What happened

Shares of EyePoint Pharmaceuticals, Inc. (NASDAQ: EYPT) are down by a jaw-dropping 27.1% as of 1:08 p.m. EST Friday afternoon. The eye care specialist’s stock is nosediving today in response to a secondary offering announced after the closing bell on Thursday. 

What appears to be drawing shareholders’ collective ire today is the offering price. EyePoint announced that it plans to offer 15 million shares of its common stock at $1.45 per share. This offering price is a staggering 25.6% discount relative to where the drugmaker’s shares closed on Thursday. 

So what

EyePoint’s decision to price this offering at a substantial discount suggests that there wasn’t much demand for its shares. That’s somewhat surprising given that the company now sports two commercial-stage products with the chronic noninfectious uveitis treatment Yutiq and the postoperative ocular inflammation medicine Dexycu.

What’s more, Wall Street expects its top line to basically grow at an exponential rate over the next few years, thanks to these dual commercial launches. This shockingly low offering price, however, implies that investors aren’t wholly convinced about its near-term growth prospects. 

Now what

Should bargain hunters swoop in on this hefty pullback? On the surface level, EyePoint’s stock comes across as a screaming buy on the heels of this massive drop. After all, this biopharma stock is now valued at approximately two times next year’s projected sales. That’s seriously cheap for a commercial-stage biopharma. On the flip side, the optics surrounding this public offering are worrisome. So, it might be a wise decision to take a wait-and-see approach for the time being.