Orthocell Ltd (ASX: OCC), has been slapped with a 'please explain' from the ASX as the market's operator as a result of the explosive behaviour of its share price recently.
The tissue-regenerative biomedical group was first issued a speeding ticket by the ASX on 6 July when its shares rose from 33 cents to 38 cents on unusually high trading volumes. Since then however, Orthocell's shares have surged another 132% (almost tripling since the beginning of the month) and are now trading at 88 cents.
They're up 14.3% today alone, compared to a 0.1% decline for the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO).
So What: Although it isn't entirely unusual for a company with such a small market value to rocket in price in such a short period of time, the ASX appears to be concerned with an update provided by the group on 16 July relating to the publication of data from a collaborative research project in a medical journal, titled Journal of Tissue Engineering and Regenerative Medicine.
The article provided peer reviewed support for a similar approach to repairing cartilage as is currently offered by Orthocell through its Ortho-ACI cartilage repair product, potentially enhancing the group's future prospects.
Indeed, one of the requirements for listing on the Australian Securities Exchange is that all entities must immediately provide the ASX with information that a 'reasonable person' would expect to have a material effect on the price or value of the company and its securities.
Orthocell confirmed that it is in compliance with these Listing Rules and its Continuous Disclosure obligations, stating that it had promptly disclosed the research information even though it didn't consider that it was under any obligation to do so.
Now What: There is a huge potential market that Orthocell could address over the coming years which is enhanced by the ageing populations across many of the world's civilised nations, together with the search for greater living standards.
Indeed, the company itself said: "There appears to have been increased recent global interest in the regenerative medicine sector in which the Entity operates". This may be demonstrated by recent large transactions in the sector and a change in legislation in Japan to "provide a more rapid approval process for regenerative medicine therapies."
With a market capitalisation of less than $50 million, there could still be ample room for Orthocell to continue growing. In saying that however, the biomedical sector is renowned for its volatility and a heavy pullback could also be on the cards. Investors would be wise to only ever invest an amount they can comfortably afford to lose, whilst always ensuring they maintain a well-diversified portfolio.
