RAC - Charts & Price Action, page-329

The amount of capital needed is set by the development costs, the number of shares issued is set by the SP.

If you have a lot of traders in a stock the SP is much more volatile. The more volatile the SP the greater the discount from the SP needs to be for anyone putting capital in. This drives up the number of shares that need to be issued for a given capital need.

More volatile stocks increase the riskiness of the stock as there is more chance the SP will be in a trader driven low when a company needs to raise cash (i.e. increased risk of excessive dilution or bankruptcy). Many biotechs try to overcome this risk by raising huge sums of cash (at massive discounts) rather than raising when they need. This encourages lazy management, but even worse, because of the discount rates applied to the sector, a dollar raised today costs far more than a dollar raised in a year's time.

What is needed is investors with investment horizons the same as the biotech development timeline. Rather ironically because of super the majority of investors are really looking for returns over the long term (10, 20, 30 years), yet when it comes to biotech many (most) are focused on short term trading profits (lots of mums and dads biotech investors trading their SMSF). Biotech done right is the perfect partner for super funds, yet we have managed to somehow match it up with the hottest of hot money.