Please ensure Javascript is enabled for purposes of website accessibility

Why Humanigen Stock Is Tanking Today

By Prosper Junior Bakiny - Mar 31, 2021 at 2:17PM

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

The company announced the pricing of a secondary stock offering.

What happened?

Shares of clinical-stage biopharmaceutical company Humanigen (HGEN 7.98%) were falling sharply on Wednesday following the company's announcement of the pricing of a public offering of common stock. Naturally, investors aren't thrilled with the prospect of Humanigen diluting its shareholders. As of 2:06 p.m. EDT, the company's stock was off by 15.3%, after having been down by as much as 16.9% earlier in the session.

So what

The timing of Humanigen's public offering of common stock probably isn't random. On Monday, its stock price skyrocketed by more than 50% after it announced positive news regarding one of its pipeline candidates, lenzilumab. The hopeful COVID-19 treatment proved both safe and effective in a phase 3 clinical trial when taken in combination with other treatments and steroids. Specifically, patients treated with lenzilumab and other medicines were 54% more likely to survive without the assistance of a mechanical ventilator than those treated with a placebo and other drugs.

Stressed out doctor with his head on his forehead.

Image source: Getty Images.

Humanigen will soon seek emergency use authorization from the Food and Drug Administration for lenzilumab. No doubt the healthcare company will use the proceeds of the pending stock offering to fund the launch of this product. The company intends to sell 5 million shares of its common stock for $18.50 per share -- and after their decline Wednesday, Humanigen shares were trading slightly below that level. The drugmaker will also grant underwriters a 30-day option to purchase up to an additional 750,000 shares at the same price. Humanigen expects to collect $92.5 million in gross proceeds from the transaction, which is set to close on April 5.

Now what

Regulatory approval could come relatively soon for lenzilumab. Once it does, it will likely send Humanigen's stock soaring, especially considering the company currently has no products on the market. In other words, despite Wednesday's slump, the drugmaker still looks poised to outperform the market, at least in the short term.

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

Humanigen, Inc. Stock Quote
Humanigen, Inc.
$2.03 (7.98%) $0.15

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

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.