Crowned then Clipped: When the Raise Gets There Before the Rally

Good morning,

Welcome to today’s edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

Retail punters rejoice!

The FDA approved the CLIA Waiver for Lumos Diagnostics point-of-care diagnostics test.

A US$300M swing in the company’s favour.

But…

The jubilation may be short-lived (for retail investors)

The company did not allow the market to trade on the news. Instead, it leveraged the catalysts to immediately raise ~$22M to shore up the balance sheet.

Good for the company. Good for sophisticated investors. Bad for the retail investors.

Now, many retail investors buying into the stock wanted to “bet” on the outcome of this catalyst.

A good result, the stock goes up.

A bad result, the stock goes down.

But by diluting the shareholders and not allowing for true market price discovery once the result is known, the momentum is immediately snuffed out.

Any buying from sophisticated investors on the catalyst no longer happens on screen… it happens in the placement.

Lumos is taking a calculated risk.

Letting the stock trade on news in a volatile market may have prompted a sell-off.

There are essentially 7 reasons that stocks go down on good news:

What Lumos wanted to avoid was selling due to reason #7: Market sentiment is poor.

It’s tough out there for early-stage growth companies.

Capital is tight, and investors are risk-off due to the situation in Iran.

We will never know how the stock would have traded had the company not raised money, but Lumos is hedging its bets.

Money now, rather than risking it later.

Still…

I can’t help but feel like Lumos has been shaking the champagne bottle only to quietly open it over the sink.

This “raise on the news” happened two other times today.

4DMedical secured CE Mark certification for CT: VQ™ and raised $83M.

Firebrick Pharma secured regulatory approval for its Nasodine Nasal Spray in Indonesia… and goes into a trading halt for a raise.

It’s a sign of the times that brokers and companies don’t believe the market has the appetite to put capital in without news to back it up.

In a bull market, these results trade up on momentum.

Now, the after-market story is much harder.

Let’s dive in…

Lumos Diagnostics (ASX: LDX) secures US FDA CLIA waiver for FebriDx®, and raises $22M via a placement at 22.5 cents with a 1 for 2 option.

🪑 While it might not be the result retail investors wanted, the company is now cashed up (plus the US$5.5M milestone payment) to grow into its next valuation.

4DMedical (ASX: 4DX) secures CE Mark certification for CT: VQ™ and raises $83M via private placement at $5.90/share to fund European expansion. (4DX)

🪑 Good result to get another big raise away at a higher price than the $150M one in January. Momentum is real for 4DX.

Yesterday, PainChek (ASX: PCK) reported UK sales growth with 4,000 new licenses, 9% QoQ growth, adding $230,000 ARR. (PCK)

🪑 Up 25% on the news, the market liked this one.

Radiopharm Theranostics (ASX: RAD) doses the first patient in a Phase 1 trial for a radiopharmaceutical targeting advanced prostate cancer. (RAD)

Clinuvel (ASX: CUV) showcases its various vitiligo programs at America’s largest dermatology conference. (CUV)

🪑 I love this image in the announcement of an “artist's impression” of CLINUVEL’s booth. 

What are the odds that the artist is actually ChatGPT?

Firebrick Pharma (ASX: FRE) announces the first regulatory approval for its Nasodine Nasal Spray in Indonesia… then went into a trading halt for a capital raise. (FRE)

🪑 Good result. I had a chat with FRE’s CEO, Peter Molloy, last week, and this is a big milestone for the company. 

The goal is 10 markets in 3 years. Singapore tick. Fiji tick. Indonesia tick.

But as we know, approvals are the first step. The product needs to sell.

AdAlta (ASX:1AD) kicks off engagements with its partner Shanghai Cell Therapy Group to advance the Chinese CAR-T program in Australia. (1AD)

🪑 Good update, this one with the next milestones and timelines is clear. 

Still, the AdCella subsidiary will need to raise the capital to advance the asset. That is the big catalyst I’m watching for here - but this announcement suggests things are on track.

Yesterday, I gave my Biotech Industry Pulse Check at the NWR conference.

Watch the full interview:

See you all next week,

The Armchair Analyst.

PS. Next week, my brother is getting married, so I’ll only have articles out on Monday and Tuesday. The rest of the week is family time!