Shares of Tonix Pharmaceuticals Holding (TNXP -5.26%) were crashing 22.7% as of 10:54 a.m. ET on Tuesday. This marked the second consecutive day of big losses for the pharma stock.
The sell-off came after Tonix announced a 1-for-32 reverse stock split on Monday afternoon. This stock split took effect today.
Reverse stock splits aren't a sign that things are going well for a company. That's certainly the case for Tonix.
The company's board of directors approved the 1-for-32 reverse stock split to boost Tonix's share price. This move was needed to meet the $1 minimum bid requirement for the stock to remain listed on the Nasdaq Stock Market.
Prior to the announcement of the reverse split, Tonix's shares had lost nearly two-thirds of their value year to date. The reverse stock split artificially inflates the share price. However, it doesn't change anything about the underlying reasons behind the steep decline. Tonix doesn't have any products on the market yet and continues to burn through its cash.
The reverse stock split buys Tonix some time to advance its pipeline. The company expects to report interim results from a phase 3 study of TNX-102 SL in treating fibromyalgia in the first quarter of 2023. Tonix has previously reported results from two other late-stage studies of TNX-102 SL in treating fibromyalgia. One study met its primary endpoint, while the other didn't.