Profit from ReNeuron's short-term slide

Having last year secured £33m of funding through government grants and a £25m share issue at 2.5p, ReNeuron is planning to transform itself from an early-stage research outfit into a full-blown clinical development business by the end of 2014. While the focus on building up its own clinical data means ReNeuron is now unlikely to announce any near-term deals, the strategy should enhance the company's attractions as an acquisition target and deliver the most value to shareholders in the long term.

Promising foundations are already in place to help ReNeuron realise its objective. The company's star product is its ReN001 stroke drug, which it plans to take into second-stage trials in the first half of this year after initial treatment of patients proved effective in 2013. If a second study delivers more positive data, which it is hoped will come through in the second half of 2015, the wider pharmaceuticals and biotechnology market will be forced to sit up and take notice.

The company is also expected to start Phase I trials for its critical-limb-ischaemia drug ReN009 in the first half after publishing strong pre-clinical data last year. And, this month, ReNeuron announced encouraging pre-clinical data for its anti-blindness treatment ReN003, which received the commercially important 'Orphan Drug Designation' last year.

A number of factors should help the rapid commercialisation of ReNeuron's drugs if trials prove positive. The US, and particularly Japan, have made considerable efforts to fast-track the development of regenerative medicines, such as those ReNeuron is working on. The latter has made it easier for late-stage clinical treatments to enter the market, even if there is only limited proof of the drug's efficacy in humans. And while Europe is lagging behind, the pressure is on for it to play catch-up or lose its competitive edge.

Product development should also be helped by an earlier than planned switch to developing 'cryopreserved' - 'frozen' in layman's terms - versions of its drugs. This will reduce product costs and lead to earlier product launches. A £7.8m grant from the Welsh government is also helping ReNeuron fund the building of a world-class cell manufacturing and development facility. And, importantly, given the cash-consuming nature of loss-making drug development operations, the recent round of fundraising should finance the company until the fourth quarter of 2016, well after data is expected from the ReN001 and ReN009 trials.