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The Synairgen share price: here’s why I’d buy and hold this stock

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The Synairgen (LSE: SNG) share price delivered a great return on investment last year. The shares started the year at 6.34p each and ended it at 153p. The spike in price was caused by the firm’s development of a Covid-19 treatment called SNG001 and its early success. It received positive results from its phase 2 study that started in March 2020.

So far this year, Synairgen shares are up 3.7% and the 12-month return is around 838%. That said, at early Tuesday afternoon’s price of just under 157p, the stock is well below its record level of 246p from August 2020. But maybe that’s an opportunity for me. I see Synairgen as a long-term ‘buy’ as it seems Covid is here to stay, despite vaccine success.

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Synairgen’s Covid-19 treatment

Synairgen was founded in 2003 by three professors who had a vision of creating a respiratory drug discovery-and-development company. But with a market capitalisation of just around £315m, it’s still a fairly small business. It has only three proprietary drug programs in its pipeline, with the most eye-catching being SNG001, its treatment for Covid-19 patients.

The company clearly differs from giant pharmaceutical companies such as Pfizer, Moderna, and AstraZeneca. They’ve focused on developing a Covid-19 vaccine, by targeting coronavirus patients instead. Synairgen has recently commenced a phase 3 trial, which is being tested in approximately 20 countries and includes 610 Covid-19 patients. 

Vaccines aren’t 100% effective and not everyone will take them. So, I firmly believe that the treatment, if approved, could potentially reduce the risk of this pandemic in the long term.

Synairgen share price outlook

That would be good news. But obviously, it’s a challenge to predict what the future holds for the company right now. The world is in wait-and-see mode, and the lasting impact of the coronavirus pandemic is not yet apparent in the global economy. But here’s why I think the business is a good buy right now — and it isn’t just because the Synairgen share price is far from its all-time high. Right now, there’s no effective treatment for Covid-19 patients. The world really needs a treatment for the disease as vaccines probably won’t eliminate it on their own.

When I look ahead, this is a key reason why I believe Synairgen is a good stock to hold for the long term. Of course, even though the price has fallen recently, the spike in the Synairgen share price over the last year makes this stock risky. And the share price is likely to drop if the company fails to achieve its targets.

But overall, I’m optimistic about the outlook. And even though Synairgen is seen as a ‘Covid-19 stock’, it’s not a one-trick pony. Its BioBank platform technology, for instance, is quite impressive. It should help Synairgen discover and develop novel therapies for respiratory diseases in general. Additionally, its pipeline portfolio includes inhaled interferon for asthma patients and a treatment for COPD.

As such, I’m going to add the stock to my portfolio today, especially following the drop in the Synairgen share price in the past week. 

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Tom Chen 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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