Why did the Synairgen share price skyrocket?

Synairgen is a pharmaceutical drug development company that focuses on discovering new treatments for respiratory diseases. In 2020, it adapted its knowledge and talent to produce SNG001 – an advanced treatment for Covid-19 patients with severe symptoms.

There are numerous drugs already on the market to ease the impact of the virus. However, what makes SNG001 unique is the fact that it’s inhaled rather than injected. Thus the medicine can be directly absorbed into the lungs.

The primary catalyst behind Synairgen’s soaring share price was the announcement that SNG001 successfully completed its phase II trials. The results of which showed a 79% reduction in the need for ventilation machines amongst patients. Needless to say, the drug shows promise. And it would seem the FDA in the US agrees as it has greenlit the treatment for fast-track approval.

Last month, Synairgen began recruiting for phase II/III trials to gather more data and target patients at home instead of in a hospital environment.

If SNG001 is approved, City analysts have forecast that total revenue for 2021 will be around £150m, some £47m of which will be profit. Comparing that to Synairgen’s current share price places the P/E ratio at 7.4. To me, that looks relatively cheap for a high-growth biotech stock. But, as always, young drug development companies carry a lot of risk.

Discovering new medicines is a high-risk process

The results from the phase II trials are undoubtedly positive. However, they’re far from conclusive. After all, only 101 patients were involved in the study. As this sample size grows into the thousands for phase III, more accurate results will be acquired. And they may not be as positive as the earlier phases indicated.

It’s entirely possible for drugs in phase III to be rejected by regulators or simply become economically unviable after approval. This is particularly problematic for Synairgen as it has no other products in its portfolio.

The company has formed a handful of partnerships over the years and provides some service work. But ultimately, it lacks any form of reliable or recurring income. As such, it is continually having to raise additional funding to keep the lights on.

Suppose SNG001 fails to deliver the desired results? In that case, Synairgen will have to start the typical 10-year drug development cycle basically from scratch. As I don’t think investors are that patient, this will likely lead to a collapse in the Synairgen share price.

The bottom line

Personally, I think buying shares in Synairgen at its current price looks more like speculation than investing. The firm has many challenges ahead, and failing to overcome them could be catastrophic for the entire business.

For now, I’ll be keeping a close eye on it throughout 2021. But I’m not adding it to my portfolio yet.

The post The Synairgen share price is up 680% in a year! Should I buy now? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Synairgen. 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.

Stock market goals

Forget the quick wins — good investing rests on solid foundations and knowing what you want to achieve before throwing every penny you have at stocks. Simply ‘wanting to be rich’ isn’t enough because it won’t help you refine your strategy (there are many ways of making money in the markets).

So, what are your financial goals? Is it saving for retirement in the future or generating income now? Are you saving for your child’s university tuition fees or a deposit on a house?

Just as important is knowing how much energy you’re willing to commit to investing. There’s little point buying single company stocks if you’re not prepared to follow their progress (or lack of). You’ll probably be better off buying funds managed by professionals or, alternatively, low-cost index trackers and doing something else with your time. 

Speaking of which…

Take advantage of time

One powerful advantage retail investors have over the professionals is that the latter’s scorecards are continually scrutinised. If they don’t perform, their careers are cut short. This is unfortunate since investing success can/should only really be judged over years and ideally decades. The short-term moves of stock markets tend to be pretty meaningless.

As retail investors, we don’t have this problem. They’ll be no one to hand us a P45 if we underperform for a while.

More importantly, we can use this to our advantage through buying shares in undervalued companies experiencing temporary problems. Assuming all goes well, we’ll reap the rewards later down the line.

Diversify (but not too much)

Throwing all your cash at only a few stocks is a recipe for ruin, particularly if they’re in volatile sectors such as oil and gas or biotech. 

Having said this, being overly diversified can hold you back too. The more shares you own, the less you deviate from the market as a whole.

To beat the stock market, you need to do something different to the market. It’s no surprise, therefore, that some of the UK’s most successful money managers are those who only invest in their best ideas. Think 20-30 stocks…think Terry Smith or Nick Train. 

There’s no magic bullet when it comes to defining how many shares to hold but here’s a simple acid test: if you’re losing sleep over your portfolio, you’re likely taking on too much risk.

Stick to your script

It can be easy to deviate from your own script in pursuit of riches, especially when others appear to be doubling their wealth overnight. How many usually-calm private investors were rushing to invest in Synairgen last week? Quite a few, I imagine.

Even the professionals sometimes struggle to do it and they’re managing other peoples’ money (see Neil Woodford’s fall from grace last year).

Don’t follow the herd. Avoid unnecessary commission costs that erode returns. Learn to sit on your hands. Learn to buy and hold. 

The post Learning how to invest in the stock market? Read this now! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the 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.

Before explaining why, let’s have a recap.

What’s behind Synairgen’s rise?

