At 23p, the price is now firmly down in penny share territory. So what happened, and what does the company say about what to expect next?

Synairgen share price hit #1

Things were going swimmingly until 21 February, when the SNG share price suddenly fell off a cliff. On a single day, shareholders saw 84% knocked off the value of the company. And it was all down to a clinical failure.

On that day, Synairgen announced that a Phase 3 trial of SNG001, a broad-spectrum antiviral drug candidate, “in patients hospitalised with COVID-19 did not meet its primary or key secondary efficacy endpoints“.

CEO Richard Marsden did, however, say that the drug was administered, “on top of standard of care which changed substantially between our Phase 2 and Phase 3 trials“. The improvement in standard care, he suggested, might have compromised the potential for SNG001 against the planned study endpoints.

Share price hit #2

Then the Synairgen share price took another hit on 17 March, after the US National Institute of Allergy and Infectious Diseases (NIAID) stopped recruiting patients for a Phase 2/3 trial that included SNG001.

Synairgen said it was, “due to the significant shift in the nature of the pandemic which would necessitate a substantial modification of the study design not feasible in this multiple treatment-arm, platform trial“.

The SNG share price fell 17% on the day. And since then, the shares have barely moved. So where is the share price going next?

It is enlightening to look beyond the past 12 months of share price movement, and back to pre-pandemic days. Since the end of December 2019, Synairgen shares are still up a very nice 260%.

What does that say about the power of long-term investing? It is still only a little over two years. But to me it shows that the big day-to-day ups and downs in the midst of the pandemic carried by far the most risk.

Where next for Synairgen?

So back to what the future might hold for the SNG share price. The company has just made a presentation at the 32nd European Congress of Clinical Microbiology & Infectious Diseases (ECCMID), in Lisbon. It covered the positive results from the firm’s earlier Phase 2 trial that were originally announced in July 2020.

So there’s nothing new there. But it does reinforce that work on SNG001 is still very much alive. And that maybe we shouldn’t give up on the Synairgen share price.

With the March announcement, the Synairgen CEO said, “we are actively seeking inclusion in platform trials for hospitalised patients and are working closely with the NIH to also find a suitable trial for SNG001 in home-based patients“.

So there is still some time to go. And it sounds like Synairgen is focusing on the treatments that will be needed as Covid-19 transitions to a long-term endemic status.

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It announced that the US National Institute of Allergy and Infectious Diseases (NIAID) — part of the National Institutes of Health (NIH) — has ceased patient recruitment for a phase II/III trial titled Protocol ACTIV-2/A5401. The study included the testing of SNG001. This is an inhalable formulation which contains the broad-spectrum antiviral protein interferon beta.

Synairgen said that trials have been halted “due to the significant shift in the nature of the pandemic”. This would require “a substantial modification of the study design not feasible in this multiple treatment-arm, platform trial.”

New trials needed

Synairgen said a new clinical trial design is now needed to test the efficacy of SNG001 against Covid-19. It added that “ongoing discussions” are now taking place between lead investigators from ACTIV-2 and Synairgen. This is “to try to identify an appropriate clinical trial to continue the evaluation of SNG001.”

Chief executive Richard Marsden added that the firm is “actively seeking inclusion in platform trials for hospitalised patients”. And it’s  “working closely with the NIH to also find a suitable trial for SNG001 in home-based patients.”

In February 2021, SNG001 had been included in the study on non-hospitalised adults experiencing mild to moderate Covid-19. The Synairgen share price has now fallen 88% since disappointing SNG001 trial data was released in mid-February.

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Over the past two years, the group has been testing SNG001, a formulation containing the antiviral protein interferon beta, to treat the virus. Interferon beta has been shown to help improve lung function and recovery in other experiments. 

The treatment has already made it through Phase 1 and 2 trials. Now it has been recommended SNG001 advances into Phase 3 trials in mild-to-moderate Covid-19 patients.

This progression is part of the sizeable ACTIV-2 study. It is sponsored by the US National Institute of Allergy and Infectious Diseases, which runs the public/private programme, Accelerating Covid-19 Therapeutic Inventions and Vaccines, or Activ. 

Alongside this programme, the company is also running its own Phase 3 study. The results from this trial will be available early in 2022, according to management.

Positive step forward

There is no doubt in my mind that this is a positive step forward for the company. The move into Phase 3 trials only reinforces the existing data from earlier SNG001 testing. Data shows that using the treatment can lead to a substantial improvement in severely ill coronavirus patients.

