Eledon Pharma Shares Fall After Pricing $50M Stock Offering
The capital raise follows a steep drop in the company's stock last week after its lead drug candidate produced mixed results in a Phase 2 clinical trial.
Eledon Pharmaceuticals (NASDAQ: ELDN) saw its shares fall sharply in early trading Wednesday after the company announced the pricing of a $50 million public offering at a significant discount to its recent trading price, a move designed to shore up its finances for pivotal clinical trials.
The Irvine, California-based biotech company priced the offering of common stock and pre-funded warrants at $1.65 per share. The move comes just days after Eledon's stock plunged by nearly 50% following the release of mixed clinical trial data for its main drug candidate, creating significant pressure on the company's valuation and prompting the capital raise.
The offering, which represents more than a third of the company's roughly $135 million market capitalization prior to the announcement, introduces substantial dilution for existing shareholders. According to a company press release, the raise consists of over 15.1 million shares of common stock and pre-funded warrants to purchase an additional 15.1 million shares.
This capital infusion follows a challenging week for the company. On Monday, Eledon announced that its lead drug, tegoprubart, an anti-CD40L antibody designed to prevent organ rejection in kidney transplant patients, yielded mixed results in its Phase 2 BESTOW clinical trial. While the drug demonstrated a favorable safety profile, it failed to meet its primary efficacy endpoint of showing a statistically significant improvement in kidney function at the 12-month mark.
The market reaction to the trial data was severe, cutting the company’s stock value in half and creating an urgent need to fortify its balance sheet. Eledon stated that the net proceeds from the offering will be used to fund the continued clinical development of its product candidates, including moving tegoprubart into a more expensive and lengthy Phase 3 trial, pending discussions with regulators.
For clinical-stage biotechnology firms like Eledon, which do not yet have revenue-generating products, raising capital through stock offerings is a common but often painful necessity. The process dilutes the ownership stake of current investors and can signal to the market that the company needs cash, often leading to a drop in the stock price.
The offering is being managed by joint book-runners Leerink Partners, Cantor, and LifeSci Capital. Following the mixed trial results, analysts have been adjusting their expectations. Notably, Leerink Partners cut its price target on Eledon from $8.00 to $5.00, though it maintained an "Outperform" rating, suggesting a belief in the drug's long-term potential despite the recent setback.
Eledon's path forward now depends heavily on its upcoming discussions with regulatory bodies to design a Phase 3 trial. The company expressed confidence that the strong safety data from the Phase 2 study provides a foundation for advancing the program. This $50 million in fresh capital provides the necessary runway to pursue that goal, but the company faces the challenge of convincing investors and regulators of tegoprubart's potential after it missed its primary goal in the mid-stage study.
Prior to the offering, Eledon reported having $93.4 million in cash and equivalents as of September 30, which it had projected would fund operations into late 2026. The new offering significantly extends that runway as it navigates the critical and costly next phase of drug development.