Synairgen (LON: SNG) shares were of the winners of the covid-19 pandemic, soaring from 5p at the end of 2019 to 247p by August 2020. But after experiencing extreme volatility, the biotech stock fell to 172p last Friday. And then yesterday, disaster struck. The Synairgen share price collapsed by 94% to 13p, as its proprietary covid-19 medication yielded disappointing trial results.

However, Synairgen shares have now recovered to 26p, as a home-based trial could still yield results.

Synairgen share price: trials and tribulations

The biotech company’s valuation was justified by its ongoing phase III trial into its novel ‘SNG001, a formulation for inhalation containing the broad-spectrum antiviral protein interferon beta.’

And unusually for biotechnology, the basic science behind the drug was easy to understand. Scientists found that covid-19 suppresses the natural production of interferon beta, which is part of the body’s natural defence against common diseases such as flu. Covid-19 suppresses the production of the compound, and Synairgen speculated that a direct dose into the airways through a nebuliser would trigger a stronger antiviral response in infected patients.

In phase II results, SNG001 cut the odds of a covid-19 patient in hospital developing severe disease by almost 80%. Patients were two to three times more likely to recover to ‘no limitation of activities’ post-disease. And it cut the average hospital stay by a third at a price of only £2,000, making it financially cost-effective for governments to mass-order.

The investment case was sound. Fellow biotech stock AstraZeneca is currently reaping the rewards of its successful phase III trial of Evusheld. The drug has been approved in the US as an antibody treatment for immunocompromised patients who cannot be vaccinated, after results demonstrated an 83% reduction at the median six-month analysis of developing symptomatic covid-19 compared to a placebo.

But breakthroughs are the exception rather than the rule; Synairgen investors have discovered this to their cost. The company has announced that ‘the international Phase 3 SPRINTER trial of SNG001 in patients hospitalised with COVID-19 did not meet its primary or key secondary efficacy endpoints.’ It further elaborated that ‘patients who received SNG001 were no more likely to be discharged from hospital than patients who received placebo, and patients who received SNG001 were also no more likely to recover to “no limitation of activities.”’

CEO Richard Marsden said the failure may have been due to the ‘standard of care which changed substantially between our Phase 2 and Phase 3 trials. This improvement in patient care may have compromised the potential of SNG001 to show a clinical benefit.’

Biotech bubble

However, there is a glimmer of hope for Synairgen. The trial threw up an ‘encouraging trend in prevention of progression to severe disease and death, which we strongly believe merits further investigation in a platform trial.’ And the company ‘eagerly’ awaits phase II data from a current trial on home-based covid-19 patients, which could still yield a positive result for SNG001.

But the collapsing Synairgen share price may be a harbinger for the biotech bubble. It's not the first biotech stock to collapse in recent months because of an underwhelming trial result. BridgeBio Pharma's share price collapsed in December when it made the ‘disappointing and baffling’ discovery that placebo patients with a rare heart disease could walk further after treatment than those given the company’s Alnylam drug.

Sensorion collapsed in January after its failed hearing loss medication trial. Rafael also fell hard after the inadequate performance of its lead cancer drug Devimistat in October. And Angion Biomedica has also suffered after the failure of both its covid-19 anti-fibrotic therapy and its ANG-3777 kidney transplant medication.

Of course, trial and error is fundamental to science. It’s far safer to invest in large-cap companies like AstraZeneca with the financial firepower to absorb research losses. But even the likes of Moderna and Pfizer are now far below their share price highs.

And many biotech companies are now struggling, with investors abandoning the sector as the pandemic falters and monetary policy tightens. According to Refinitiv, biotech firms in the US have raised $32.7 billion from launching Initial Public Offerings since the pandemic began. But 83% are now trading below their launch prices. Yet Synairgen still has a cash balance of £25 million. And better trial results could be forthcoming.

The UK was a biotech market leader in the early 2000s, but more than a third of UK biotech firms collapsed after the 2008 financial crisis. As inflation rises, a similar correction could be imminent.

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