It was more an investment article than anything else. In trying...

It was more an investment article than anything else.

In trying to keep within copyright law, I parsed the text through an AI tool to reword the article. I haven't mucked around with keeping the paragraphs as they were.

Back in mid-2012, I suggested 20c per share for the young yet ambitious biotech company Avita Medical (AVH). Subsequently, stock in the specialist clinic for burns did nothing.That is, until the start of 2019, when it exploded, climbing from 10c at the start of the year to current levels of over 70c, principally due to initial success in cracking the giant US market following regulatory approval.The thing is, I 'd forgotten about it, having ceased coverage some five years ago. When I covered Avita, it had already experienced a number of false starts but was still riding high on the roll its “ReCell” therapy played in the Bali bombings in 2002.

Perth surgeon Fiona Woods developed the procedure, and it has been confirmed that ReCell rescued 28 people in the terrorist attack. Woods had been nominated for Australian of the year in 2005.Skin grafting is the standard treatment for burns and involves a lot of dressing: ReCell is much simpler and safer. It uses a tiny portion of skin and is sprayed onto the wound surface, usually within 30 minutes. Healthy skin will then be cultivated within seven days.

As it was described to me back then by Avita's California-based head of business development, ReCell was a “game changer”.By 2014 all I saw, however, was cash burn, disruption at board level (a new CEO and chairman) and a stock price that had halved to 10c. In late 2014 we told subscribers: “We continue to believe that there is demand for ReCell but AVH is desperate for capital. Hold. ”Oh, and I stopped coverage.

Back then the company's market cap was $31 m. Having raised hundreds of millions in equity and increasing its shares on issue from 370 million to 2.1 billion, Avita has a value on the stockmarket now of $1.6bn.This story highlights important points for would-be medtech investors.The first is that such companies, which often involve‘‘ black box technology'', have the potential to burst into life very quickly.The second is it's prudent to hold a position of size that you can carry. This might be 1 per cent of your portfolio. You can not afford to leave 10 per cent of your portfolio dead for 10 years. The cost of other opportunities is just too high.

Individual investors have the luxury to hold underperforming stocks for the long term.Fund managers, whose jobs are on the line if they 're not beating the market, don't. This has always been the case, but it's more so today, considering the structural shift of active to passive investing (index funds).A medtech you can't miss is the producer of the famed “Green Whistle” analgesic, Medical Developments (MVP).This stock has had a tremendous run, pretty much from the get-go since we first covered it about the same time as we ceased coverage on Avita. In 2014 it was just over a $1 and now it's approaching $11.

We've been banking profits and trading around a core position, having lots of fun doing clever things. It's easy to be clever when a stock goes up over a relatively long period of time.Then there's Pharmaxis (PXS) which focuses on development drugs for inflammation and fibrotics disease. The stock was 15c in mid-2013 and hasn't gone anywhere, despite some great hope. The current price is 11c.

The most recent news was hard to take. In mid-December the giant German pharma Boehringer Ingelheim said it was discontinuing development of a compound it had acquired from Pharmaxis in 2015. The fact a big pharma can simply write off tens of millions of dollars gives you a great deal of perspective as a minority shareholder. The group has four other compounds it is developing, $23 m in cash at last count and no debt. There is still hope.

If you own a biotech or two, don't panic if things don't go your way; don't feel you have to put your hand in your pocket every time the company asks for money, and don't invest too much.Moreover, these stocks are good to have in your portfolio because they have little market-related risk. Right now, with all that is going on, they 're worth considering.