Correction: An earlier version of this article stated that phase 3 trials would commence in October, rather than be completed in October.
The Synairgen (LSE:SNG) share price has been exploding recently. Over the last two weeks, the company saw its stock rise by more than 85%, pushing it to an all-time high! And in the previous 12 months, investors have seen a return of nearly 300%. That’s some incredible growth for quite a short space of time. So, should I be adding this business to my portfolio?
The surging Synairgen share price
I’ve previously explored Synairgen’s business. But as a quick reminder, the firm is a drug developer specifically focused on discovering new treatments for respiratory diseases. When Covid-19 started to spread, the management team quickly began deploying resources to create a new therapy.
The result of this R&D endeavour is a drug called SNG001. This isn’t a vaccine but rather a treatment to reduce the severity of symptoms for patients in critical condition. There are several competing medicines making their way onto the market. However, what makes SNG001 unique is that it’s administered through inhalation rather than an injection. This allows for direct absorption within a patient’s lungs.
Progress surrounding this new treatment appears to be the primary catalyst behind Synairgen’s exploding share price over the past year. And as far as I can tell, the recent surge is due to another progress report on its development. Results from in vitro studies revealed that SNG001 potently reduced the presence of Covid-19 to undetectable levels. And what’s more, it was just as effective with the Kent and South-African variants of the virus.
Needless to say, this is hugely positive news. Seeing the Synairgen share price take off is quite understandable to me.
What’s next?
As promising as these results are, there’s still a long road ahead. Synairgen is now actively recruiting for phase 3 trials which are set to finish in October this year. Fortunately, SNG001 is on the fast-track approval process by the FDA that could significantly shorten the time to market launch.
However, it’s important to remember that receiving regulatory approval is a difficult feat that most drugs fail to achieve, even after reaching phase 3. To date, most tests have been completed in a laboratory or among a small, select group of individuals. It is entirely possible that the phase 3 clinical trials of SNG001 will not produce similarly positive results.
Given that the Synairgen share price is being elevated by the prospect of future revenue from this drug, any adverse outcomes from these trials will likely cause significant volatility. And may even cause it to plummet to pre-pandemic levels. After all, this is a pre-revenue business.
The bottom line
If SNG001 does make it to market, then yes, the Synairgen share price could be propelled to even higher levels. But that’s not guaranteed. There remains a lot of uncertainty surrounding its future. And at this stage, an investment in it is exceptionally risky, in my opinion. Therefore, I’ll be keeping this business on my watch list for now.
