Why Has Biotech Company Floristam's stock Soared About 30% This Month?

biotech company floristam's stock has surged about 30% in the past month, investors are rattled and the stock is concentrating nice trading cycles. however, this move by the stock raises questions. this is the second time the stock has received a strong buy recommendation from a well-known analyst.

last time floristam made an ipo after nice increases and the stock crashed about 26% the next day and about 47% within a month. has anything happened in the last month that justifies the leap we're seeing? there are usually two factors that affect the share price of biotech – psychological and rational.

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unfortunately for investors, only the rational factors leave the stock at the high price, promising a profit over time. in a careful analysis of floristem, it is not clear whether it is possible to see that these factors exist.

why do invest in a floristem now

Pluristem develops technology that allows stem cells to be extracted from embryo placenta, tissue that is currently discarded after birth and is therefore expected to be cheap and easy to obtain.

In addition, as far as we know, there is currently no ethnic problem with the use of this tissue, unlike the use of stem cells originating from the fetus itself. Floristem examines the use of these cells to treat limb injury resulting from atheruma (PAD), with the company having additional products in earlier stages of regulation and development.

Thewhy biotech company floristam's stock has soared company has been given FDA approval and approved by the European EMA for the record in which they intend to use phase 2 and 3clinical trials to treat patients who are in the latest and most acute stage of aortics.

In addition, the company is developing technology that will potentially allow it to grow large amounts of stem cells produced from the placenta more efficiently than existing technology. Also, according to Floristam, this way of growing allows cells to grow more naturally, thus making them more efficient.

The company has 15 approved patents, and dozens more applications, and according to Floristam, the patents cover the growing process, cell properties and their use for various contraindications.

The Company also signed a cooperation agreement with United Therapeutics to use the company's product for restorative treatment of patients with hypertension in the lungs, for a $7 million advance, and another $48 million if the company meets the various milestones and succeeds in future clinical trials.

why not invest in a floristem now

Floristem is just starting phase 3 clinical trials. That is, investors do not yet have any real proof that the product that the company is developing actually works, as opposed to, for example,Protelics.

In addition, contacting both the FDA and EMA at the same time may reduce the time to market the product when approved, but does not increase the chances of the trials being successful. In addition, if you look at the business environment, it is evident that the use of stem cells is not a new field, and it attracts and attracts many companies, so it is not a niche product with few competitors.

Among the company's competitors are Osiris, which has closed a cooperation agreement with giant Genzyme, Mesoblast, which works in partnership with the giant Cephalon recently bought by Teva, and the giant Celgene, which also produces stem cells from the placenta.

while floristem's growing technology allows for large quantities to grow in less space and perhaps at a lower cost than the alternative, we do not know any company with a product that works to avoid allocating more space for the tumor, nor have significant clinical evidence presented at this stage that the way the tumor really makes the cells more suitable for treatment.

that is, it is also necessary for the technology to give a competitive advantage in production and that the cells it produces will do what is expected of them. unlike the brains and the example, where the medical devices it develops, the technology itself is used for treatment. floristem also claims that it is now submitting applications to extend patantine coverage on growth technology until 2023-2026.

the question remains whether coverage today is sufficient to exhaust the revenue flow if marketing approval is received, and what are the chances of obtaining an extension. regarding maturity, in a letter to shareholders from 16/5, the ceo says the company is focused on making the technology commercial from the pilot phase it is currently in.

floristem on the news

floristam has twice received hot buy recommendations from analyst ray dirks, which claims a high target price of $10 per share. in january this year, this analyst's recommendation pushed the stock to $4.2.

floristam initialized more shares, and the share price plunged 26% the next day, reaching $2.24 in less than two months, reflecting a 47% drop in the share price.

dirks compares floristem with mezublast, cutting the target price for the first time. however, in our opinion, such a comparison is impossible to make in the field of biotech, due to the different technologies used by companies, due to the difference between the types of cells produced by each technology, due to the different advances in clinical trials, due to the different contraindications to which each company is directed, and more.

it was also recently published that trachea transplant surgery was performed outside the body from stem cells, which encourages investors in floristem. it does not appear that it is possible to learn from transplanting an organ grown from stem cells outside the patient's body in case of the different injection of stem cells as floristem does.

bottom line

in conclusion, floristem seems to be just getting started in terms of proving its value to investors. the letter to the aforementioned shareholders indicates that the company has approximately $44 million as of march in its coffers, and that floristem estimates that its cash burn rate will only increase this year.

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the company's reports for the first quarter of 2011 showed that there was already an increase of approximately $1.5 million in unfunded operating expenses, from approximately $5.7 million to approximately $7.2 million in the nine months ended march of this year. so it is inevitable that the company will be forced to obtain additional funding for the purpose of continuing its operations, possibly as early as 2012, a move that may dilute investors.

the bottom line is that floristem has not shown scientific or business progress this year, justifying a 30% jump in the past month, and the factors that operated here may be mostly psychological. it is worth, however, following the company's announcements to the stock exchange and look for indications of successes in clinical trials.