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Here’s why Ademdus Ltd dropped today

Regenerative medicine and therapeutic vaccine business Admedus Ltd (ASX: AHZ) dropped 4.5% to 8.5 cents in trade today as investors worry about the company’s outlook.

The concern is likely related to the fact that sales of the company’s CardioCel patch used in cardio surgery have not taken off as quickly as might have been expected. Total revenues for the six months to end December last year were $4.8 million, with costs and expenses towering over revenues to suggest the company’s outlook is patchy.

The business posted a net operating cash flow loss of $9.56 million for the most recent six-month period, with only $9.6 million of cash held at the end of the period.

The company has a history of capital raisings and given that it has spent heavily on promoting its CardioCel product, investors will be hoping that the current half sees a sales improvement. Notably, Admedus is still on a big valuation for a company posting half-year revenues of $4.8 million.

The stock has dropped 27% over the last month in response to the financials and muted sales, but it does have one champion in broker Morgans, which in March put a bullish price target on the business of 22 cents. In May 2014 the broker acted as lead manger in Admedus’s most recent share placement and clearly has a favourable view of the biotech business.

It’s possible that Admedus will perform well into the future thanks to the success of CardioCel or one of its therapeutic vaccines, it’s also possible that it will go to the market to raise capital again. Investors should make sure they’re comfortable with the investment case before committing to a purchase.

Admedus joins the likes of Prana Biotechnology Limited (ASX: PBT) and Novogen Limited (ASX: NRT) as a junior biotech hoping to make it big, but there are probably far better options available to investors with a bit of cash to spare.

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Motley Fool contributor Tom Richardson has no financial interest in any company mentioned. You can find him on Twitter @tommyr345

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