The driver behind the 4D Pharma share price

This morning the early-stage biopharmaceutical group released new data from its Phase 1/2 MRx-4DP0004 clinical trial. This is a new drug aimed at helping patients suffering from asthma. And the results were promising, to say the least.

Some 83.3% of patients who received the drug saw an improvement, and 50% of this group reduced their use of SABA inhalers. By comparison, these numbers drop to 56.3% and 18.8% respectively, for subjects who received a placebo.

Needless to say, it would appear the firm’s drug is working. And with no severe health side-effects detected, management has decided to proceed with the next stage of the clinical trial.

There are already plenty of asthma treatments available, which raises the barrier to commercialisation for this drug. Why? Because 4D Pharma will need to prove that its solution is better than what’s already available. It’s too soon to determine if this is the case. And we probably won’t find out until phase 3 trials begin.

However, suppose the results continue to be positive throughout the rest of development? In that case, the 4D Pharma share price jump today could be the start of an explosive long-term journey of growth. Why? Because asthma treatments have a multi-billion dollar addressable market size. And when compared to the group’s current £59m market capitalisation, the growth opportunity becomes crystal clear.

Taking a step back

As exciting as the explosive opportunity for the 4D Pharma share price is, there’s no guarantee of success. In fact, there’s already evidence of a potential problem.

All the data from clinical trials is gathered and analysed using complex statistical models that return something called a p-value. Without getting too deep into mathematics, a p-value essentially represents the probability of the results being wrong. And in the case of MRx-4DP0004, that probability is 8.8%.

Is that bad? No. Is it good enough? Also no. In most cases, medical regulators demand a p-value of less than 5%. And I don’t think it’s wise to assume 4D Pharma will be an exception. In other words, the clinical trial data from phases 2 and 3 need to be better for this treatment to have a chance of making it to market.

To buy, or not to buy?

This company is not a one-trick pony by any means. Like I said earlier, 4D Pharma has four other drugs in development that offer equally outstanding growth opportunities for its share price.

However, these other treatments are also in early-stage clinical trials. And it could be years before anything is ready to submit to regulators. That’s a long time for something to go wrong, especially since the group doesn’t generate any revenue at the moment.

Personally, I’m not going to be adding any shares to my portfolio today. But I will be keeping an eye on progress moving forward.

The post Here’s why the 4D Pharma (LON:DDDD) share price is surging today appeared first on The Motley Fool UK.

Why I’m tempted to buy despite the risks 

Given that many investors won’t have heard of 4D Pharma, I’ll start by explaining what it does. It focuses on developing Live Biotherapeutic Products (LBPs), which are drugs derived from the human microbiome. It has developed its research to build MicroRx, which is a discovery platform that’s able to select those bacteria that have a therapeutic effect in specific diseases, including cancer.

The company has 10 main programmes in development. These include two drugs that have reached phase II clinical trials and are progressing relatively well through the drug testing process. It also has a research collaboration with MSD, a trade name of Merck to discover and develop Live Biotherapeutics for vaccines.

This close partnership with a major pharmaceuticals firm could open the door to further collaboration in future, I think, and Merck could even buy the therapies as they progress through the drugs approvals process. I believe this would be a good outcome for shareholders as it would raise cash and move 4D pharma towards being profitable. 

For now though, the company remains loss-making. Losses in 2020 were around £26m. Yet 4D Pharma has cash and cash deposits that cover about a year’s worth of research and development costs. In 2021 the biotech firm raised approximately $24.03m (£17.29m) in a private placement. It has also secured a credit facility for up to $30m with Oxford Finance SARL. That’s all good news, but despite this extra money, it could still need to once again call on investors for even more, which would have the effect of diluting any holdings. I feel that raising longer-term debt would usually be preferable from a shareholder perspective.

The bottom line

Given UK investors have no other share like 4D Pharma to buy, I think that if evidence builds around the value of the microbiome in healthcare, 4D Pharma’s shares should do well. Investing in the stock is clearly not about today’s fundamentals. The investment case is all about how 4D Pharma is a world leader in an exciting new area of healthcare innovation and about its future potential. 

Of course, it’s possible 4D Pharma shares could be worth nothing. It’s a speculative, high-risk company to invest in. There are no two ways about that to my mind. But most rewards involve calculated risks. So, I would put aside just a small part of my overall cash to add 4D Pharma shares to my portfolio, given their huge potential. If just some of what’s in the pipeline works as expected, it could be transformational. When — or if — the potential of the microbiome in healthcare is proven, the 4D Pharma share price could rise very quickly. It may be a roller coaster ride up to that point though, but it’s one I’m prepared for. 

The post 4D Pharma shares have rocketed and I’m tempted to buy now appeared first on The Motley Fool UK.

4D Pharma is developing live biotherapeutic products (LBPs), a novel class of drug derived from the human microbiome. The microbiome is essentially microbes that live within the human body. Of particular interest for future healthcare are those in the gut. 4D Pharma has a number of drugs in phase II trials across different medical fields including immune-oncology (cancer) and gastro-intestinal (such as treatments for IBS).

Why could this penny stock double?

Here’s the interesting part – why could the shares do phenomenally well in the coming 24 months? I expect the move into phase III trials will increase the profile of 4D Pharma with investors, both biotechnology investors and beyond.

I think the company’s US listing, on the NASDAQ exchange, will add significant liquidity and provide money for the company to keep progressing its trials. It has raised £30m and has cash on the balance sheet so future shareholders hopefully shouldn’t get diluted.

Overall though what most makes me think the share price can potentially double in two years is that by 2022, revenue is forecast to be £16.2m, from negligible revenue currently. Analyst forecasts have the shares on a price target of 405p, versus around 84p at the time of writing.

There are massive risks, however. First, there is the risk that drug trials fail, or that progress is slower than investors hope. Another concern is that there could be greater competition as the microbiome is becoming increasingly understood. Although 4D Pharma has raised money from shareholders, if trials do go on longer than expected, the company may ask backers for more money. That would dilute any holding and make it harder to make a profit.

On the balance of risk and reward, though I think 4D Pharma is a penny stock I’d likely add to my portfolio. However, it would be a small position! If things go well and it moves to making revenue, I think the share price could at least double within two years.

Another option?

I think Quarto is another penny stock with huge potential. It’s a very different company. Quarto is an illustrated book publishing and distribution company. The shares trade on a forward price-to-earnings of only seven, indicating the shares could be cheap. The group has aggressively cut debt and been adding cash to the balance sheet in recent years. That could set it up for future growth.

On the other hand, margins are quite small and revenues have been falling in consecutive years since 2017. The group also doesn’t pay a dividend, a potential red flag that management believes the group faces challenges. It could be a high-risk/high-reward penny stock that I’ll research further before deciding whether to add to my portfolio.

The post This penny stock could double in just 2 years appeared first on The Motley Fool UK.

Three ‘trending’ penny shares have had some significant catalysts this month, ranging from a suspension of shares to a new listing in the US on the NASDAQ.

Recently, I pitted three FTSE 100 portfolio staples against each other and now I would like to do the same with 4D Pharma (LSE: DDDD), Novacyt (LSE: NCYT), and Supply@ME Capital (LSE: SYME).

I am going to look at these shares as if I were in a casino and I was dealt all three. What company would I hit again (buy more), hold (keep) and fold (sell)?

Hold

Novacyt, a medical diagnostics company, was a star of the stock market last year – and even with the recent pull back to 720p, it is still 400% up on the year. The Novacyt share price sold off after its earnings report even though it had very positive sales growth to £277m from £11.5m in 2019. It wasn’t numbers but guidance that unsettled investors, as it stated that it expects sales of Covid-19 products to be strong for most of 2021 but it wasn’t clear beyond that.

I am not sure how Novacyt will utilise its increased cash reserves or its specialism in Covid-19 testing, therefore it is hard to wage where fair value is. I do believe that Covid-19 testing is here for the foreseeable future. Mr. Dealer, I’ll hold.

Fold

Supply@ME Capital (SYME) is a fintech firm; it allows companies to make money from their inventory. The idea is to allow businesses to generate cash flow from their unsold goods.

