Pharmacyte Biotech Inc (OTCMKTS:PMCB) has been posing a number of red flags, which the investors and some analysts have been inattentive to. The company had recently gained quite a lot in the stock market, with its share value almost doubling, after a research note from Goldman Small Cap Research. While there is no doubt that company has been making a quite a number of developments recently, with its drugs for treatment of cancer, but its financing for these projects is under severe scrutiny.

The research stated that Pharmacyte sits in a great position and has the potential to make universal treatments for a number of different types of cancers. The company’s cell in a box has been granted the status of an orphan drug by the FDA, which tremendously subsidizes the cost of development. Unfortunately, what the report does not mention is that Pharmacyte is in a poor financial state. It has just about $1 million in cash, while it is reported to use the same amount per month.

The only way Pharmacyte is able to get that much cash to support its running cost is through equity issuance. As far as revenue is concerned, there has been none for the past 2 fiscal years, with less than $1 million in R&D investments. The current market capital of the company stands at $130 million. Unfortunately, looking at the cash burn rate of the company, investors might be looking at severe dilution in the near future.

However, the company has finally reached a number of important milestones, after waiting years for them. The developments with the clinical trials have definitely raised the company’s profile, but looking at how the company manages its finances, it is highly unlikely that the company would be able to keep its stock near highs. With the high risk of volatility associated with the stock, investors should probably wait for a Pharmacyte product to hit the market, before they invest big in the company.

Pharmacyte Biotech Inc (OTCMKTS:PMCB) closed at $0.151, without reporting any change on May 19. The company has 707.77 million shares being traded in the company with a 52-week range of $0.09-$0.33.