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400% share price surge! Is it too late to buy shares in Synairgen?

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Synairgen (LON:SNG) is a drug company specialising in therapies for asthma and COPD. This morning the Synairgen share price surged over 400% after it announced positive results on a recent clinical trial relating to a new treatment for Covid-19.

The £287m company has been listed on the FTSE AIM All-Share index since 2004. Today’s share price surge took it skyrocketing past its IPO high of £1.64 a share. Is it now too late to buy shares in this exciting biotech company?

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Why the price surge?

The clinical trial moving the Synairgen share price was based on its SGN001 therapy. This is a treatment designed to reduce the most serious aspects of Covid-19 in hospitalised patients. It involves the use of a protein called interferon beta that is naturally found in the body but suppressed by the coronavirus.

By inhaling this protein, the patient experiences relief and a reduction in breathlessness. The clinical trial resulted in a 79% reduction in patients developing severe disease requiring ventilation. It also showed patients were 2 to 3 times more likely to make a much better recovery. It should be noted these results have not yet been published in a peer-reviewed journal and further analysis will be needed.

A few years ago, the interferon beta therapy developed by Synairgen was being used in partnership with big pharma giant AstraZenecaAZN pulled out of the partnership when an asthma trial failed, which put the Synairgen share price into free-fall. However, Synairgen always maintained the drug therapy had potential and retained full rights after AstraZeneca pulled out. Today’s news is a major comeback from that previous disappointment.

Has the Synairgen share price got further to climb? 

With AIM shares there is always the risk that things won’t go as planned. Buying shares in pharmaceutical companies also always comes with an element of risk. Biotech and pharma is a tightly regulated industry filled with speculation, and managing cash flow can be tricky. However, this is a fantastic development for Synairgen. I think today’s news gives it positive attention that will stand it in good stead for some time to come. Synairgen was previously backed by Neil Woodford, who added it to his former UK equity fund.

When dealing with pharmaceutical treatments there are many regulatory hoops to jump through. But with the Covid-19 pandemic, everyone is eager for anything that will help bring it under control. For this reason, I don’t think it is necessarily too late to buy shares in Synairgen. Certainly, those shareholders that got in early on a speculative buy will be feeling very pleased that they did so.

This is still a risky buy but could be an exciting addition to a diversified portfolio looking for growth opportunities. I think the Synairgen share price has further to climb.

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Kirsteen 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.

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