At the end of January, SYME requested a suspension of the listing of its shares pending publication of its results which meant for over a month, investors could not buy or sell SYME shares. After due diligence from the FCA, the shares recently started trading again at around 0.55p. Due to its true penny share status, there is arguably plenty of upside if SYME can prove its business model to be profitable. However, this would be a speculative investment and shares this size can be illiquid, which generally means wider bid-ask spreads, and greater price volatility. Mr. Dealer, I fold.

Hit

4D Pharma is a company pioneering development in the area of the human microbiome (the bacteria found in our gut).

Recently, 4D Pharma completed a merger with a US investment vehicle, which provides the company with a quote on the tech- and biotech-focused NASDAQ stock market under the ticker $LBPS. By dual-listing in the US, this should introduce the firm to a new pool of prospective investors.

Key figures within the business own 12.7% of the company which I believe demonstrates their confidence in 4D Pharma shares. Currently, 4D is not profitable and it is not forecast to become profitable over the next three years. Trading at 130p, this is a long-term play for me. Mr. Dealer, I’ll buy more.

Penny shares: risk v reward

Companies listed on the Alternative Investment Market (AIM), such as Novacyt and 4D Pharma, are provided with more regulatory flexibility than those on the main market so you can expect greater volatility. However, with careful diligence, the AIM can be a lucrative market for discerning stock pickers.

Thus, when faced with the decision to hit, hold or fold, I would hit 4D Pharma, hold Novacyt and sell SYME.

The post 3 trending penny shares: hit, hold or fold? appeared first on The Motley Fool UK.

The performance has put the company on the radar of most small-cap investors. This improving investor sentiment towards the business could send the 4d Pharma share price even higher in the coming weeks and months.

As such, if you’re interested in owning a share of this high-growth small-cap, here’s what you need to know before investing. 

Interested in the 4d Pharma share price?

Shares in this early-stage biotechnology business have rallied over the past six months on the back of two developments. 

First off, in the middle of July, the company raised nearly £8m to fund its operations until the beginning of 2021. According to management, the funds will be used for at least four clinical studies of treatments in the pipeline. These include 4d’s MRx-4DP0004 Phase II Covid-19 trial and its MRx0518 Phase I clinical biomarker study. 

The company was also planning to use some of the funding to pursue a US market listing. I think this is a sensible decision. US-listed pharmaceutical and biotechnology businesses tend to attract higher valuations as this increases the number of investors who can buy the shares. US listings also make companies more attractive as acquisition targets. 

The second development that has helped the 4d Pharma share price recently is the publication of the results from a recent trial of its MRx0518 treatment. This product is a “single strain live biotherapeutic” that has the potential to help people with cancer.

The results of Part A of its Phase I/II trial were positive. Nearly half of the trial participants saw a “meaningful benefit” from the drug when combined with another treatment. A quarter of the participants saw their tumours shrink by around 30%.

These results are positive, but they are not conclusive. The study only involved 12 subjects. So, a lot more work needs to be done before 4d Pharma can bring the product to market. 

Still, these early results are encouraging. They should help improve investor sentiment towards the business, which could lead to greater access to funding in the months and years ahead. 

High risk

While the above might have sent the 4d Pharma share price surging in recent weeks, there’s no guarantee this will continue. The company’s recent fundraising showed that the business is still not self-sufficient. It is unlikely to be so until its primary treatments come to market. That could take years. 

As such, while the 4d Pharma share price may look attractive at current levels, I think it may be best to hold the stock as part of a diversified portfolio. Doing so would allow investors to profit from any upside growth while minimising downside risk. 

The post Interested in the 4d Pharma share price? Here’s what you need to know appeared first on The Motley Fool UK.

It received a go ahead for the next phase of its Covid-19 treatment a few days ago.

Long-term potential

Promising as this sounds, as a long-term investor I’d like to take a closer look at DDDD to understand its potential prospects. It was founded in 2014, and has been listed on AIM since. It’s pre-revenue right now and is researching a line of treatment called ‘live biotherapeutics’. This treatment focuses on gut bacteria to find cures for a range of diseases. I reckon it could be a while before these cures become successful revenue generators for 4D pharma.

