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The Synairgen share price is flying! Here’s what I’d do now

Roland Head
·3-min read
Risk reward ratio / risk management concept
Risk reward ratio / risk management concept

The Synairgen (LSE: SNG) share price surged higher on Friday morning and is up by 28% as I write. The stock rose after positive results from the trial of a drug used to treat coronavirus patients were published in The Lancet Respiratory Medicine journal.

The trial results showed that coronavirus patients who received Synairgen’s SNG001 “inhaled formulation of interferon beta-1a” had “greater odds of improvement and recovered more quickly”.

This news isn’t a complete surprise. Synairgen’s share price rose by over 400% in one day in July when the company originally disclosed the results of this trial.

But the publication of the results in a respected, peer-reviewed journal provides an extra layer of credibility. I believe it could pave the way for the larger-scale phase-three trial that would be needed to gain commercial approval.

After the vaccine – Is it too late?

The stock market has surged this week on hopes that a Covid-19 vaccine produced by US pharma giant Pfizer could help bring the coronavirus pandemic to an end. But I think the reality is that even in a best-case scenario, rolling out the vaccine will take time and it will never be 100% effective.

In the meantime, people will continue to catch coronavirus and need treatment. The latest UK government data show that there are currently more than 14,000 Covid patients in UK hospitals. Many other countries have similar numbers.

Synairgen’s share price slumped on Monday when the vaccine news emerged. But I think it’s too soon to forget about the need for other treatments. I think there’s a good chance that SNG001 could still find a sizeable commercial market.

What happens next?

The SNG001 trial that’s being reported on today was a phase-two trial. This means it was relatively small, with just 101 patients. Drug development is a three-stage process. For SNG001 to progress towards commercial approval, a larger phase-three trial will be required.

I don’t know how long that might take to complete. But I think it’s worth looking at the broader picture. Before coronavirus took hold at the start of this year, Synairgen was trialling SNG001 for use with patients suffering from COPD, a chronic lung disease.

My understanding is that this has been put on the backburner so the firm can focus on Covid-19. But I think it’s fair to say that the work being done now could end up being useful for a broader range of respiratory conditions.

In other words, I don’t think Synairgen’s commercial potential is limited to treating Covid.

Synairgen share price is up 2,000% in 2020

Back in January, Synairgen was trading at just 6p. As I write, the stock is trading at 128p.That’s a gain of more than 2,000% in less than a year.

Am I too late to buy the shares? I think it’s hard to say. Synairgen doesn’t currently have any revenue and is loss-making. But if a large-scale trial of SNG001 is successful, I’d guess that regulatory approval could follow quite quickly.

I think Synairgen’s share price could go either way from here. Although I can see the potential for further gains, this kind of situation is beyond my personal risk tolerance. For this reason, I won’t be investing.

The post The Synairgen share price is flying! Here’s what I’d do now appeared first on The Motley Fool UK.

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Roland Head 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.

Motley Fool UK 2020