The Renalytix (LSE: RENX) share price has meant pain for shareholders in the past few years. From the peaks of 2021, shares in the biotech firm had crashed a whopping 99% by the end of January.
But from market close on 8 February, to the time of writing on 13 February, the price has soared by nearly 500% on the back of progress with US Medicare approval.
Kidney diagnostics
Renalytix is in the business of kidney disease diagnosis. Its flagship is called KidneyIntelX, which has shown promising results so far.
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But there’s been no profit as yet. And until there is, we don’t know if the technology will attract widespread uptake.
As the firm said in a statement about risk: “KidneyIntelX and kidneyintelX.dkd are based on novel artificial intelligence technologies that are rapidly evolving and potential acceptance, utility and clinical practice remains uncertain“.
Hmmm, did they mention artificial intelligence (AI) there? Maybe I can see a reason for the huge share price spike in 2021.
Growth boom
AI is exciting. But it’s also been one of the biggest marketing buzzphrases of the past few years. Couple AI with a biotech growth stock, and I think that was a recipe for boom and bust.
But now that’s in the past, and we might be looking at a new sustainable run. It often takes a second wind for a new growth stock to really settle down to long-term growth.
So what does Renalytix look like now as an investment?
The books
Net sales are forecast to rise strongly in the next few years. But there’s no profit on the cards as far out as 2026. Losses are, at least, expected to fall by about half by then.
The technology does sound good (as far as I understand it). But the company’s finances don’t look great to me. For the year ended June 2023, Renalytix recorded a loss of $46.2m. At least that was down from $56.7m the year before, but there’s still a lot of cash burn happening.
For the first quarter of the current year, the net loss came in at $10.2m. At 30 September, the firm had only $13.9m in cash and equivalents on the books.
New progress
In recent weeks though, we’ve seen more positive data for the uptake and success of KidneyIntelX. It also looks like the techology is on the way to getting approval for Medicare patients in the US.
The firm says that “on February 8, 2024 the Centers for Medicare and Medicaid Services (‘CMS’) published a draft Local Coverage Determination (LCD)“, with a price of $950 per test. A final LCD is expected sometime this year.
This looks like solid progress, and it could bring first profits a bit closer. But, for me, there’s still too much uncertainty and risk.
I don’t know how much more cash the company will need to raise to reach profitability. And that means I’ve no idea how much dilution I might face if I buy now.