Synairgen’s product is based on the principle of delivering SNG001 directly into the lungs. The goal of this is to help restore or boost natural antiviral defences to prevent the virus from causing severe lower respiratory tract illness.

If successful, not only can the treatment help the world battle coronavirus, but it may also be helpful in fighting off other virus threats. It may also have a role to play in helping patients recover from different ailments. Interferon beta is already used to help patients with MS. Studies have shown that it can help asthma patients as well. 

Based on these qualities, I do not think it is unreasonable to assume this could ultimately be a significant product for Synairgen. The company has to get the treatment to market first, which could be easier said than done.

Synairgen share price risks 

Even though SNG001 is in Phase 3 trials, there is still a risk that it could prove ineffective in a larger trial group. If it does succeed in the trial, it could be a while before the product hits the market. 

In the meantime, the company will have to try and keep the lights on. This is probably the most prominent risk investors face. If it takes longer than expected to get SNG001 to market, or if complications arise in the current set of trials, Synairgen could run out of money.

In this situation, it may have to ask shareholders for extra cash, which would dilute existing investors. There is no guarantee it would be able to raise the money, and in the worst-case scenario, Synairgen could collapse.

Still, that is the worst-case scenario. In the best case, SNG001 could become a blockbuster treatment for the group. 

Considering these factors and today’s update, I think the outlook for the company is improving. That is why I would buy a speculative position in the stock today.

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The progress continues

Despite what the SNG share price would suggest, Synairgen has actually achieved some promising milestones. Its flagship drug SNG001 is currently undergoing phase three trials. And the last patient is on track to be enrolled by the end of November.

As a reminder, SNG001 is an inhaled interferon beta formulation to treat severe respiratory diseases. That’s a fancy way of saying, patients aren’t injected but rather breathe the drug directly into their lungs. The company is currently running trials to verify its effectiveness against severe cases of Covid-19.

Early lab results released back in May showed the treatment successfully eliminated the virus to undetectable levels. And if a similar outcome can be replicated in the upcoming phase three trials, Synairgen might soon shed its pre-revenue status. The next set of results for SNG001 are expected to arrive within the next few months. In the meantime, the firm has already begun exploring its effectiveness on other Covid-19 variants. And recruitment for its phase two trial of home treatment has just finished recruiting.

Needless to say, this is quite an encouraging amount of progress over the last six months. So why did the share price fall on the news?

The crashing share price

Drug development is a very expensive endeavour, with no guarantee of results. Now that SNG001 is entering phase three trials, the costs are ramping up. Consequently, research & development expenses have exploded over the last six months from £4.5m in 2020 to £36.9m in 2021. And with more staff on the payroll, administrative costs have more than doubled.

In my experience, seeing a high ramp-up of costs when entering phase three trials is not uncommon. The study is estimated to have a total of 610 patients in 99 different hospitals around the world. And hospital fees for running clinical trials are high.

Consequently, ignoring the effects of taxes, the firm reported a loss of £38.9m. That’s more than 600% larger than a year ago. So I can see why some investors were spooked, triggering the fall of the SNG share price.

The bottom line

The spike in costs ultimately doesn’t concern me as much as it does the market. After all, Synairgen still has £46.2m of cash on its balance sheet, which is a decent liquidity level. However, given the amount of capital being sunk into this single product, it does mean the SNG share price is exposed to a single-asset risk.

Suppose these trials don’t produce positive results? In that case, the SNG share price could be on the verge of collapsing even further. Personally, this binary outcome doesn’t tempt me. Therefore, I’m still keeping Synairgen on my watchlist for now.

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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? 

Company outlook

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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Even Hargreaves Lansdown investors have turned positive on Synairgen shares. The company was one of the top 10 most purchased stocks last week on the platform.

The AIM-listed firm recently came out with an announcement, which I thought was very encouraging. I’m still bullish on the stock and would buy it in my portfolio.

The announcement

So, last week, Synairgen released a statement saying that its in vitro studies showed that its treatment is effective against key Covid-19 variants. I’m not surprised the stock jumped on this news.

As a quick reminder, the company developed SNG001, which is a treatment for Covid-19. It’s worth adding here that this is not a vaccine. This is used to treat those who are already infected with the coronavirus. So far, the clinical trials of SNG001 have been successful.

But what does this new announcement mean? Well, it’s certainly positive news for Synairgen shares.

