Why the Admedus Ltd share price is 14% higher today

Biotech company Admedus Ltd (ASX:AHZ) shares surge higher following the release of its fourth quarter report. Is it time to get on board?

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Whilst the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) may have started the day relatively flat, it certainly wasn’t the case for Admedus Ltd (ASX: AHZ). The share price of the biotech company rocketed higher at the open and is currently up by over 14% at present.

The jump in its share price comes following the release of its fourth quarter report which showed a 40% increase in full year sales to $14.1 million. Furthermore, its full year forecast of sales growth of at least 50% in FY 2017 has no doubt gone down well with investors.

This growth is largely the result of its Infusion business being awarded a 5-year contract with the new Royal Adelaide Hospital for the installation of the arcomed Chroma Infusion pump system. It expects this contract to have a material impact on annual revenue starting in the first quarter of FY 2017.

Chairman and interim CEO Wayne Paterson anticipates its CardioCel product to also continue growing sales on a quarter on quarter basis. Although sales of the regenerative heart patch may have underwhelmed thus far, the company expects it to play a part in helping the company achieve profitability in FY 2018.

For the quarter the company reported a net cash loss of $4.4 million. This left it with a cash balance of $8.8 million and $3.5 million in research and development rebates expected in FY 2017. Thankfully for shareholders cost cutting is expected to reduce operating costs by $12 million during FY 2017, which should hopefully mean the company doesn’t have to initiate any capital raising in the next 12 months.

Whilst I think there are positives to be found in an investment in Admedus, in the sector I personally have a preference for Pro Medicus Limited (ASX: PME) and REVA Medical Inc (ASX: RVA). Both companies are well worth researching further in my opinion.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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