– For the last two months, it’s the vaccine developers that have hogged the headlines, but for anyone still looking for exposure to the medical campaign against the virus, they are not the only play available.
U.K.-listed small cap Synairgen (LON:SYNG) stock rose over 10% on Wednesday after announcing the start of a phase 3 trial for an interferon beta treatment delivered by inhaler, which early test results have indicated reduces both the severity of infection and subsequent recovery time. The news comes against the backdrop of a sharp deterioration in the public health situation in the U.K., which has stretched the country’s hospital system to the limit. Anything that allows faster recovery and the freeing up of hospital beds is likely to be grabbed with both hands against such a backdrop.
Synairgen’s advantage is that its product is essentially a tweak to a well-established and broadly-tolerated drug that is already widely used to fight other diseases. As such, the chances of regulatory approval seem high, and it has already been fast-tracked by the U.S. Food and Drug Administration.
The stock subsequently pared its gains but was still up 7.1% by mid-morning in London at its highest since Pfizer (NYSE:PFE) and BioNTech’s breakthrough announcement that their experimental vaccine was effective in treating the virus.
The Pfizer/BioNTech announcement ushered in a rough couple of months for a host of small and medium-cap stocks that had flourished in the early stages of the pandemic. Companies like Italy’s DiaSorin (MI:DIAS), U.K.-based Avacta (LON:AVTG) and the Anglo-French venture Novacyt (LON:NCYT) – all of whose strengths lay in detecting the disease rather than treating it – all suffered as Pfizer was followed by Moderna (NASDAQ:MRNA) and AstraZeneca (NASDAQ:AZN) in rolling out vaccines that ought – in time – to sharply reduce the need for Covid-related clinical diagnostics.
Neither DiaSorin – a well-established company with hundreds of millions of euros in annual revenue, nor Avacta, a startup with hardly any revenue, has really recovered. DiaSorin hit its lowest level since September earlier this week. Avacta stock has done better. It fell 40% in the weeks after the Pfizer/BioNTech announcement but has recovered some 20% since then, helped by a couple of licensing agreements that reminded the market of its original focus on developing biotherapeutics for cancer treatment – a business that will long outlive the Covid-19 pandemic.
But along with Synairgen, the small-cap that has rebounded best is Novacyt, whose 2,000% rally last spring briefly made it the hottest stock in Europe. Both Novacyt and Avacta are working on developing so-called ‘lateral flow’ tests for Covid-19, which give results in minutes. While other lateral flow tests have already reached the market, they are plagued by low reliability. As such, the successful development of a reliable alternative could still be rocket fuel for either stock, given the improvement in testing regimes that that would imply.
Novacyt said last year it expects to launch its product in the first quarter of this year. Novacyt stock was up 7.1% by mid-morning in London, without any visible price trigger.