Studies were conducted at labs in the Netherlands, confirming that SNG001 “potently reduced”  the coronavirus to “undetectable levels” in cells that were infected with the “Wuhan-like” strain as well as the UK/Kent and South African variants.

My view

I’ve previously commented that I think Synairgen shares have bags of potential. And I think this announcement demonstrates it.

Clearly the emerging Covid-19 variants are of huge concern. They pose a threat to the global economy returning to any kind of normality. While the current vaccines are proving to be effective, I don’t think this is enough. They may not work against future coronavirus variants. It’s great to see that the data confirms that “SNG001 is a broad-spectrum antiviral product”.

What I like about Synairgen is that SNG001 could play a key role in combating seasonal variants and other respiratory diseases. I also agree with CEO Richard Marsden’s comments that it’s pleasing “to see initiatives being put in place to accelerate and support development of antiviral therapeutics as a backstop for patients who are admitted to hospital”.

It means that the company’s products could be at the forefront of treating Covid-19. In my view, it also places Synairgen on the radar as a potential takeover target by a larger competitor once the pandemic is over. The company will start dosing patients at trial sites in India as part of its SNG001 Phase III study imminently.

Risks

Syanirgen shares come with a lot of risk. I only have to look at the stock price chart to see that investors are in for a volatile ride. I’d only invest what I could afford to lose.

The company hasn’t generated any revenue yet and so it’s loss-making. I expect this to be the case for sometime because Synairgen is still conducting clinical trials for SNG001. There’s no guarantee this will be successful, so investors may need to brace themselves.

But I’m aware of the risks involved with Synairgen shares. I think this announcement is positive news and could push the stock higher.

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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.

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The AIM stock is now trading around the 100p mark. I’d use this dip as a buying opportunity as I reckon this company still has bags of potential. Here’s why.

Why have Synairgen shares been falling?

I think the main reason why this AIM stock has fallen significantly is due to the successful rollout of Covid-19 vaccines.

It’s worth noting here that the stock rallied last year on the hopes of its SNG001 product. Unlike a vaccine, this is a treatment for coronavirus. So when there was doom and gloom about the pandemic, this stock soared after it announced that trials for SNG001 were successful.

In the UK the jabs have been rolled out to tens of millions of people, so the euphoria surrounding the AIM stock has subsided. I guess that early investors have also taken their profits.

Another reason why the shares have fallen is that the news flow regarding the treatment has somewhat reduced. The clinical trials for SNG001 will take time, but I’m optimistic for a positive outcome.

The potential

I think it’s important to realise that the pandemic isn’t over yet. While things in the UK may be improving, there are other countries that are still suffering the impact of Covid-19. And let’s not forget the threat of virus variants. For this reason, a treatment for coronavirus remains extremely important.

So far, SNG001 has proved successful in trials. It’s been tested on hospitalised Covid-19 patients as well as as people who are suffering from the illness at home and don’t require hospitalisation.

In its announcement at the end of April, CEO, Richard Marsden said the “SNG001 treatment led to a threefold likelihood of recovery to ‘no limitation of activities’ in the markedly/severely breathless population compared to those on placebo in the home and hospital setting, and that further analyses reinforce our previous findings”.

To me, this news is very encouraging. It’s also reassuring that international Phase III trials in hospitalised patients requiring supplemental oxygen are due to commence later this year.

Risks

Synairgen is making progress but still has a long way to go. There’s no guarantee that the Phase III trials will be successful. 

The company hasn’t made any sales yet and is unprofitable. There’s a lot riding on SNG001. And it could make or break Synairgen. This isn’t for the fainthearted. So I’d only invest what I could afford to lose.

For now, the company has enough cash to see it through further clinical trials. It managed to raise money last year and as of the end of 2020, Synairgen was sitting on a cash balance of £75m.

But if there are any setbacks, it may require further funding. And there’s no guarantee it will receive additional money. This could impact the stock.

My view

Despite these risks, I’d buy Synairgen shares at the current price. As a long-term investor, this company has bags of potential even after Covid-19. It’s research and findings could prove useful to another large firm. Hence the AIM stock could be a potential takeover target.

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To put this decline into perspective, over the past 12 months, shareholders have seen a return of 126%. Moreover, since the beginning of 2020, the stock has risen by more than 2,000%. 

However, past performance should never be used as a guide to future potential. Just because the Synairgen share price has produced considerable returns in the past doesn’t mean it’ll continue to outperform. 

