Curasight (one-pager): Halving of market implied likelihood of succes looks exaggerated

Following the announcement from Curasight last month that the company will not proceed with its rights issue, investors has sent down shares in Curasight sharply and the stock price has continued to slide. All things being equal this implies a lower likelihood for the company to successfully launch its therapeutic strategy, i.e. the regulatory approval and subsequent launch of its uTRACE (diagnostic) and uTREAT (therapeutic). And as long as there is no news of alternate financing plans or partnership deals, uncertainly will most likely remain.

While raising capital was certainly the preferred plan A, a revised plan B to seek alternate financing in some form is now on the table. Assuming this will not have the likely diluting effect as a rights issue, a revised plan does not necessarily have to be that bad. Of course, exploring alternate financing opportunities can be a troublesome, time consuming and (very) expensive exercise, but this is not uncommon practice for biotech companies these days. And importantly; it does not fundamentally change the longer-term potential of Curasight from a medical advancement perspective.

The rights issue was primarily intended to finance the strategic ambition to accelerate a parallel development of uTRACE and uTREAT. Perhaps, this plan will not be initiated at this point, but remember that this ambition represents an additional potential value, ideally bringing forward the perceived value of uTREAT which will now likely just be postponed. Or to be precise; being brought back to the same situation before the revised strategy was made and the right issue was announced. For some investors, a management credibility issue has probably emerged, but the underlying fundamental potential of the company should be more or less unaffected, and certainly not negative of the magnitude that an almost 50 percent drop in the share price would suggest.

Assuming alternate financing will be obtained, and that the development of the pipeline and the overall potential of the medical advancement for Curasight remains intact, we have revisited our model and updated our One-Pager accordingly.

Disclaimer: HC Andersen Capital receives payment from Curasight for a Digital IR/Corporate Visibility subscription agreement. /Claus Thestrup 08:30 AM 16-04-2024.