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Why BioXcel Therapeutics Stock Is Swooning Today

By Brian Feroldi - Feb 20, 2020 at 10:57AM

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Shares tumble after the company announces that it is raising capital.

What happened

In response to the company giving the pricing details of a recently announced common stock offering, shares of BioXcel Therapeutics (BTAI -0.54%), a red-hot clinical-stage biotech that uses artificial intelligence to develop drugs, dropped 17% as of 11:30 a.m. EST on Thursday.

So what

BioXcel announced on Wednesday that it was offering 2 million shares of its common stock to the public. The underwriters of the deal were also given a 30-day option to purchase up to an additional 300,000 shares.

The good news is that BioXcel was able to sell all 2 million shares. However, it was forced to discount the stock all the way down to $32 to attract enough buyers to fill the order. That's far below Wednesday's closing price of $41.14.

Group of researchers pointing at DNA

Image source: Getty Images.

Given the pricing details, its easy to understand why shares are being slammed today. 

Now what

The capital raise will put about $64 million into BioXcel's bank account before deducting fees. The company plans to use those funds to continue to advance the clinical development of BXCL501 as a hopeful treatment of neurological and psychiatric disorders such as dementia and opioid withdrawal. It also plans on advancing the development of BXCL701 as a potential treatment for prostate cancer, pancreatic cancer, and solid tumors.

Both BXCL501 and BXCL701 are still in phase 1/2 development, so it will take some time before investors learn whether or not these drugs are the real deal. That fact makes BioXcel an extremely risky biotechnology stock, so my plan is to monitor this company's progress from the safety of the sidelines. 

Brian Feroldi 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.

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