As the Scancell (SCLP) share price falls, should I buy?

With the Scancell share price having fallen 25% since February, our writer considers whether he ought to add it to his portfolio.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

It’s been a rewarding year for shareholders of Scancell (LSE: SCLP), whose shares have risen 187% in the past 12 months. But lately they have stalled, giving up 25% of their value since February.

Here I explain why the shares have been dropping, and my next move.

Vaccine hopes

Scancell is primarily a developer of immunotherapies for cancer. But during the pandemic, it has pivoted towards Covid-19. The company has developed a vaccine it hopes is cheap, effective and scaleable. With massive global demand for vaccines to suit all budgets, the market warmed to this new focus by Scancell.

Last month the company announced that  it obtained local regulatory permission for a Phase 1 clinical trial of its COVIDITY vaccines in South Africa. That puts it well behind larger competitors, such as Pfizer and AstraZeneca, that long since completed the equivalent clinical trial phase of their vaccines and have been rolling them out commercially since last year. However, I don’t think that means Scancell is too late. There’s large global demand for vaccines. It could be that Scancell ends up offering a cost or availability advantage that makes its vaccine more appealing to developing countries, for example.

The company took advantage of improved sentiment about its prospects to boost its liquidity last year, issuing £15m of new shares.

Where next for the Scancell share price

I think this year’s pullback in the Scancell share price reflects investor impatience. An initial burst of enthusiasm at the prospect of the vaccine programme has started to ebb away over time.

But I still think the programme could unlock more value in future for the company. If clinical trials are successful, this modestly-sized UK company will have a vaccine in demand by the millions across the world. That could certainly help boost the share price.

But if the vaccine programme turns out to be disappointing, the premium that the Scancell share price has attracted during the pandemic could fall away completely. That isn’t the end of the road, though. Scancell had a long-standing immunotherapy programme before the pandemic. In the short term at least, COVIDITY failure could lead to the Scancell share price plummeting. But the company maintains its cancer immunotherapy programme. Further success in that could help support the price in future, independently of the Covid-19 vaccine workstream.

Some major risks

Clearly, a lot currently rides on the Covid-19 programme. Like many medical development companies, Scancell has been consistently loss-making for many years. That can only go on so long before a company needs to boost its liquidity. It was able to do that last year, but at the cost of diluting existing shareholders. There’s a risk that costly drug development and testing could create a similar need to boost liquidity in future.

My next move on the Scancell share price

With so much riding on the final outcome of the clinical trials, the stock feels highly speculative to me right now. A good result could push the share price to an all-time high. But equally, a disappointing outcome in the South African trial could lead to the share price crashing.

So while I will be following the clinical trials with interest, I won’t be adding Scancell to my portfolio.

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.

Christopher Ruane 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

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »