Synairgen's (LSE: SNG) stock skyrocketed on Monday amid news that the largely unknown British respiratory therapeutics company had demonstrated in a phase 2 clinical trial that its inhalable drug SNG001 reduced the chances of coronavirus patients needing a ventilator by a stunning 79%. According to an interview conducted by the BBC, the company's head scientist operating the trial called the results "a game-changer," and went on to say that it could be "a major breakthrough" in the battle against COVID-19, a sentiment echoed nearly verbatim by an unaffiliated professor of metabolic medicine who was solicited for comments.
While the results are still preliminary and need robust third-party confirmation, investors are already curious about whether SNG001 poses a threat to established competitors in the coronavirus therapeutics space, like Gilead Sciences (NASDAQ: GILD) and its antiviral drug remdesivir. In a nutshell, there's a lot to be hopeful about when it comes to Synairgen's new therapy, but that doesn't mean you should rush to sell your Gilead shares.
SNG001 is worth watching closely
Synairgen's double-blind placebo-controlled clinical trial for SNG001 meets broadly accepted standards for scientific rigor, and its substantial cohort of 220 patients suggests that its impressive results probably aren't a statistical blip. And Synairgen claims that the drug reduced symptoms like shortness of breath, thereby helping patients who received it rather than a placebo to head home from the hospital after a median of six days. In contrast, patients who received the placebo were discharged from the hospital after a median of nine days. That said, it's unclear whether this discrepancy is statistically relevant.
Unlike many of the drugs in development for coronavirus, SNG001 is an inhalable formulation of a natural chemical called interferon-beta (IFN-beta) that the human immune system produces to combat viral illnesses. When human immune cells in the lungs are exposed to interferon-beta in the context of a viral infection, they can fight the infection more effectively, thereby protecting healthy cells and curbing viral growth. This phenomenon isn't new to science, but Synairgen's primary innovation is nebulizing IFN-beta so that patients can inhale it deep into their lungs, where coronavirus infections are thought to be the most established.
Don't expect remdesivir revenue to be threatened anytime soon
For all its merits, biotech investors should realize that SNG001 probably won't replace remdesivir due to a combination of scientific factors and business factors. First, SNG001 won't be a direct competitor for remdesivir's market share. Remdesivir has been shown to help COVID-19 patients recover slightly faster than placebos, reducing the median hospital stay from 15 days to 11 days. However, the drug may or may not confer a benefit to survival rates when examined under scientifically rigorous conditions, and researchers are already investigating whether it might perform better when combined with other therapies. Thus, SNG001 has a plausible chance of being one of these other therapies to use in conjunction with remdesivir for hospitalized patients, but right now there isn't enough evidence to suggest that it could be the only treatment needed to get people back to good health.
Furthermore, Synairgen is still a nascent company, with a market cap of only $284 million despite its promising preliminary results and eye-popping stock growth. The phase 2 IFN-beta program for COVID-19 is its most advanced project, and the company had a scant $2.45 million in cash on hand in the most recent quarter, implying an urgent need to raise new funds. Concurrent with its soon-to-initiate phase 3 trials, Synairgen's plans to scale up SNG001 manufacturing aim to produce several hundred thousand doses per month by the end of the year.
In comparison, Gilead plans to produce at least 2 million treatment regimens' worth of doses by December, a dramatically larger effort which is ongoing alongside a smattering of follow-up clinical trials. With a market cap of $93 billion, Gilead's stock will probably not grow as aggressively as Synairgen has in the short term.
But if SNG001 is found to be medically incompatible with remdesivir -- a complexity which there is currently no evidence to support -- and it is also shown to be more effective, it might start to capture some of remdesivir's market share. For now, Synairgen has a lot of drug development and manufacturing scaling to do before it is a credible threat to Gilead.
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