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Could this small cap double after posting a £2.7m LOSS?

Shares of medical technology company Angle (LSE: AGL) rose as much as 8% in morning trading, despite it announcing a first-half loss of £2.7m. The market may have overlooked that in light of the company also reporting encouraging progress towards commercialising its liquid biopsy technology, Parsortix.

Considerable potential

Angle said there was an increase in research use, with many leading cancer centres “evaluating and adopting Parsortix into their research and clinical studies“. Currently, this provides Angle’s revenue, which is relatively low — just £219,000 for the six months ended 31 October — but the commercialisation opportunity is far more substantial.

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To this end, the company has initiated two 200 patient studies in Europe and the US for its first clinical application — the detection of ovarian cancer. In a separate release, it reported a positive interim evaluation of the first 50 patients in both studies and said headline data from the full studies is expected to be available in Q2 this year.

There are no concerns about Angle’s immediate funding needs, as it raised £10.2m at 64.5p a share last May and today reported cash on the balance sheet of £9.7m at 31 October.

Speculative proposition

The company’s market cap is £39m at its current share price of 52p, compared with a high of over 100p a couple of years ago. This is a speculative investment proposition, so the shares could easily double on sentiment alone, but such a rise could also be justified by fundamentals in due course.

But, of course, any setback in commercialising its technology could lead the shares to plummet. Angle estimates that the market value available to it, if its ovarian cancer test were fully adopted, would be in excess of £300m a year.

With the company also working to address breast cancer and prostrate cancer, there’s clearly considerable potential. But, at this stage of its development, it can only be rated as a ‘speculative buy’.

Advanced retreats

Another pioneering — and currently loss-making — small cap in the cancer field is Advanced Oncotherapy (LSE: AVO). It’s valued about the same as Angle by the market, having a market cap of £41m at a share price of 57p.

Advanced Oncotherapy saw its shares crash 20% on Tuesday after it revealed that it had been informed the day before that Chinese company Sinophi Healthcare “wished to terminate” an order for Advanced Oncotherapy’s LIGHT proton therapy machines.

However, Sinophi had already indicated this in an update on its website as long ago as 26 November, citing “delays in the proton therapy machine delivery schedules”. Furthermore, Sinophi suggested that Advanced Oncotherapy didn’t have “a working prototype capable of commercialization” and that its technology was “still in the research and development stage”.

Serious concern

If correct, this has to be a serious concern for investors, not only because the technology is less developed than imagined, but also because an empty order book isn’t going to help Advanced Oncotherapy in negotiations with potential lenders for funds it desperately needs. It’s also going to need cash for legal costs, because it believes Sinophi has “no legal basis” for terminating the orders and will “take appropriate action”.

For these reasons, I believe Advanced Oncotherapy is best avoided by investors.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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