Why the Orthocell Ltd share price soared 33% this week

The Orthocell Ltd (ASX: OCC) share price continued to soar today. After surging 19% on Tuesday, the shares have risen another 9.6% today to trade at 51.5 cents.

Their total 33.8% gain since the beginning of the week compares to a 2.1% decline for the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) benchmark.

So What: Orthocell is a small bio-therapeutic company which provides innovative approaches to the regeneration of tendon, cartilage and other soft tissue injuries.

Its shares skyrocketed in July 2015 after an article in a popular medical journal provided peer reviewed support for a similar approach to repairing cartilage as is currently offered by Orthocell, which investors thought could highlight or maybe even enhance the group’s future prospects.

After hitting a high of 99 cents however, the shares quickly came off the boil and recently traded as low as 35.5 cents.

Source: Yahoo! Finance

Source: Yahoo! Finance

Now What: The enormous gains enjoyed by the company’s shares over the last couple of days likely relates to an announcement it made on Tuesday. Orthocell said that its ‘Cell Factory’ derived bioactive molecules for the generation of tissue-specific growth factors have been granted patent in the United States.

The company noted that: “More than 500,000 cartilage surgeries are undertaken in the US each year and the use of growth factors to prevent or augment a portion of these surgeries represents an attractive market opportunity for Orthocell.”

Because of this, the company could certainly benefit from a growing and ageing population, together with the prevalence of more cartilage conditions and the push for a greater quality of life. In saying that however, Orthocell remains a very speculative bet with plenty of risk factors which investors should carefully consider before buying.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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