What happened

BioXcel Therapeutics (BTAI 0.77%) stock is plummeting Monday. The clinical-stage biotech specialist's share price is down 44.6% as of 11:15 a.m. ET, according to data from S&P Global Market Intelligence.

BioXcel published its second-quarter results before the market opened this morning and paired the release with news of a major restructuring initiative. In addition to posting Q2 sales and earnings that fell short of the market's expectations, the company also announced a major pivot for its product pipeline and plans to reduce its workforce. 

So what

BioXcel recorded a loss of $1.83 per share on revenue of $457,000 in the second quarter. Meanwhile, the average analyst estimate had targeted a per-share loss of $1.72 on sales of 467,000. For a clinical-stage biotech that's still producing very little in the way of revenue as it develops, tests, and attempts to receive authorization to market products, this kind of sales and earnings miss is hardly unusual or cause for alarm. But BioXcel is making big shifts that are flashing bearish signals. 

The company has announced that it has paused its pursuit of a Phase 2 trial that would have evaluated the efficacy of its Igalmi drug as an adjunctive treatment and combination therapy with selective serotonin reuptake inhibitors (SSRIs) or serotonin-norepinephrine reuptake inhibitors. Igalmi has already been approved in the U.S. for treating adults with agitation linked to schizophrenia and bipolar disorder, but the pausing of Phase 2 trials for expanded use suggests a narrower potential application for BioXcel's most important product.

In conjunction with the shift, the company plans to reduce its workforce from approximately 190 employees to 80 employees. 

Now what

BioXcel Therapeutics ended the second quarter with cash and equivalents totaling $127.5 million. With its restructuring and cost-saving initiatives, management expects that its current cash balance will be enough to support the business through mid-2024.

Even with a significant reduction in expenses, the company will need to raise new capital at some point over the next year. That likely means selling new stock.

Selling new shares in order to raise funds is a typical move for clinical-stage biotechs that are recording substantial losses while generating little revenue. But BioXcel's need for capital is more concerning in light of signs that potential applications for Igalmi have narrowed.