The Synairgen share price has rocketed 500% in two days! Here’s what I’d do now

The Synairgen share price (LON:SNG) has had a storming two days following positive results on a potential treatment for coronavirus. Should new investors go all-in?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Yesterday, respiratory drug developer Synairgen (LSE: SNG) jumped an astonishing 420% in value. It’s up another 15% this morning. Could there be even more to come? Quite possibly. That said, I think anyone investing should keep their expectations in check.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 ways to make money from a stock market crash

This writer's not spending time trying to guess when the next stock market crash will be. Instead, he's getting ready…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

How this rocketing FTSE 250 stock is tapping into the billionaire-making AI revolution

As the AI revolution mints new billionaires, this high-flying FTSE 250 company has been making its shareholders wealthier too.

Read more »

Investing For Beginners

4 actionable stock market investing habits that can boost my profits

Jon Smith looks at the stock market and explains how he picks the right shares to buy, running through a…

Read more »

Investing Articles

The Standard Chartered share price leaps on FY dividend and buyback news. Time to buy?

An 8% jump for a UK-listed bank on 2023 results? That's what just happened to the Standard Chartered share price.…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Can Lloyds shares get any cheaper?

Lloyds shares have fallen further following the release of the bank's 2023 results. This Fool senses now is a time…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

£7,000 of money to spare? Here’s how I’d aim to turn that into £1,000 in annual extra income

Christopher Ruane explains how he would aim to generate a four figure income to cushion his future, all with dividend…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Is this stellar dividend growth stock the only no-brainer buy on the entire FTSE 100?

Picking shares requires careful thought and analysis, but this FTSE 100 growth stock appears to be pressing all the right…

Read more »

Investing Articles

I bought 422 Glencore shares in July and 232 in September. Here’s what they’re worth now

Glencore shares have had a rough ride leaving Harvey Jones out of pocket. Should he cut his losses or average…

Read more »