What happened
One day after moving higher in the market, Aurinia Pharmaceuticals (NASDAQ: AUPH) stock was deep in the loss column on Thursday. Optimism flowing from good news the previous day was erased by the Canadian biotech's announcement that it's floating a new, $200 million secondary stock issue consisting of slightly over 13.3 million common shares.
So what
Aurinia's motives for this fresh round of capital-raising seem pure. The company says it will utilize the proceeds from the issue chiefly "for pre-commercialization and launch activities, research and development" for its pipeline drug Lupus Nephritis treatment Voclosporin. The company's good Wednesday news was that Voclosporin's New Drug Application (NDA) filing was accepted by the Food and Drug Administration (FDA).
Image source: Getty Images.
Voclosporin is now set to be the first approved treatment for the affliction, which is a serious inflammation resulting from systemic lupus erythematosus (an autoimmune disorder).
The problem with the share issue is dilution. According to statistics compiled by Yahoo! Finance, Aurinia currently has slightly over 112.6 million shares of common stock outstanding. As a result, the new issue's dilution will edge into the double digits, at a bit over 10% of the current count.
Now what
Investors might be overreacting to the latest news. The FDA has granted Voclosporin priority review, with a target-action date of Jan. 22, 2021. That's very soon by pharmaceutical-industry standards, so if the drug gets the green light, Aurinia could have a blockbuster product on the market within only a few quarters.
10 stocks we like better than Aurinia Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aurinia Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 2, 2020
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
