What happened
Shares of Incannex Healthcare (IXHL -6.14%) were crashing 58.4% lower as of 3:52 p.m. ET on Wednesday. The huge decline came after the Australian drugmaker announced earlier today the issuance of 1.85 million shares related to the exercise of unlisted stock options.
The addition of 1.85 million shares makes up less than 4% of Incannex Healthcare's outstanding shares. That's not nearly enough dilution to cause the pharmaceutical stock to plunge so much.
Today's sell-off is more likely the result of quick profit-taking. The share price skyrocketed earlier this week following the company's announcement of preliminary results from a phase 2 clinical study evaluating experimental cannabinoid IHL-42X in treating obstructive sleep apnea.
So what
Incannex's phase 2 results were positive, with 20% of study participants experiencing a reduction in the apnea-hypopnea index (AHI) of more than 80%. Sixty percent of participants receiving IHL-42X experienced an AHI reduction of greater than 50%. Some investors piled into Incannex with those good results.
But the study included a grand total of 11 participants. Ten of those completed treatment. It's too early to firmly conclude that IHL-42X will produce similar results in a larger number of patients. It appears that some investors realized this and opted to lock in profits after the stock soared so much after Incannex's announcement of the phase 2 results.
Image source: Getty Images.
Now what
Incannex expects to announce the full results from the phase 2 study of IHL-42X in the second quarter of 2022. The company is also scheduled to meet with the Food and Drug Administration on May 11 to discuss advancing the experimental drug into pivotal clinical testing.