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This FTSE small cap is up over 800% in 2020. Here’s what I’d do now

The FTSE and global markets have crashed in the past three months. This is a result of the coronavirus pandemic and related economic shutdown. 

Biotech and healthcare companies are now in a race to try to create a vaccine. As well as a vaccine, some companies are creating other tools in response to the virus such as apps for testing information.

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It’s not just the major pharmaceutical companies that are working hard to create a vaccine. There are other smaller companies you may not have heard of who are also in the fight. One such company is Synairgen (LSE:SNG). 

FTSE AIM resident

Synairgen is a respiratory drug discovery and development company founded by three University of Southampton professors. Its primary focus is on lung viral defence and its current product, known as SNG001, may have potential coronavirus applications.

Synairgen has been on the FTSE AIM index for nearly 15 years so it is not a company created in direct response to the pandemic. It has access to the scientific and clinical research facilities of Southampton General Hospital. 

SNG001 is wholly owned by Synairgen and is based on existing intravenous antiviral treatment. A potential new inhaler version could deliver it straight to the lungs. This is where damage is done by the coronavirus. Synairgen could benefit from having a tried and tested drug, in comparison to other companies that are starting from scratch. 

Recent news and performance

At the end of March, Synairgen announced its plans for testing SNG001. Its CEO commented, “A successful outcome from this trial in Covid-19 patients would be a major breakthrough in the fight against this coronavirus pandemic.” 

Since the turn of the year, Synairgen’s share price has increased over 800%. This makes it one of the best performing stocks in the UK in 2020. It is easy to understand why its share price has risen rapidly with the treatment it could potentially create. On 2 January, its per share price was 5.87p. At the time of writing it is closer to 55p. 

The company has been profitable in recent years although most of the money it makes is channelled back into research and development. This has resulted in some years showing a loss. After the trial announcement, Synairgen announced £14m in new funding based on offering new ordinary shares. It has confirmed this money would be used to fund the trials announced a week earlier. 

Verdict

I would not put all my eggs into one basket when it comes to coronavirus vaccine stocks. I would especially not put them all into a small cap company. However, I feel Synairgen is the type of low-price small cap that could be worth a gamble. I don’t see an issue in investing a small amount of money.

I would not be able to tell you how many companies there are out there trying to create vaccines and treatments. But I do know for certain that not all will succeed. So, as long as you understand that there are risks and you’re prepared for a loss, what is the harm in trying a small cap? Of course, you could play it safer and look to a bigger FTSE name such as GlaxoSmithKline.

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Jabran Khan 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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