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Synairgen shares are up 14% in 1 month. Would I buy now?

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Synairgen (LSE: SNG) shares are up 14% over the past month. The stock first came onto my radar in December and I’ve been watching it ever since. I’ve written about the stock a few times and I think its worth another update given the share price rise.

What makes Synairgen shares different?

I think a quick reminder of what makes Synairgen shares different from the other pharmaceutical stocks is worth a mention.

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Large drug companies such as Pfizer and AstraZeneca have created vaccines for Covid-19. What Synairgen is doing is creating a treatment, called SNG001. This means that if anyone develops Covid-19, SNG001 could be used to treat it.

In a nutshell, Synairgen’s treatment should be effective where vaccines aren’t. It could also prove useful in the case the virus mutates to the point where vaccines become less effective.

I must highlight that it’s still early days for SNG001. The treatment is being trialed and hasn’t yet received regulatory sign-off to be used when treating Covid-19. But I think things look promising for Synairgen shares.

What’s the story so far?

I’ve been watching the stock since December and a lot has happened since then. SNG001 has successfully completed Phase I and II trials, which involves using the treatment on a sample of hospitalised patients and assessing the results. Just because it has completed the first two phases, of course, doesn’t guarantee it’ll pass Phase III. 

I reckon the recent positive news flow on Synairgen shares has boosted the price. In December, the AIM-listed company announced that it would conduct further trials in the US. But this wasn’t the best part. Synairgen also announced that the US regulator, FDA, had awarded SNG001 with a fast track status.

But wait, there’s more news. On 13 January 2021, Synairgen reported that the first UK patient had been given the SNG001 treatment as part of its global Phase III trial for hospitalised Covid-19 patients. While there’s no guarantee the treatment being successful in the third phase, I’m optimistic on the prospects for Synairgen shares. If on the other hand, it didn’t pass the Phase III trial, I expect Synairgen shares to fall significantly.

So why have Synairgen shares rallied recently?

Well, it’s more positive news. I should highlight that the trial phases mentioned above are for hospitalised Covid-19 patients. And the results look promising.

In the past few weeks, Synairgen has announced that as part of its Phase II/III trails it’s now testing SNG001 on patients who are suffering with Covid-19 at home and don’t require hospitalisation. If this is successful, it’ll mean quicker treatment so this will reduce the need to transport infected patients and eliminate virus exposure to healthcare workers. This should be positive for Synairgen shares.

Would I buy Synairgen shares now?

It’s still early days for Synairgen. While the results so far look promising, I must highlight that this is a small company and there’s risks involved when investing. The risk for Synairgen to fail is greater than for its larger counterparts.

Once the global pandemic is over, I don’t think it’s end of the road for Synairgen. It could get snapped up by a large pharmaceutical competitor. The research conducted by Synairgen could prove useful for other respiratory diseases.

For these reasons, I’m comfortable with buying Synairgen shares within my diversified portfolio.

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Nadia Yaqub 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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