Shares of Minerva Neurosciences (NASDAQ: NERV), a clinical-stage biotech focused on diseases of the central nervous system, fell more than 31% in July, according to data from S&P Global Market Intelligence.
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Here's a review of the key developments from the period that contributed to the strong share-price movement:
- As predicted by my Foolish colleague George Budwell, Minerva performed a secondary common stock offer in early July to take advantage of its soaring stock price from June. Minerva sold 6.5 million shares to investors and underwriters at a price of $7.75 per share. The transaction netted the company just over $41 million after fees were deducted.
- Later in the month, two of the company's board members -- Michele Ollier and Nico Vandervelpen -- announced their decision to resign. Minerva stated that both had decided to refocus their attention on their "private equity activities."
- Finally, the company announced that the American Journal of Psychiatry had published online the results of its previously reported phase 2b clinical trial using MIN-101 as a hopeful treatment for schizophrenia. The trial showed that MIN-101 achieved its primary outcome with no observed adverse effects when compared to placebo. Minerva confirmed that a pivotal phase 3 trial is expected to kick off in the second half of the year.
Given the capital raise and sudden exits of two board members, it is understandable why shares took a step back in July.
It has been a wild couple of months for Minerva's shareholders. In June the company's stock soared after investors learned that it was amending its licensing deal with Johnson & Johnson. The updated deal gave Minerva global strategic control over MIN-202, a hopeful treatment for insomnia and depression. What's more, the company could receive up to $70 million in milestone payments if certain clinical targets are achieved. On the flip side, the company now has to pay for MIN-202's clinical development out of its own pocket, which is one reason that July's capital raise was necessary.
Overall, Minerva's pipeline products continue to look promising, but investors need to remind themselves that good-looking phase 2 data doesn't always translate into success in pivotal trials. This is especially true for drugs that target diseases of the central nervous system -- just ask investors in Intra-Cellular Therapies (NASDAQ: ITCI). Intra-Cellular's stock was flying high based on its strong phase 2 schizophrenia results, but then shares imploded after the company's drug failed to outperform a placebo in pivotal trials.
Will Minerva be able to succeed where Intra-Cellular failed? Only time will tell. At least investors can feel good knowing that the company now has more cash in its bank account, so it can afford to find out.
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