For the past couple of trading sessions IsoRay, Inc. (NYSEAMERICAN: ISR) has caught the attention of investors and traders alike. Early in trading yesterday, the stock climbed dramatically, and after a couple of halts, a late press release came in, informing investors that the FDA had approved GammaTile™ Therapy. By the end of the day, the stock was up well over 100%.

Then, later in the after-hours session, the company announced a direct offering. Of course, fears of dilution came, sending the stock plummeting in the market today. By noon, the stock had lost more than 35% and seemed to be doomed to end the day in the red.

With such a roller coaster ride, combined with some recent positive news, many are wondering if now’s the time to consider investing in ISR. Here’s how I see it:

The Offering Was A Necessary Evil

At the end of the day, in-the-know investors knew that an offering was coming down the line soon. Looking at the company’s balance sheet, it was clear that the company needed money, especially if it was going to market GammaTile™ Therapy and continue progression with the rest of its pipeline.

Now, the offering wasn’t a great one. Pricing could have been better and I disagree with the warrants. Here are the details of the offering:

IsoRay said that it has signed definitive agreements with several institutional investors. Under the terms of the agreements, the investors will purchase 11,000,000 shares of its common stock at a price of $0.75 per share. Considering the strong growth seen yesterday, this was the first area where investors were clearly concerned. The second has to do with the warrants.

As part of the direct offering, ISR has agreed to issue the investors up to 5,500,000 warrants to purchase shares of common stock at a price of $0.75. At the moment, these warrants are locked down under a 6 month hold. However, after 6 months, an additional five and a half million shares may flood the market, leading to further dilution.

Considering this offering, there’s a very real reason that the stock is falling today. After all, adding 11 million shares to the pool at a discount is going to lead to concern. That, combined with another potential 5.5 million shares in just 6 months, well, that’s going to upset investors. Nonetheless, as mentioned above, ISR needed the money, and considering the good news released yesterday…

This May Be A Buying Opportunity

While the offering was a drag on IsoRay shares, it was a necessary evil. Nonetheless, is a serious positive to look at here. Truth be told, the declines today could prove to be a buying opportunity. Let’s not forget, the FDA just approved GammaTile™ Therapy. That’s a big deal. 

The news was announced yesterday afternoon with a press release. For those of you who haven’t been following ISR, GammaTile™ Therapy is a therapy that incorporates the company’s proprietary Cesium-131 seeds with customizable collagen-based carriers. The treatment has received 510(k) regulatory clearance from the FDA as a treatment for recurrent brain tumors. Of course, the promise shown in clinical studies is likely to lead to strong demand in the commercial setting, a setting in which the company has assistance with moving toward.

That’s because, an agreement was signed in the past with GT Medical Technology surrounding GammaTile™ Therapy. The two companies would work together to produce the treatment. From there, GT Medical Technology would move toward commercialization while a 10 year exclusive supply agreement was put in place for ISR to supply its proprietary Cesium-131 for the product.

At the end of the day, this approval is massive news for ISR and all involved, and could lead to incredible value ahead.

Let’s Not Forget Build-Blu

Another product that’s important to remember when considering IsoRay is their Build-Blu product. On May 11th, the company announced the upcoming launch of the Build-Blu™ delivery system for real-time prostate brachytherapy.

Build-Blu is a seed stranding device that will allow prostate brachytherapists to affordably build custom-configured strands with Cesium-131 while in the operating room. As a result, the treatment allows clinicians to individualize the procedure to the patient’s anatomy in real time. While the product is still in the early phases of commercialization, the company intends on pushing the treatment hard as could be seen in the press release yesterday about the direct offering. In fact, in the release, the company said that it:

intends to use the net proceeds from this offering for working capital and general corporate purposes with particular focus on marketing the brain applications and Build-Blu™ delivery system for real-time prostate brachytherapy.   

Final Thoughts

At the end of the day, dilution can be a killer of value. However, in my opinion, the offering that sent the stock tumbling will improve the balance sheet and set the foundation for strong growth ahead. Considering that the company has two products that present a solution to medical issues with high levels of need, ISR may just be sitting on a gold mine. Should commercialization go as planned, those who get in now will likely be counting serious profits later.

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