Nothing could make speculative investors more excited than the words "revolutionary new field of cancer treatment" splashed across a small company's investor presentation.
Investors have piled into global biotechnology group Prima Biomed Limited (ASX: PRR) this morning, bidding the shares as much as 91% higher to 6.5 cents each. The stock has since retreated to 5.3 cents, although it is still trading nearly 56% higher than yesterday's closing price, and a staggering 141% higher since Monday.
In an announcement to the market yesterday, the company said that trial results for a potential ovarian cancer vaccine, CVac, had shown a significantly better chance of survival for patients going through remission for the second time. In fact, the data implied that the treatment could add "at least 16 months" to the median survival rate for patients treated with CVac.
Today, the company said that it is planning to raise $20 million to fund the commencement of two important clinical studies for its lead product, IMP321.
It said that Ridgeback Capital Investments, which is a US-based specialist healthcare investor, will invest $15 million in the business while the Board is considering a share purchase plan (SPP) to shareholders which could yield another $5 million.
Should you buy?
As I explained in yesterday's update regarding the promising CVac results, biotechnology companies can reap enormous rewards for investors when trial results go well – as is the case with Prima Biomed this week. But even larger players in the space such as Sirtex Medical Limited (ASX: SRX) and ResMed Inc. (CHESS) (ASX: RMD) have shown just how damaging a poor trial result can be to the stock's price.
Prima Biomed has shown promise, but it is still in the early stages of testing the potential vaccine, which makes it a risky investment prospect. While you could look to put a small amount of cash to work in the hope that further success is achieved, you would certainly be wise to limit your exposure and maintain a well-diversified portfolio at all times.
