The Synairgen (LSE: SNG) share price has been on a rollercoaster ride this year. Year-to-date, the stock is up 5.5%. However, these numbers don’t tell the whole story.
In May, shares in the biotechnology company slumped by more than a third, falling from around 148p to a low of 98p.
After reaching this low, the stock quickly rallied, charging higher over the following weeks to top out at 176p at the beginning of June. Despite this volatility, shares in the company are still up nearly 400% over the past 12 months.
Since the beginning of June, the Synairgen share price has moved sideways. So the question is, what’s next for the stock?
It’s impossible to predict the short-term movements of stocks. Still, in the long-term, equity prices should track underlying business performance. Therefore, if the firm’s operating performance improves, the Synairgen share price should follow suit.
Currently, the firm’s future depends on the success of its inhaled formulation of interferon beta, which is being trialled as a potential treatment for coronavirus. The company’s treatment, SNG001, has shown to be effective in initial studies, but there’s still a way to go before full commercialisation.
Towards the end of May, the company informed the market that trials of the SNG001 treatment had shown it to be effective against SARS-CoV-2 variants. Commenting on the trial results, Professor Sir Stephen Holgate, the founder of Synairgen, said the studies confirmed interferon’s impact on viruses, which is a positive development for the treatment and only adds to its appeal for healthcare professionals.
SNG001 is currently undergoing testing in a phase III trial on hospitalised patients. The company expects to report the results of the trial in the second half of 2021. In the meantime, the Synairgen share price is likely to remain volatile.
While the company has reported positive trial results from its treatment up to this point, SNG001 will only make it to market if it passes the last hurdle with flying colours. Unfortunately, there’s no guarantee it will.
Synairgen share price: risky investment
If the treatment doesn’t make it through the final testing stage, Synairgen could lose its flagship product. This would be a massive blow for the business and would undoubtedly negatively impact the stock.
On the other hand, if the treatment does make it through the phase III trials, the sky’s the limit for the company. Testing of SNG001 has so far shown it to be effective against all types of respiratory viruses. As such, the potential market for this new treatment could be colossal.
Overall, the recent trading activity in the Synairgen share price seems to reflect the market’s uncertain views. It seems some investors don’t believe in the company’s treatment.
However, based on the positive test results so far, I think SNG001 could have potential. With that being the case, I’m willing to change my previously negative opinion of the stock.
As the firm pushes forward, I’d buy a small speculative position for my portfolio.
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Rupert Hargreaves 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.