The challenging Covid-19 fight

It’s also entirely likely that some treatments may not be immediately successful, especially when it comes to Covid-19. Take for instance, the case of Remdesivir, a Covid-19 drug produced by US-based company Gilead Sciences, which hasn’t been effective in its first clinical trials. Or consider France’s Sanofi’s rheumatoid arthritis drug, which can be used in only the most affected Covid-19 patients. It was earlier believed to be a potential cure for a broader set of those infected according to a Reuters report. The key point here is that it could be a while before we’d see the fruits of 4D pharma’s labour show up in its financials. 

If I’m truly convinced of investing in companies that are in the trenches in the fight against coronavirus, I’d consider a different approach. I’d donate to medical research if the cause calls out to me. There’s much research underway to provide better treatments for critical illnesses. But that’s not investment, and shouldn’t be seen as such.

My goal as an investor is to try my best to ensure returns. For this reason, I’m most inclined to invest in those companies that already have a proven track record.

Considering FTSE 100 alternatives

FTSE 100 pharma biggies are my bet for the long-term as a result. Consider the example of GlaxoSmithkline,  which has also recently been in the news for working on a coronavirus vaccine. This incidentally, is also a collaboration with Sanofi, which, as I pointed out earlier is already providing treatment in critical Covid-19 cases. It’s expected to be available only in the second half of 2021. 

Or AstraZeneca, which is working on a coronavirus treatment as well. Of course, it will be some time before we know the results of these endeavours. But these are already established companies. They are well-diversified and are financially sound. Moreover, they are likely to come out quite unscathed by the coronavirus crisis, and indeed the stock market crash. I think they are better investments for now. 

The post Covid-19 drug maker’s share price triples! Here’s what I’m doing now appeared first on The Motley Fool UK.

Last week 4D announced it received expedited acceptance from the UK Medicines and Healthcare products Regulatory Agency to begin a phase II study of a single-strain live biotherapeutic in patients with COVID-19. The company’s share price rose on the announcement.

The relevant single-strain live biotherapeutic is already in trials for treating patients with partly controlled asthma. Although only 20 patients have tested so far, there have been no serious adverse effects reported.

Previous testing showed it could significantly reduce lung inflammation and impact particular immune cell types and pathways similar to SARS-CoV-2 infection. It has also shown potential signs of future use in combating other inflammatory diseases such as multiple sclerosis and rheumatoid arthritis.

There is no doubt, this is a promising development for a British pharmaceuticals company.

Long-term potential

Investing in pharmaceuticals should be a long-term commitment. These companies work at a slow pace compared to other sectors. There is a lot of red tape to work through. Research and development costs are significant and when dealing with human health a multitude of factors must be considered. There is often a delicate balance between solving serious health problems and avoiding the introduction of unwelcome side-effects.

Commercial success is necessary for a pharmaceuticals company to generate shareholder wealth. With the world’s eye on a COVID-19 vaccine or medicine, the race to success is on. Ordinarily, this would take a long time, but, I imagine it will be sped up by outside influence and cash if the likelihood of success for 4D pharma is apparent. I think it will be a couple of months before the outcome of the COVID-19 phase II trial is discernible. 

4D pharma share price fluctuations

The 4D pharma share price has rebounded 127% since its March low of 23p after the stock market crash. However, it is still down 45% year-to-date. With gross gearing of 14%, this company is fairly low on debt, which is a good sign.

One of 4D pharma’s biggest shareholders is the US pharma giant MSD, the tradename of Merck & Co, a leader in medicines and vaccines for some of the world’s toughest diseases. In October they entered into a research collaboration and option-to-license agreement to develop vaccines based on delivering live bacteria to the gut.

Last week, the World Health Organization said there is no evidence that people who have recovered from COVID-19 will be protected from a second infection of the disease. If this is true, then any drug that can help control the virus will be more welcome than ever.

Time will tell, and a lot will depend on the success of the trials going forward. 4D pharma is still a relatively small player in UK pharmaceuticals. Although this is a promising development there are no certainties, particularly when it comes to AIM stocks.

