Small-capbiotech company Orthocell Ltd [ASX:OCC] has entered a...

Small-capbiotech company Orthocell Ltd [ASX:OCC] has entered a trading halt today. A request that will give them time to announce a fresh capital raise.

As itstands we are scant for details. We’ll have to wait till Wednesday (4 December)at the latest for those.

However,news of this cash grab does raise some curious questions. Questions that investors and the market will be eagerly awaiting.

Drugs aren’t cheap

First andforemost we have to say we’re not too surprised by this news. Bioteches arenotorious for burning through cash at incredible rates.

This isbecause drug development is extremely costly. Testing has to be rigorous andthorough, resulting in lengthy and detailed clinical trials.

Plus,many of these small bioteches — like OCC — are making negligible or no revenueduring trials.

Meaning,there is plenty of cash being spent and not much being made. As such, thesecompanies often rely on fresh capital to maintain operations.

Forexample, for the September quarter, OCC burnt through just shy of $2 million. Asizeable spend for a company with an $87.5 million market cap.

However,the company does also have a healthy cash balance. Closing the quarter with$9.3 million worth of cash & cash equivalents. Granted, $6 million of thismoney is locked up in term deposits.

So, ifthese deposits aren’t set to mature for some time, this may be one reason forthe capital raise.

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Alternatively,this capital raise may suggest a bigger move.

OCC didrecently confirm some positive results in early October, after all. Outliningsome great data from their CelGro nerve regeneration trial.

Thoughthe report wasn’t final, the fact that 86% of patients reduced or ceased usingother drugs, suggests CelGro was promising.

As OCC’sManaging Director, Paul Anderson put it: