The Motley Fool

Can the Sareum share price keep surging?

Pills spilling out of a prescription pot
Image source: Getty Images.

The Sareum (LSE:SAR) share price has been on fire this year. Over the last 12 months, the young biotech company has achieved explosive growth, sending its stock up by nearly 700%. Following its presentation at the BioTrinity 2021 Conference, investor interest has surged. But can the upward momentum continue over the long term? Or is it being driven by speculation? Let’s take a closer look.

The explosive Sareum share price

I’ve explored this business before. But as a quick reminder, Sareum is a young drug developer specialising in discovering treatments for cancer and autoimmune diseases. Like many young biotech firms, the company doesn’t have sufficient funding to develop its products single-handedly. Instead, it sells royalty licenses for its drug candidates to larger, more established pharmaceutical corporations. This provides much-needed capital, and a recurring revenue stream should a drug make it to market.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Recently, Sareum posted some encouraging progress for several of its treatments. SDC-1801, a treatment for severe Covid-19 symptoms, completed its in-vitro studies and provided strong evidence of being significantly more effective than existing anti-inflammatory steroids. As a result, phase one trials are scheduled to commence in early 2022.

Meanwhile, other treatments in its portfolio for autoimmune disease are moving into phase one trials next year as well. And additional patents for its cancer immunotherapy drugs are in the process of being secured. All of this is to say that the firm is achieving several significant product milestones. So, I’m not surprised to see the Sareum share price on the rise.

Taking a step back

The transition out of pre-clinical trials is an achievement many young biotech companies never reach. And with the management team securing additional financing, the firm looks like it’s on track for a prosperous 2022. But as exciting as this is, investors may be getting ahead of themselves.

As it stands, this is a pre-revenue business, excluding the one-time £47,000 generated in 2020. But the rapidly rising Sareum share price has pushed the market capitalisation beyond £230m. While its product pipeline does consist of promising assets, there is no guarantee that they will make it to market. After all, 90% of phase one drugs fail, even with solid pre-clinical results.

With that in mind, it seems to me that this stock’s valuation is being driven by speculation rather than fundamentals. So, I wouldn’t be surprised to see the Sareum share price come crashing down at the first sign of trouble.

The Sareum share price has its risks

Final thoughts

I can’t deny that Sareum and its share price have made impressive progress over the last couple of months. But ultimately my opinion of the company remains unchanged. Without any revenue to support operations, it remains dependent on external financing that may not be available in the future. So, for now, it’s staying on my watchlist.

Instead, I am far more interested in another young growth stock...

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Zaven Boyrazian 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.