Shares of junior biotechnology company, Admedus Ltd (ASX: AHZ), have today entered a trading halt pending the announcement of a capital raising.
Admedus is a $141 million company which is currently in the process of commercialising its flagship tissue regeneration product, CardioCel, whilst simultaneously pursuing a Herpes Simplex Virus and Human Papillomavirus (HPV) vaccines program.
CardioCel, a patch-like product which has been approved for use in heart surgery, has passed clinical trials and is now being marketed to surgeons throughout the world. Unfortunately, it hasn’t been gaining sales traction as quickly as investors had anticipated. This has been reflected in the company’s share price, which is down 34% in the past 12 months.
Whilst the technology is innovative and provides a great growth path for the company, Admedus is losing cash fast.
As fellow Motley Fool writer, Tom Richardson, wrote in February, “Admedus is expecting to receive research and development tax rebates this financial year, but unless CardioCel or other sales pick-up the business looks to be fast running out of cash.”
Just last week, the company announced the rollout of CardioCel into Hong Kong and said, “CardioCel® use continues to expand, with 28 European centres and a further 28 centres in the US using the product, with the product now used in over 60 centers globally,”
However, so far, sales growth hasn’t been up to scratch. In addition, the company’s share count has been ballooning.
I recently sold my shares.
And as I noted last week, “I’m waiting to see how the company reacts to its dwindling cash pile and would prefer to wait until the growth rates turn into meaningful revenues before hitting the buy button.”
Whilst we don’t know the exact details of the capital raising just yet, Admedus shares are probably best avoided, for now.
A safer bet than Admedus…
If you're looking to make capital gains and receive a juicy fully franked dividend in the process, you should know Scott Phillips, lead advisor of Motley Fool Share Advisor, recently named his #1 dividend stock of 2015. It's cheap, growing fast, has a huge cash balance and is currently sporting a grossed-up dividend yield of 5%! Best of all: You can get its name and stock code free in his brand-new investment report!
It's that simple - No credit card details or payment required!
Last chance: click here now for your FREE copy.
Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the companies mentioned in this article. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.