At time of writing, the share price of Orthocell Ltd [ASX:OCC] is up 2.46%, trading at 62.5 cents per share.
Despite a recent pullback, it has been an exciting ride for investors with the Orthocell share price going through the roof on 8 May:
Today we will be looking at what caused Orthocell’s remarkable rise and its prospects going forward.
Orthocell share price reacts to nerve regeneration trial
The Orthocell share price spike started with news that four patients had successfully completed a nerve regeneration clinical trial using the company’s CelGro® treatment.
As the announcement noted:
‘Prior to surgery with CelGro®, the first four patients scored a muscle power of zero (0), with complete paralysis or significant difficulties in performing activities of daily living. Following CelGro® nerve regeneration treatment, the first four patients all scored a muscle power of four (4), representing an 83% improvement.
‘The very positive results indicate CelGro® can accelerate and augment the repair of damaged or severed nerves. Tensionless repair of peripheral nerves is of significant clinical interest to the orthopaedic community because of the potential improvements in efficiency and efficacy of surgical procedures. Tensionless repair will reduce surgery time and the risk of additional trauma to soft tissue through the use of sutures.’
CelGro® is a collagen medical device platform for soft tissue regeneration and repair applications.
You can see what this looks like below with regards to soft tissue repair:
For investors, the most exciting thing about the successful clinical trial is that it has the potential to massively expand Orthocell’s addressable market — that is the revenue opportunity for a product or service.
In their half-yearly report, Orthocell said that the addressable market for CelGro® was $2.6 billion.
This has now jumped out another $1.1 billion with the nerve regeneration opportunity.
Orthocell estimates that approximately 700,000 procedures that could use CelGro® are completed each year.
The expansion of the uses of CelGro® beyond the dental market can only be seen as good news for the company.
The company had previously been focusing on dental bone and soft tissue repair.
What are Orthocell’s prospects?
While the recent pullback may have come as a shock — it is understandable as many long-term holders could be evaluating their position after suffering over the course of the year.
Going forward, it seems at this juncture the company is now focused on two primary things — marketing and future clinical trials.
An upcoming announcement of the results of the rest of the ongoing trial could also prove a boon with the company noting that:
‘The study involves 20 patients with traumatic nerve injury requiring surgical repair. Orthocell has treated 75% of patients (15 of 20), with recruitment expected to be completed by Q2 CY2019.’
Meanwhile, the dental market in Europe remains a focus and it is seeking regulatory approval for this application in the US and Australia.
Over the coming weeks, it is possible you may see brief pullbacks as investors cash in on a spectacular rise.
That being said, this particular biotech stock seems to have a more solid base (and could keep going up at a more subdued pace) than previous biotech darling Biotron Ltd [ASX:BIT].
For Money Morning