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Why the Biotron Limited share price cratered today

One of the most popular speculative shares on the ASX over recent months in Biotron Limited (ASX: BIT) lost 22% or 4.5 cents to close at 16.5 cents in trade today even after the biotech presented some data from its Phase 2 clinical trial titled “Significant Immunological Outcomes after 12 weeks of BIT225 and Antiretroviral Therapy in an HIV-1 Phase 2 Clinical Trial”.

In summary the healthcare researcher presented some of the trial results for its BIT225 drug to an HIV treatment research conference in Miami, Florida.

According to Biotron the data from the trial shows that “Bit225 is having a unique effect in patients, over and above viral suppression seen with current antiretroviral drugs…..The data shows that there are significant immunological benefits in patients receiving antiretroviral drugs with 200 mg BIT225 compared to antiretroviral drugs plus placebo“.

This data sounds exciting, which makes the share price fall today curious, although it should be noted that the data was already public knowledge and in the market beforehand.

The data is also only from a Phase 2 trial, with biotechnology companies normally having to complete three different trial phases successfully before they can apply to a healthcare regulator such as the US Food and Drug Administration (FDA) to have their treatment or therapy approved for commercial sale.

A phase 2 trial is generally limited in its scope in terms of patient numbers, researchers involved, etc, to save on costs as clinical trials can be very expensive and often end in failure.

However, it now seems that Biotron Limited may be able to press ahead with a large scale Phase 3 trial for the BIT225 drug.

One major problem is funding, and Biotron is openly seeking a funding partner to “support future clinical trial evaluations to further characterise a clinical impact on viral eradication”.

Unfortunately as at September 30, 2018 the company had just $896,000 cash in hand on its balance sheet, no revenues and a cash outflow of $606,000 for the quarter.

However on October 17 it reported it has raised $4.7 million via an options underwriting agreement with CPS Capital Group. It did concede though that it will still need a commercial partner to further fund more clinical trials.

The stock has risen from just 2 cents prior to the original September 28 announcement about the positive data from the Phase 2 trial.

Given its financial position and early stage status it looks a high-risk bet as biotech investing is speculative by nature. Others that have struggled to deliver positive returns for investors include Admedus Ltd (ASX: AHZ) and Mesoblast limited (ASX: MSB).

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Motley Fool contributor Yulia Mosaleva has no position in any of the 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 Scott Phillips.