Please ensure Javascript is enabled for purposes of website accessibility

Here's Why MediciNova, Inc. Stock Is Sliding Today

By Cory Renauer - Updated Feb 8, 2018 at 1:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lower-than-expected pricing for a secondary offering just took the shine off recently announced trial data.

What happened

Shares of MediciNova, Inc. (MNOV -0.78%), a clinical-stage biopharmaceutical company, are down around 13.2% as of 12:11 p.m. EST on Thursday. The company recently pleased investors with positive data for its lead candidate, but investors aren't happy with how the company will go about funding a pivotal trial with ibudilast for the treatment of progressive multiple sclerosis (MS).

So what 

After the bell yesterday, MediciNova, Inc. announced it would offer around 5 million shares for just $9.05 each, which was well below the market price at the time. The stock surged above $11 earlier this month after the company presented data showing ibudilast, the molecule formerly known as MN-166, led to a 26% disability progression reduction for patients with progressive MS.

Person making a frustrated gesture while looking at stock charts.

Image source: Getty Images.

While the data warrants further investment into a larger pivotal trial, the offering will raise MediciNova's outstanding share count about 14% higher. The dilutive effects of the secondary offering will significantly reduce investors' slice of any profits MediciNova might earn down the road, but will only add around $46 million to the company's cash pile.

Now what

MediciNova had just $24.5 million in cash and equivalents on the books when the company last reported. To address concerns that the company's balance sheet is too modest to fund a proper pivotal study the nine-employee company thinks it can satisfy regulators with a relatively small, 700-patient pivotal trial. 

MediciNova wants to use the same disability progression metric ibudilast scored high on during its mid-stage progressive MS study as the primary endpoint for an upcoming pivotal trial. Investors will want to look for signs the FDA is on the same page. Small biotechs have a dangerous tendency to ignore the agency's advice when it doesn't jive with the soothing narratives they present investors.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MediciNova, Inc. Stock Quote
MediciNova, Inc.
MNOV
$2.53 (-0.78%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.