It often seems thread is full of stale bulls suffering from PTSD…..the biotech market has been in free fall generally and the relentless downward momentum in the share price have caused many of the most loyal believers to trim their holdings due to recent heightened geopolitical and economic risks.
The whole point of being in the healthcare sector, is that products such as Remplir for nerve, are not discretionary purchases. Whether you have a car accident, workplace injury or get blown up by an IED, the restoration of nerve function/reduction in nerve pain , becomes the priority for any patient . This is not the same as for Striate, where many alternative dental implants will do …but some are a little better than others. I have had several dental implants and the rate of healing was just an inconvenience which i hardly gave a second thought to. Assuming the links given by many posters are correct, TGA approval is hopefully the start of a series of regulatory approvals in other jurisdictions. I doubt that we will get full approval in the US for at least another 2 years….but many other Asian countries (with the exception of Singapore) should now be able to fast track approval without the need for an exhaustive process. I know , because I asked the question of the Company some months ago. Investors are not stupid , they can understand that a market like Australia , with a population of 25m, is the precursor to widespread acceptance in other markets. This is indeed , a watershed moment . Let’s say, for example, If Orthocell , looks on course to shortly achieve a run rate of $2-3m of profit just from the Australia nerve repair market in this indication… within two years we could be looking at several million dollars , on a regional basis. If the Company is successful with a “de novo” application in the US allowing a premium pricing structure, the rewards could be so much larger…so I think the journey to a $1bn market capitalisation has begun in earnest today !
All this being said….the tendency for stale bulls to “sell the news”…is typical of how jaundiced investors can become . Orthocell’s market cap is a pittance against a huge market opportunity. How big the addressable market for Remplir is, is open to different interpretations. In its October investor presentation, the management referred to a $7.5 bn market in nerve repair in the US, Japan and EU. However, we need to qualify that opportunity further , by reminding ourselves that injuries over 20mm are not likely to be suitable for using this procedure at the current time. That being said, Remplir’s has improved efficacy rates, where clinical studies involving quadriplegics ,have shown over 75% of patients using achieve MRC Grade 3/4 recovery. This is unmatched in competitor therapies which often take twice as long to reach lower levels of their peak efficacy. The improved performance characteristics , should allow for somewhat better pricing than competing products…based on a cost benefit analysis…but, in my opinion there is unlikely to be huge differentiation, other than in very specialist areas like tetraplegia…where a typical treatment cost could be as high a $40k per person.
We will probably have to wait a few months to see what pricing reimbursement levels are set in Australia…at which time analysts can sharpen their pencils ..and start to finesse their valuations. For those geniuses looking to sell the news, I suspect some of you have nothing to sell , having already sold on the way down…but I wish you well trying to get back in. There is often a disconnect between positive announcements and small companies share prices. This is partly due to the whole process of institutional due diligence , where many boxes must be ticked before a new purchase for a portfolio can be made. I believe the current share price is particularly low in the last few months, because of options granted years ago to outside advisors/KOLS ? which were sold into the market just before expiry . This can be evidenced by the increase in the average number of shares in issue …and the additional funds shown on the cash flow statements.
Moving forward , Orthocell is well capitalised and has a decent cash balances for the current scale of activities, but it would not surprise me if they did an opportunistic small raise at a later stage, to further strengthen the balance sheet to fund US expansion ….if the price recovers substantially . Alternatively , alternative investment structures , such as royalty deals or distribution agreements , should be able to finance the spectacular growth prospects. Post Australian approval for Remplir and assuming a reasonable US distributor for Striate, anything less than a US $100m valuation right now , even in current market conditions, would appear churlish to me. The gross margins for this product should be in the nineties and post a US approval , we should be multiples of that valuation.
Lastly, no one has talked about the other elephant in the room . How broad is the TGA approval for indication of use ? If the TGA has sanctioned Remplir’s use, across a wide spectrum of peripheral nerve repair injuries, the rewards will be that much greater. We can look forward to being imminently briefed, by the Company on our regulatory authorisation for use in Australia !
Some of my worst short term investment decisions have turned out to be my best investments over the longer term .In the biotech market, its all about timing …and having exposure to a stock at key moments in the validation process , leading to inflection points in valuation. Some share prices will take longer than others to react to great news ….that is an opportunity not a concern . Try to remember why you first bought this share…not the pain you have experienced in the intervening period. Good luck to all shareholders . It is going to be an interesting ride in the next few months. OP
Please do not rely on the facts or opinions expressed in the above post when making an investment decision. I could be the office cleaner . Please do your own research.
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