at $2.58 per share. The move is expected to raise approximately $56 million, before underwriting fees and expenses.

Now what

Trulance sales are small, but they doubled quarter over quarter, and prescription volume should increase as doctors and insurers become more comfortable with the drug. Since Linzess sales grew 38% to $626 million in 2016, there's clearly an opportunity for Trulance revenue to become far more meaningful for Synergy Pharmaceuticals, especially if it secures an FDA approval for use in irritable bowel syndrome with constipation next January. 

Regardless, Synergy Pharmaceuticals stock remains a high-risk investment. Allergan's got deep pockets that it can use to try and keep Trulance at bay, and while Trulance sales growth last quarter is encouraging, the company's mountainous spending means there's no telling when this company could turn a profit.

It also doesn't help investor confidence that its latest equity sale might not be its last. Absent a significant increase in revenue over the next year, Synergy Pharmaceuticals is probably going to have to either sell more shares or tap more of the $300 million senior secured loan it arranged in September. Currently, it owes $96 million in long-term debt on that secured loan at an annual interest rate of 9.5%. The company can borrow $100 million before February 2018 and then it can draw up to two separate $50 million tranches before March 31, 2019. 

Overall, until investors begin to see more meaningful Trulance revenue, it's hard to argue that this is the best biotech stock to buy right now.