CytoMed (NASDAQ: GDTC) stock is down 33% over the last 24 hours. GDTC stock fell in a mixture of real trading time, the aftermarket and now this morning. The reason for the decline is simply that it rose too much yesterday. Sure, there was a piece of news, the award of a patent. But for a pharma research company the patent is the start of the process, there's another 5 to 10 years to go before there's something on the market. So, that 100% CytoMed stock price rise of yesterday was absurd and wasn't going to stand.
As we said about CytoMed stock: “CytoMed (NASDAQ: GDTC) stock is up 100%. The rise in GDTC stock seems to be coming from the award of a patent. This is a very silly idea, quite ridiculous. Of course, it's just great for those who were holding the stock when the price started to rise but that means it's an interesting trading opportunity. And we'd not suggest that the direction of travel is going to be continually upward. For to think so is to miss, entirely, where a patent comes in the medical development process.”
Calling it silly and ridiculous may have been pretty strong but it was also correct.
CytoMed Therapeutics stock price from Google.
To give more of the reasoning there: “But here's the thing. Patent grants come at the beginning of the drug or treatment testing process. Sure, it's great to have one - but there's no evidence this works at all yet. Because that's how the system works. Find something that might be worth testing then apply for the patent. Maybe a year later the patent will be granted. But there's still some 5 to 10 years of testing to do before anything can be put on sale. Phase I, Phase II, Phase III tests before the FDA will even look at authorisation.”
Now it's true that we didn't recommend going short GDTC stock but then we would very rarely do that anyway. The risk reward ratio of the private investor just doesn't strike us as being worth it except in the most outrageous circumstances. It's also true that while it can be obvious that such a stock price rise will reverse it's not wholly obvious how far it will go before it does - so a short position can be taken out by a rising price even if the concept and analysis is entirely correct.
But the basics here are simple enough and true. The award of a patent to a pharma research company is interesting, of curse it is. But it's the start of the decade long process of trying to gain FDA authorisation, not the end of it. Therefore it's of limited value when looking at the stock price or market capitalisation.