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This Neil Woodford favourite looks attractive after Q4 update

Shares in ReNeuron (LSE: RENE) jumped by as much as 14% in early deals this morning after the company published two exciting product updates.

Firstly, the company announced this morning that it has successfully developed a cryopreserved formulation of its human retinal progenitor cell therapeutic candidate, a huge milestone quickly as it will enable the cells to be frozen for shipping and storage and easily thawed at the point of clinical use. This development should significantly increase the lifespan of cell therapy treatments, which target degenerative diseases of the retina.

The new formulation has also allowed the firm to expand its clinical programmes in ophthalmology. Expansion of the company’s clinical trials to more patients is planned, and management is looking to test its existing treatment on cone-rod dystrophy patients in an attempt to diversify the business’s markets.

Alongside the above news ReNeuron, which is a favourite of star hedge fund manager Neil Woodford, also announced today that it is planning to start a randomised, placebo-controlled, Phase III clinical trial in the US and Europe in patients who are living with disability post-stroke of its CTX cell therapy candidate for stroke disability. ReNeuron received positive data from its Phase II clinical trial for this product at the end of last year and the commencement of the Phase III testing is a another step closer to commercialisation.

Unfortunately, thanks to the success of these two products, ReNeuron’s management has decided to put the programme for critical limb ischaemia on hold for the time being and concentrate on the “significant opportunity presented by our stroke disability programme and our expanded retinal disease programmes.

Time to buy?

There’s no denying that ReNeuron has made considerable progress with the development of its early-stage treatments over the past two years. Still, as with all early-stage pharmaceutical companies, ReNeuron is a risky investment and the market’s treatment of shares in the company over the past 12 months shows just how cautious investors are about the firm’s prospects. Indeed, since the end of April 2016 shares in ReNeuron have declined by 27% and since April 2015 the shares are down 44%.

However, there may not be much more downside for the shares as at the time of writing the company’s market capitalisation is £70 million, which is only just above the £60 million of cash ReNeuron reported at the end of September 2016. 

Based on historical figures, the firm is burning around £7m in cash every six months, so it’s reasonable to assume that at the end of March ReNeuron had a cash balance of £53m, around 1.7p per share. And even though it can take several years for treatments to move through the testing process, it looks as if ReNeuron has enough cash on hand to remain solvent until its products hit the market.

The bottom line

So overall, if you’re looking for a blue sky growth company that is supported by one of the UK’s most prolific investors and has a cash rich balance sheet, ReNeuron could be a company worthy of further research.

On the road to a million

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.