I think this is a share worth watching and I hope it continues to achieve positive outcomes. Value investing is a long-term commitment and one in which you should be confident in the companies you are buying shares in. 

The post 4D pharma share price spiked under COVID-19 phase II study spotlight appeared first on The Motley Fool UK.

Share price in reverse

Woodford participated in the IPO of AA (LSE: AA) when it was floated at 250p a share in June 2014 and bought again in a further placing at 385p in April 2015.

The shares have subsequently declined. They took another hit last Tuesday when the company fired its executive chairman Bob Mackenzie for “gross misconduct” (a Jeremy Clarkson moment with a colleague in a hotel bar) and also lowered its full-year forecast to “broadly in line with that of the last financial year.”

The shares ended the week at 206p — 18% below the price Woodford paid in the IPO and 46% below the price he paid in the 2015 placing.

(Roadside) recovery stock?

Back at the time of the IPO, Woodford described AA as a “very high-quality … utility-like” business that had been “milked” by its private equity owners. He reckoned that, having been “liberated” by the IPO, it could deliver strong growth and shareholder returns.

It hasn’t yet. Last year’s revenue and profits were below those it posted in the year it came to market. Furthermore, it’s made only modest headway in reducing its high level of net debt (£2.7bn from £3bn) and very high net debt/EBITDA ratio (6.7 from 6.9).

Nevertheless, Woodford has maintained his faith in the prospects for the business, increasing his stake on last week’s bad-news day. I agree there’s significant scope to grow the strong AA brand but I find the company’s current debt profile off-putting.

Utilitywise or unwise?

Woodford bought shares in Utilitywise (LSE: UTW) in spring 2015 when they were trading north of 300p and also participated in a placing at 290p a month later. They’re trading at 61p as I’m writing — 79% below the placing price.

The company helps businesses get better value out of energy and water contracts. A camp of bearish analysts has always been sceptical of its business model and revenue recognition policies. And they’ve been proved right.

Woodford and his team said in mid-July they were reassured by a call with management but added: “We continue to monitor the situation closely.” The company released another issue-riddled trading update last week, so it will be interesting to learn what Woodford’s position is now. My position is to watch from the sidelines for the time being.

Needle in a haystack?

Woodford has bought shares in 4D Pharma (LSE: DDDD) at prices up to 790p (in a placing in December 2015). They’re currently trading at 270p, with most of the fall having come this year.

He said last week: “Shares in 4D Pharma declined, despite continued positive progress in the development of its live biotherapeutic therapies … We remain very attracted to a long-term commercial opportunity that is being substantially overlooked by the market.”

This is one of numerous pre-revenue, lossmaking businesses Woodford has bought for their long-term potential. There could be some big winners among them but needles in haystacks come to mind. As such, I think investing in Woodford’s Patient Capital Trust (or a specialist biotech fund) is a better option than buying one or two individual stocks.

The post 3 Neil Woodford stocks trading at massive discounts appeared first on The Motley Fool UK.

Breeding success

Shares in Genus (LSE: GNS) have almost doubled since April 2014, to 2,003p, and since 2001 they’ve managed a 1,500% return.

The firm describes itself as “the world’s leading provider of bovine genetics and reproduction services,” which does sound nicer than saying it mainly sells bull semen. It’s actually cleverer than that sounds, and there’s a lot of genetics wizardry behind the firm’s breeding research. It’s big in the pork business too, and its technology is applicable to other areas.

Earnings have been strong over the past few years, and though dividend yields are low at just 1.4% last year, they’re well covered and are strongly progressive — the annual handout has been growing at around 10% per year.

A downside is that the shares are currently highly rated, on a forward P/E multiple of a fraction under 30 for the year to June 2017. However, with a 10% rise in EPS forecast, further growth in the years ahead could see returns rising steadily.

With September’s full-year results, chief executive Karim Bitar said: “We established gene editing as a core strategic longer-term growth platform … that offers considerable opportunity in disease resistance,” pointing out that the “GSS technology is ready for commercial launch and we expect to have legal clarity in the coming months on when we will be able to bring it to market“.

