Aptamer (LON: APTA) shares are up 183% in London this morning on the back of what is indeed good news for the company. They've an agreement to make a lateral flow test for Alzheimer's. This is more than just the announcement about this specific test, it's a validation of the basic strategy the company is pursuing.
That announcement: “Aptamer Group plc (AIM: APTA), the developer of novel Optimer® binders to enable innovation in the life sciences industry, and Neuro-Bio, an Oxford-based biotechnology company with a therapeutic focus on neurodegenerative disease, announce success in the development of Optimer binders to enable a lateral flow test for the early diagnosis of Alzheimer's disease.” That is indeed good news. Something that can diagnose likely Alzheimer's 10 years in advance, great. That the base platform of Optimer can be used to do this is even better - what other tests can then be developed on the back of it?
However, however. Such tests do not get put straight onto the market. It's not like getting a CE Mark (fill out the form, pay £500, start selling), this is the sort of thing that needs to be proven in a clinical setting. And the big market will always be the US - this means FDA approval. That's a distinctly capital intensive business, getting through that testing process to authorisation.
Aptamer Group share price from London Stock Exchange
But there's more here. As we discussed about Aptamer a little while ago. They're very short of working capital because people just aren't closing deals. Cashflow is tight therefore. That's what caused that 50% and more drop in the share price 6 weeks back in that chart above.
So, we've a capital intensive stage of the company coming up, the attempt to get these tests authorised. We've also a company in need of just more basic working capital. And finally we've a company whose share price has just gone up 183% in a day.
Our diagnosis here would be that there's going to be a capital raise in 3…2…1…
Now of course, we cannot be entirely sure about this. But we would suggest a little caution in chasing Aptamer ever higher on this news about the Alzheimer's test. Yes, it is good news, assuming it really does work it will make good money. But only after authorisation and that's going to require more capital. And when better to raise more money than when the value of the company has just tripled?
Well, quite. The management would almost be derelict in their duty if they didn't try to raise money now. So, a reasonable assumption is that there will be a capital raise shortly.
