The share price of 4D pharma (LSE: DDDD) is on a tear as I write. It’s up a whole 197% from its lowest point in late March. This is a sharp rise by any standards. And for good reason.
It received a go ahead for the next phase of its Covid-19 treatment a few days ago.
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Promising as this sounds, as a long-term investor I’d like to take a closer look at DDDD to understand its potential prospects. It was founded in 2014, and has been listed on AIM since. It’s pre-revenue right now and is researching a line of treatment called ‘live biotherapeutics’. This treatment focuses on gut bacteria to find cures for a range of diseases. I reckon it could be a while before these cures become successful revenue generators for 4D pharma.
The challenging Covid-19 fight
It’s also entirely likely that some treatments may not be immediately successful, especially when it comes to Covid-19. Take for instance, the case of Remdesivir, a Covid-19 drug produced by US-based company Gilead Sciences, which hasn’t been effective in its first clinical trials. Or consider France’s Sanofi’s rheumatoid arthritis drug, which can be used in only the most affected Covid-19 patients. It was earlier believed to be a potential cure for a broader set of those infected according to a Reuters report. The key point here is that it could be a while before we’d see the fruits of 4D pharma’s labour show up in its financials.
If I’m truly convinced of investing in companies that are in the trenches in the fight against coronavirus, I’d consider a different approach. I’d donate to medical research if the cause calls out to me. There’s much research underway to provide better treatments for critical illnesses. But that’s not investment, and shouldn’t be seen as such.
My goal as an investor is to try my best to ensure returns. For this reason, I’m most inclined to invest in those companies that already have a proven track record.
Considering FTSE 100 alternatives
FTSE 100 pharma biggies are my bet for the long-term as a result. Consider the example of GlaxoSmithkline, which has also recently been in the news for working on a coronavirus vaccine. This incidentally, is also a collaboration with Sanofi, which, as I pointed out earlier is already providing treatment in critical Covid-19 cases. It’s expected to be available only in the second half of 2021.
Or AstraZeneca, which is working on a coronavirus treatment as well. Of course, it will be some time before we know the results of these endeavours. But these are already established companies. They are well-diversified and are financially sound. Moreover, they are likely to come out quite unscathed by the coronavirus crisis, and indeed the stock market crash. I think they are better investments for now.