Arch Therapeutics Inc. (OTCBB:ARTH) Couldn’t Retain Its Gains

Arch Therapeutics Inc. (OTCBB:ARTH) managed a pretty spectacular 40% jump on Tuesday, but unfortunately for its supporters, the gains made back then proved unretainable. Why?

As we discussed when the news hit the web, the success in the animal testing of the AC5 Surgical Hemostatic Device™ is certainly an important achievement that should not have gone unnoticed. However, the cascade of buying that it triggered took the ticker further up the charts than was reasonable or logical. As we all know, hype jumps tend not to last and more often than not end in a spectacular crash.

Moreover, while this news does reveal a significant step forward, it is also one of the first steps along that long and winding road.

Who knows how long clinical testing on humans could take, and how much further waiting will be necessary before the AC5 gets cleared by the FDA?

And that’s just one of the concerns that could be expressed about ARTH‘s current situation. Another one is the fact that, according to its filings, ARTH‘s financial situation is hardly enviable as well. Proper medical research is a costly endeavor, and the company’s outstanding debts are already approaching $10 million, while at the same time its cash reserves of little more than $3 million don’t look like they could last for very long.

This means that ARTH will need to find a way to fund its operations before long, and if it chooses to do so through convertible notes, investor value could be in trouble.

Now, this is not to say that ARTH is a bad company and it won’t make it – indeed, at the moment, it has more going for it than most other OTC Markets medical penny stock companies. It doesn’t mean that the volatility it is currently enjoying couldn’t or shouldn’t be exploited for profit, either.

Still, investors should take note of all the information due diligence can provide and use it to their benefit.