What happened

Shares of BioXcel Therapeutics (BTAI 0.77%) were down 62% at 11 a.m. on Thursday after the company announced phase 3 trial results for Alzheimer's disease–related agitation therapy BXCL501. The stock is down more than 68% so far this year.

So what

BioXcel is a biotech company that uses artificial intelligence to find neurological and immuno-oncological therapies. On Thursday, before the markets opened, it announced positive top-line results for a phase 3 trial for BXCL501, a oral film formulation of dexmedetomidine, to treat agitation in Alzheimer's patients. The company said the therapy met its primary efficacy endpoint with a better result after two hours than a placebo on the Positive and Negative Syndrome Scale, Excitatory Component (PEC). 

However, according to Reuters, the company said one trial site's lead investigator was found to have fabricated emails related to the timing of a serious side effect with the company's vendor that was responsible for monitoring the safety of the drug. The Food and Drug Administration (FDA) raised the issue at a site inspection in December, leading to a BioXcel investigation. CEO Vimal Mehta said it was more of a documentation issue and did not involve falsification of side effects, adding that the company may do its own independent audit regarding the trial data.

Now what

The precipitous drop may be a bit of an overreaction. It's worth noting that dexmedetomidine, the drug in BXCL501, has already been approved in a sublingual form to treat agitation associated with schizophrenia or bipolar disorder, and a intravenous form has been approved as an anesthetic. BioXcel said the drug still shows a strong safety profile and that the company intends to submit a supplemental new drug application later this year with the FDA. A bigger concern for investors is where BioXcel will get the finances to market the drug. As of the first quarter, the company had only $165.5 million in cash, enough to fund operations only into 2025. The stock's plunge will make it harder to raise money through a stock sale.