Scancell Holdings (LSE: SCLP) had passed below my radar this year — but in the past month or so, the share price has soared.
Since late October, it’s more than doubled, reversing a weak year in general and propelling the stock to a 12-month gain of 30%. And over the past five years, we’re looking at a 118% rise.
Is Scancell one of those things many investors hope for at least once in their careers? A penny stock set to become a multibagger? First, though, what’s it all about?
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Scancell describes itself as a “clinical stage biopharmaceutical company.” It uses its immune system expertise to develop “truly novel medicines” targeting cancer and infectious diseases.
The company’s approach results in the development of vaccines and monoclonal antibodies. And it seems there’s been a fair bit of progress over the course of 2022.
Novel immunology
We’ve seen how novel approaches to vaccines can get us quick results during the Covid pandemic. The research cycle was greatly accelerated due to the urgency. But the unprecedented vaccine success has shown the things that could be possible with this kind of technology.
At this point, though, the risk-spotting side of me is tapping my shoulder and trying to give me a warning. It’s very easy to get caught up in new biotech developments, and assume every company doing research in the same field will be successful.
Just because one gold prospector has struck it rich doesn’t mean the one in the next valley will do so too.
Optimism
With that caution aside, Scancell has been sharing upbeat news with investors. Most recently, the company has licensed technology that should allow it to reach a Phase 1 clinical study of its Modi-2 cancer candidate by 2024.
Prior to that, we heard that the first patient in the firm’s ModiFY Phase 1 trial has been dosed.
Scancell has also recently signed a licence agreement for US biotech company Genmab to use its GlyMab development technology. Scancell could receive up to $624m depending on Genmab’s success with it.
Bottom line
This all sounds promising to me — though I have to remind myself that I don’t know anywhere near enough to understand all the clever biotech details. But we need to get down to the hard cold facts of cash.
For the year ended 30 April 2022, Scancell posted an operating loss of £13.3m. That’s up from the previous year’s £8.8m, and reflects the cost of the company’s three ongoing clinical trials. There are no profits forecast for at least the next two years, so it looks like we’ll be in the cash burn phase for a while yet.
The £28.7m on the balance sheet in April (down from £41.1m) should last for now. But it looks to me like more cash will probably be needed before Scancell turns a profit. And that could mean dilution for existing shareholders.
Verdict?
I’m seeing a potential biotech growth stock, but not yet profitable and still burning cash. I’ve seen plenty before in the same situation. But I’ve never had any way to tell which ones would turn into good buys, and which would mean goodbye to cash.
