The Synairgen (LSE: SNG) share price has jumped in early deals this morning after the company published an update on the trials of its coronavirus treatment.
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.
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.
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