I admit I’m torn over the stock’s high current valuation, but I do see a potentially lucrative future for Genus.

Gut feeling

4D Pharma (LSE: DDDD) isn’t yet profitable, and the AIM-listed researcher’s shares are out of favour — after climbing to a peak at the end of March, they’ve retreated by 19% to today’s 790p. But the firm does have some enthusiastic supporters — ace investor Neil Woodford has a 24% stake in the company through his Woodford Investment Managements firm, and Invesco owns 14%.

4D is delving into the human gut, specifically looking for drug candidates among the hordes of bacteria to be found therein. And it’s making some solid progress.

In July the firm reported encouraging phase 1 results from its single strain live bio-therapeutic for the treatment of Irritable Bowel Syndrome, Blautix, with a better-than-placebo response. These are early days, and phase 1 is really about safety and tolerability rather than efficacy, but hopefully the company will move on to phase 2 trials in 2017.

Phase 1 trials are also under way on the firm’s candidate for the treatment of Paediatric Crohn’s disease, Thetanix, also a live bacteria extracted from the human gut.

These are widespread and often debilitating conditions, and success in these fields could be very profitable indeed. 4D has so far built up a library of around 3,000 bacterial strains and plans to extend its research into other diseases, including cancer.

The company is burning through around £10m a year, but at the 30 June interim stage there was cash and equivalents on the books of £75.4m, so there’s plenty of funding there for a few years yet. As blue-sky hopefuls go, 4D Pharma could be a winner.

The post Are these two hot biotechnology shares to buy today? appeared first on The Motley Fool UK.

Of course, beefed-up marketing campaigns haven’t come cheap and are the reason pre-tax losses doubled to £10.5m. However, as seen with the jump in revenue, increased awareness has filtered through to higher sales and management expects to turn its first profit in fiscal year 2017. This would be a huge step for a company that is barely two years old and still has massive disruptive potential for the stodgy traditional estate agent model.

Purplebricks, rather than taking a commission on each property sale of up to 2.5%, offers simple flat-fee packages that are payable whether or not the sale goes through. The low fixed fees combined with the benefit of working with a self-employed local estate agent is what sets Purplebricks apart from both traditional agents and other online-only competitors. If the company can keep up the pace of breakneck growth, maintain 60%-plus market share among online competitors, and doesn’t rush its planned expansion into Australia, Purplebricks definitely has a place on my watch list.

Biotherapeutics

Neil Woodford’s interest in disruptive companies is also apparent with his 24% stake in biotherapeutics firm 4D Pharma (LSE: DDDD). Biotherapeutics is a burgeoning field that seeks to harness the benefits of live organisms such as gut bacteria to treat a variety of illnesses that have thus far defeated traditional pharmacology.

4D’s initial focus has been on gut bacteria and diseases in the related area, such as Crohn’s, colitis and irritable bowel syndrome. Progress has been picking up lately and the company now has several of its 15 treatments progressing through clinical trials.

Despite currently having no revenue, 4D is well placed to continue investing in its pipeline due to £85.4m in cash against total annual pre-tax losses last year of only £10.1m. But while the company’s financial position is appealing and biotherapeutics have massive upside, investing in a small pharma company that currently has no approved products or revenue is just too risky a proposition for me.

Trust in Woodford?

It’s a similar story for another of Neil Woodford’s most concentrated holdings, his 21% stake in Imperial Innovations (LSE: IVO). It has ties with universities and researchers across the UK and invests in start-ups in industries as varied as novel oncology treatments to remote sensors for oil & gas facilities.

With stakes in 38 companies, many of them early stage private ventures, investing in Imperial Innovations requires placing high amounts of trust in the fund managers to choose their investments well. Without the expertise necessary to judge the prospects of starts-ups focused on everything from the treatment of viral infections after bone marrow transplants to next generation lithium ion batteries, Imperial Innovations isn’t at the top of my buy list despite Neil Woodford’s bullishness.

The post Should you buy Neil Woodford’s favourite small caps Purplebricks Group plc, 4d Pharma plc and Imperial Innovations Group plc? appeared first on The Motley Fool UK.