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The SAR share price has jumped 1,000%. Should I buy now?

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A GlaxoSmithKline scientist uses a microscope
Image: GlaxoSmithKline

The SAR share price has seen blistering growth in 2021. Anyone buying just a few months ago will have more than doubled their money. So what’s behind the spike, and is it too late to buy now?

Sareum Holdings (LSE:SAR) is a mid-sized UK pharma founded in 2004. It’s a small molecule drug developer focused on cancer and autoimmune diseases. 

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Over the last 10 years the Sareum share price has been bumbling along not doing very much. But in the last 12 months it has leapt astonishingly quickly. That’s driven this unprofitable company to a £200m+ market cap. 

Why the SAR share price rocketed

On 7 January 2021, Sareum heard it had won patent approval in the US for an invention associated with its proprietary SCD-1802 kinase inhibitor programme. 

The granting of this patent in the US completes the protection of the intellectual property for our proprietary SDC-1802 programme across all major markets,” said chief scientific officer Dr John Reader.

Small molecule drugs have been the cornerstone of modern pharmaceuticals for over a century. Aspirin, for example, is a small molecule drug. They can enter cells easily because of their size and using science whizzbottery can even be ‘programmed’ to perform specific functions. 

On 15 June 2021 SAR issued a release saying it had received nearly £1.5m for 30m shares at 4.9p per share “by the same high net worth individual who subscribed to shares to the value of £900,000 as announced by the Company on 1 June 2021”. 

The cash will be used to progress its SDC-1801 and SDC-1802 TYK2/JAK1 inhibitor drug development programmes, the company said. 

This white knight, whoever they are, clearly believes in the potential here. That’s left a lot of smaller investors with a Fear of Missing Out jumping aboard. Since this time last year the SAR share price has more than 10 bagged. So £5,000 invested in June 2020 would be worth approximately £55,250 today.

What the future holds

In December 2020, the UK’s Research and Innovation arm gave Sareum £174,000 to investigate the therapeutic potential of SDC-1801 for Covid-19. 

Sareum is aiming to complete preclinical studies of SDC-1801 by the end of Q3 this year. 

It says clinical trials as well as a potential Covid-19 application from the programme will also be developed. That will require more funding though, so shareholders should expect to be diluted further. 

The company has only reported one year of profit out of the last six. That’s not unusual for a growth company and especially not one dealing with experimental drugs. R&D costs are very high, which makes risk very high too. The associated rewards can be stonkingly good if the company hits on a winning product, though. 

Like all early-stage drug developers it takes vast sums of money to get these products out of the lab and into production. There is never 100% certainty that any product will work. And there are multiple points of potential failure along the road to market. Drugs could prove ineffective at clinical trials. The failure of its most important potential money-spinners could crash the Sareum share price. 

There’s clearly more to come from Sareum. Buying now offers potentially very high rewards, although at high risk. I would wait to hear more developments on the key results from SDC-1801 studies before buying more, to be honest. 

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Tom Rodgers owns shares in Sareum Holdings. 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.

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