Why Micro Cap Nemaura Medical Crashed 39.5% Today

The clinical-stage upstart is raising money via a stock offering that dilutes existing investors.

Todd Campbell
Todd Campbell
Dec 18, 2018 at 2:01PM
Health Care

What happened

After announcing it's raising $2.5 million in a stock offering, Nemaura Medical (NASDAQ:NMRD) saw its shares drop 39.5% by 2 p.m. EST on Tuesday.

So what

In September, the company said it was on track to begin selling its sugarBEAT glucose monitor in the United Kingdom if European regulators approve it, and it planned to submit the device for Food and Drug Administration approval in the United States early in 2019. 

A man clasps his hands to his cheeks.

Image source: Getty Images.

Today, management announced it's tapping investors for $2.5 million to help finance its expected European launch and a U.S. clinical trial. Specifically, the company's offering was priced at $1.04 per share, and each share will include a warrant allowing the purchase of an additional share at $1.04 within five years. Nemaura Medical expects this offering will close on or about Thursday, Dec. 20, "subject to satisfaction of customary closing conditions."

The cash will be welcome because Nemaura Medical only has cash and short-term fixed rate balances totaling $3.8 million. The company's general and administrative expenses were $867,499, and its research and development expenses were $1,051,821, in the six months ending Sept. 30.

Now what

SugarBEAT, a noninvasive continuous glucose monitor (CGM) for diabetes patients, hopes to differentiate itself by offering users an option to track their blood sugar every five minutes without the use of a needle to affix the monitor to the skin. Like existing CGMs, sugarBEAT transmits data to a smartphone or other device so that patients and caregivers can adjust insulin as necessary. 

The market for CGM devices is big, but it's also evolving rapidly. And there's no certainty that regulators will sign off on sugarBEAT or that patients will embrace it. Increasingly, medical device companies, including Medtronic (NYSE:MDT) and Tandem Diabetes (NASDAQ:TNDM), are pairing insulin pumps with CGMs to create automated insulin delivery solutions. Those solutions could wind up being more desirable for insulin-intensive patients.

Since Nemaura Medical is a small company with limited financial backing -- and it aims to compete in a marketplace with entrenched, deeper-pocketed foes -- I think watching its progress from the sidelines is best until there's more regulatory insight and evidence it can win away market share.