What happened
Shares of Acumen Pharmaceuticals (ABOS -0.63%) were down more than 16% at 11 a.m. on Tuesday after the company announced a public stock offering. The company's shares are still up more than 50% so far this year.
So what
The clinical-stage biotech company focuses on therapies that target toxic soluble amyloid beta oligomers to treat Alzheimer's disease. On Sunday, the company announced that it had positive topline results regarding a phase 1 study of ACU193 to treat Alzheimer's disease. That announcement drove the stock up more than 54% on Monday. After the markets closed, though, the company said it was planning a $100 million stock sale to help fund operations. The move downward Tuesday makes sense for several reasons. The stock sale dilutes the value of the stock. Plus, many investors got in line Tuesday to sell shares as they used the opportunity to lock in profits. Even with Tuesday's downward move, the big move upward on Monday meant they made money.
Now what
The company said it plans to use the stock sale proceeds to fund its phase 2 trials for ACU193, for other research and development expenses, and for corporate expenses. As of the end of the first quarter (on March 31), the company said it had only $183.8 million in cash, enough to fund, it said, operations into 2025. The raising of additional cash extends the company's window of time to develop a promising therapy.
After its huge run-up on Monday, investors may want to wait to see if the stock falls further before jumping in. It's important to note the company doesn't have any products yet, and no revenue, and its pipeline consists only of ACU193. The risk level remains high, though obviously, the data from the therapy's early trial results is encouraging.