Monday’s share price jump followed news of a successful trial of a treatment. labelled SNG001 (an inhaled dosage of interferon beta), in patients who had been hospitalised as a result of coronavirus.

Results showed those who received the drug in a double-blind trial (where neither the patient nor the clinician knows who is getting what) had a 79% lower risk of severe disease compared to those who received the placebo. Those on SNG001 were also more than twice as likely to recover than those who didn’t receive the drug.  

With concerns that the arrival of winter could bring about a fresh wave of the coronavirus, news that the treatment helps the lungs to tackle the virus, even in the event of co-infection (e.g. if a person catches flu), is clearly very positive. 

Can the share price keep rising?

Here, from an investment point of view, is where things get tricky.

What’s important to remember — and the company clarified today — is that the recent positive outcome was a Phase 2 trial. This phase is “designed to test the efficacy of a drug and takes place before the drug is approved or able to be marketed.” In other words, a lot of questions still need answering.

While positive that patients in both groups were matched with each other in things like age, this trial involved just 101 patients — a very small sample. Also, all were recruited in the UK, which means results might not be generalisable to other countries.

Nor did every finding from the trial reach statistical significance. In other words, we can’t be absolutely sure that what was found wasn’t just down to luck. Naturally, all this makes a much larger trial of the treatment (Phase 3 of drug development) absolutely essential. 

In short, I think SNG001 is still far from the sure thing the market presumably now believes it to be. For me, this has implications for what the Synairgen share price will do next.

The problem is that not everyone will want to stick around for the ride. It will, after all, be a few weeks before the company is ready to reveal the outcome of further analyses. If I were a trader and knew this, I’d seriously consider banking some profit on Synairgen.

And if I were a Foolish investor buying stocks for the long term (and I am), I’d be sure to appreciate that some in the market work on much shorter timescales and act (or not act) accordingly.

Buyer beware

Synairgen could certainly still reward those buying in now. However, I would caution anyone against thinking they can make easy money in a set period of time. It’s very easy to find examples of promising treatments that failed to live up to the initial hype and progress beyond Phase 3.

We must not allow our desire for a quick profit to override our true tolerance for risk. If you’re going to expect anything from the share price, expect volatility. Don’t bet the ranch and ensure you’re diversified elsewhere.

The post The Synairgen share price has rocketed 500% in two days! Here’s what I’d do now appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Paul Summers has no position in any of the 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.

Respiratory focus

Synairgen (LSE: SNG) is a drug development company founded by three University of Southampton professors, the business focusing on treating respiratory diseases such as asthma. The company has a potential asthma treatment which is being developed with AstraZeneca after signing a licensing and development deal in 2014. The deal is worth up to $232m plus royalties and the drug entered Phase IIa trials in July 2015. Synairgen hopes to release results on the trials sometime in 2017.

The inhaled treatment developed by Synairgen has the potential to be a blockbuster product. Many believe if the drug is approved then AstraZeneca may take over Synairgen to acquire full ownership of the drug. This isn’t the only project in Synairgen’s pipeline: the company recently signed a research collaboration with Pharmaxis to develop a treatment for a fatal lung disease. Chairman Simon Shaw recently commented that “our collaboration with Pharmaxis has begun to yield positive results and we anticipate a Phase I clinical trial in 2017“. 

Lupus treatment

Immupharma (LSE: IMM) is in the process of developing its Lupuzor drug which is currently in Phase III clinical trials at 43 sites across the US and Europe. The company is aiming to release “top line results” by the end of 2017. The potential of the drug is huge and the company thinks the Lupus market has the potential for multi-billion dollar sales. The company made a £3.9m loss last year mainly due to research and development costs which is perfectly normal for a junior pharma stock. Immupharama recently carried out a £8.4m funding round which should fund the company right through to 2018.  It’s clear to me that Immupharama has the potential to make huge returns for shareholders if Lupuzor is brought to the market. Investors should keep an eye on the company next year when initial trial results are expected. 

Exciting pipeline

AstraZeneca is different to the two juniors as it has a pipeline full of new and exciting drugs going through clinical trials. The company pays a chunky 4.8% dividend and trades on an attractive 14.2 times earnings. AstraZeneca has the firepower to make acquisitions in the future which should boost earnings and keep the company moving forward with new drugs and treatments. The defensive qualities of the stock should mean it holds up well after the EU referendum on the 23rd June, and investors looking to shelter cash should take a serious look at the company. Although AstraZeneca is unlikely to give you the huge gains that are possible with Synairgen and Immupharma, it could be a great core holding for the long term. 

Investing in junior pharma stocks is a risky game. The rewards could be massive, but most drugs never make it to market and companies can lose millions in research and development. 

The post Are Synairgen plc or Immupharma plc better investments than AstraZeneca plc? appeared first on The Twelfth Magpie.

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Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.