That has become painfully clear today after the firm published results from its phase II trial of inhaled interferon beta in Covid-19 patients.

Positive results 

Today’s update from the business was a positive one. According to Richard Marsden, CEO of Synairgen, the trial findings show that the “SNG001 treatment led to a threefold likelihood of recovery to ‘no limitation of activities’ in the markedly/severely breathless population compared to those on placebo in the home and hospital setting.“

SNG001 is Synairgen’s formulation containing interferon beta for nebulisation. This allows delivery directly into patients’ lungs.

Some studies have shown that Covid-19 suppresses the natural production of interferon beta. The virus can also prevent the induction of antiviral responses by infected cells. Synairgen’s work appears to show that its SNG001 formulation containing interferon beta can help overcome this problem. 

However, the company is still a long way from commercialising the product. The latest findings still need to be peer-reviewed. It’s also in the process of completing a phase III trial. After that, regulators will need to approve the product.

Considering the volume of work still required, there’s no guarantee this product will ever successfully make it to market. I think that’s the most significant risk overhanging the Synairgen share price right now. 

Synairgen share price decline 

It’s difficult to tell exactly why the Synairgen share price has declined so substantially today. However, it looks to me as if the market is starting to become concerned about the firm’s valuation. 

The company’s current market capitalisation stands at £308m, which seems to me to be a lot, considering the success of SNG001 is far from guaranteed. 

Of course, on the other hand, if the treatment successfully makes it through the next trial stage and is approved by medical regulators, the market could be substantial. In this best-case scenario, the Synairgen share price may be incredibly undervalued at current levels.

Despite this, I’m not a buyer of the stock today. I think the company’s future is incredibly uncertain. Until we have more information on the SNG001 treatment, there’s no guarantee whatsoever this will ever be a sustainable business.

This is just my own personal preference as I don’t like to invest in companies still in the development stage. However, other investors may be comfortable taking on this level of risk. 

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#1 – Synairgen

Synairgen is a UK small-cap share that I think is taking a very different stance on Covid-19. Rather than developing a vaccine, it’s developing a treatment called SNG001.

The SNG001 treatment was fast-tracked in the US by the regulator, the FDA, at the end of last year. It has successfully passed Phase I and II trials for treating hospitalised patients and now has moved onto Phase III. There’s no guarantee that SNG001 will be successful in the next phase of testing. This involves using the treatment on a bigger group of test subjects.

I should highlight that it’s still early days for Synairgen, as it’s loss-making. I reckon Synairgen is focusing all of its attention on SNG001. It could be game-changing for the company but any negative news could impact the share price.

What I’m really excited about is the company’s latest announcement. Synairgen has said that it’s testing an inhaled version of SNG001 on patients who are suffering with Covid-19 at home and who don’t require hospitalisation. If this is successful, I think it could have a lot of potential.

Even after Covid-19, Synairgen could by a potential takeover target by one of the larger pharma companies.

#2 – Sensyne Health

Another UK small-cap share I’d buy right now is Sensyne Health. In summary, the company uses artificial intelligence to analyse data. Sensyne Health’s discovery science division is the main business. This is where it analyses anonymised data from NHS trusts using algorithms.

The reason why I like this UK small-cap stock is that I think it bridges the gap between the NHS and the pharma industry. The company can use its analysis to get a better understanding of diseases. The NHS has limited resources and I reckon the pharma industry would like someone else to do the hard-core number crunching.

I think Sensyne Health’s software products are also a key growth driver. It creates digital health products that help clinicians with patient care. What I also like is that these products collect data, which can be used by Sensyne Health for research purposes.

There are risks with the stock. Sensyne Health is incurring costs and hence is currently loss-making. I reckon these research and development costs could continue and hinder future profitability.

One of Sensyne Health’s software products is MagnifEye. Last week Sensyne Health signed a £470,000 agreement with the Department of Health & Social Care to conduct a study of its MagnifEye technology for use with COVID-19 tests. It follows on from another license Sensyne Health signed with Excalibur Health. Here MagnifEye will be used with Excalibur Health’s Covid-19 antigen test.

So what does this mean for Sensyne Health? Well, its software products are gaining traction. The fact that Sensyne Health’s products are gaining visibility means that in the long term this could boost revenue generation and profitability.

It’s still early days for the company but I think things look promising for this UK small-cap share. Hence I’d buy the stock in my portfolio.

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