Synairgen (LSE:SNG) has yet again surprised the markets, as its share price continues to enjoy a fantastic 2020. The company issued £87m worth of new shares this week, and investors were snapping up them up with glee. By the end of Wednesday, the Synairgen share price had climbed 16% since the start of the week.
Cashing in on Covid-19
Synairgen is a pharmaceutical company specialising in respiratory drug development. Being in a prime position to help combat Covid-19, its share price has risen an astronomical 3,420% year-to-date. From January to April it had risen 1,360%. It then halved, but between July and November it’s risen a further 400%. Given the extreme volatility the share price has seen in this period, it’s clearly not a stock for the faint of heart. It doesn’t offer a dividend, and it’s listed on the notoriously erratic FTSE AIM index.
The company’s key selling point is its drug SNG001, which has proved effective in treating the more serious side effects of Covid-19. In particular, it markedly reduced breathlessness in patients who received SNG001 compared to those receiving a placebo.
For now, the drug is yet to be licensed, and is still in phase 2 of trials. But that’s not stopped the Synairgen share price rocketing as the company has signed deals with several global partners.
Is it all downhill from here?
Investors are rightly concerned that once the pandemic is under control, Synairgen profits will take a significant hit. But hope springs eternal. Many investors are counting on it making good progress in developing and marketing other drugs in its portfolio.
With its rise to prominence now established on the world stage, there’s no doubt it could continue to grow and prosper. Within the UK it is now a part of a collaborative body of experts in life sciences and progressive research. However, pharmaceuticals is a cut-throat industry, and I think it’s those with a biotech slant that will do the best in the years to come.
Synairgen is one such stock and as such I think it could do very well indeed. Of course, this does depend on how the pandemic evolves and how it progresses its other offerings. I think the Synairgen stock remains a risky buy, particularly at an inflated price point. Nevertheless, it’s down 30% from its summer high, so there could be room for further growth yet.
An acquisition target?
In another scenario, it may get snapped up by a bigger pharma player, particularly if it has the makings of drugs in demand. Severe asthma and COPD continue to plague children and the elderly around the world. The pandemic has highlighted the need for treatments.
Just a quick glance at Synairgen’s share price fluctuations year-to-date tells me this is in no way a safe and sure-fire investment. Still, I do think it’s got a lot going for it and if I owned it, I’d be holding for now.
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.