The Volpara Health Technologies Ltd (ASX: VHT) share price is now up 16% since March 28 on the back of news in the U.S. that the influential healthcare regulator the FDA has proposed updated guidelines for breast screening practices to include information on breast density during a mammogram.
Volpara's enterprise software helps medical practitioners identify breast density in a woman with it being considered an important risk indicator as to the accuracy of mammograms in deterring a woman's breast cancer risk.
In other words the denser a woman's breasts the lower the sensitivity of mammography as denser breasts may obscure small masses for example.
The FDA's proposed new guidelines could prove a commercial boon for Volpara's breast density clinical testing application and that's why speculators are bidding the shares higher.
For the quarter ending December 31 2018 Volpara reported an operating loss of NZ$2.7 million on cash receipts of NZ$1.9 million.
It had NZ$17.1 million cash on hand and given the share price surge I'm guessing management might be weighing up a capital raising.
The company is due to provide a trading update on April 11 when it will also provide more detail on how it thinks the potential new regulations could boost its business.
Volpara has a lot of potential, although it might be a little fanciful to draw comparisons to $1.6 billion medical imaging success story Pro Medicus Limited (ASX: PME) right now.
As such investors should be careful what they pay for shares relative to its cash flows.
