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Synairgen shares down 90% YTD after Covid-19 trial fail

Someone holding a test tube of antiviral inhaling treatment

As respiratory drugmaker Synairgen [SNG] prepares to report its interim results on Thursday 29 September, shareholders will be looking for an update on the ACTIV-2 trial for its inhaled antiviral aimed at Covid-19 patients. A read-out of the data had originally been expected in June.

Synairgens share price fell off a cliff in February after the company posted disappointing results from its phase 3 “sprinter” trial of SNG001, an inhalation treatment. At the close on 26 September, the stock was down 90% year-to-date at 20.78p. CEO Richard Marsden said in February that improvements in the care given to hospitalised patients may have “compromised the potential of SNG001 to show a clinical benefit”.

Unwilling to throw the towel in, Syairgen decided to shift its focus to the ACTIV-2 trial in the US, which is being funded by the National Institutes of Health.

Synairgen received a boost earlier this month when it released positive results from its SG015 trial of patients with chronic obstructive pulmonary disease. The trial was paused back in May 2020 due to the pandemic. The results showed that SNG001 can accelerate viral clearance from the lung,” said Marsden.

The drug discovery firm, which operates out of the University of Southampton, also announced this month that it is set to take part in a large-scale UK trial called Universal. The trial is being funded by Janssen, a pharmaceuticals division of Johnson & Johnson [JNJ].

A focus on cash burn

While Synairgen is beginning to show promise, the company is still pre-revenue and unprofitable.

The company ended 2021 with a pre-tax loss of £57.9m, up from £17.7m in 2020. Research and development expenditure more than tripled from £15.5m to £52.9m over the same period as the company scaled up its manufacturing activities. The firm held £33.8m in cash as of 31 December, down from £75m a year earlier.

Although the company described its cash control as prudent”, cash burn will be in focus when it reports its interim results.

Research and development costs are likely to continue increasing as Synairgen advances its clinical research. The question is how much clinical evidence will be enough for a regulatory submission and how much this will eat into its cash position. If cash burn becomes a significant problem, then it could weigh on the share price.

The commercialisation challenge

What will ultimately move the Synairgen share price is not the earnings announcement this week, but future trial data and results.

In October, the company says it will present positive findings from 60-day and 90-day follow-up visits to those patients that were part of the phase 3 SPRINTER trial that disappointed earlier this year.

Chris Brightling, a senior investigator at the UK’s National Institute for Health Care Research (NIHR) and a professor at the University of Leicester’s department of respiratory sciences, said in a press release that the promising long-Covid data is very welcome”. Brightling added that although the data will require further investigation, there are signs that SNG011 may have a positive effect in reducing some of the most recognised and problematic symptoms associated with long Covid”.

With Covid-19 cases rising in the UK last week and long-Covid expected to be a prevalent problem, Synairgen certainty hasnt missed the boat. But the challenge facing the company is not simply receiving regulatory approval, but commercialising SNG001 and bringing it to market so it can capitalise on the opportunity.

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