Synairgen PLC – Received approval for a COVID-19 drug trial in the home environment

Synairgen PLC (LON: SNG) is a FTSE AIM All-Share listed Company, which is involved in drug discovery and development of therapies for respiratory diseases.

Recent News
On 26^th May 2020, the SNG Group announced the expansion of SG016 trial of SNG001 in novel Coronavirus patients.

Highlights of Preliminary Results (for the year ended 31 December 2019)
As on 26^th May 2020, the Group released its unaudited results for FY 2019 and following were the highlights – paused the trail of SG015 in COPD patients due to COVID-19 disruption; In March, the MHRA and Health Research Authority had approved SNG001 trial in COVID-19 patients; study of SG016 progressing well and results are expected to come in July 2020; extending SG016 trial for COVID-19 patients in the home environment. Regarding financials, the Company had raised GBP 14 million through equity issuance to strengthen its position for COVID-19 related activities. The loss from operations for FY 2019 stood at GBP 4.82 million as against GBP 4.13 million in FY 2018. At the end of the year 2019, the Group reported GBP 2.45 million in cash and bank deposits versus GBP 5.33 million in FY 2018. Further, the Group announced that Lain Buchanan would be appointed as new Chairman of Remuneration and Nomination Committee from June 2019.

Share Price Performance
 
Daily Chart as on 27^th May 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

SNG’s shares were trading at GBX 46.90 on 27^th May 2020 (before the market close at 9.52 AM GMT+1), down by 6.20% against the last day closing price. Stock's 52 weeks High is GBX 78.00 and Low is GBX 5.50.

From the technical standpoint, its shares were trading well below its short-term support level of 20-day simple moving average prices, which reflects a downward in the stock and carrying the potential risk to move down further.

Valuation Metrics
  
(Source: LSE)

As on 30^th April 2020, Price/Sales multiple of the SNG was 15.0x, which was significantly higher as compared with the Pharmaceutical & Biotechnology industry. Hence, it is reflecting that the company is trading at a higher multiple as compared to its peers.

Key Risks
The Company is still reporting a loss from operations; moreover, the loss from operations has been increased in FY2019 compared to FY2018. The emergence of Coronavirus had halted the COPD trial and diverted their attention towards pressing concerns of the pandemic.

Conclusion
During the financial year 2019, the Group reported a decline in both top-line and bottom-line items of the income statement. Moreover, the company’s Price/Earnings, EV/EBITDA and Price/Cash Flow multiples are in negative zone as compared to the industry multiples. However, the Group has received approval for three major clinical trial, which are expected to undertake in the coming months. Moreover, the Company is active on many fronts from designing the trials to supply chain for potential demand.
 
Based on the above rationale, we have given a “Watch” recommendation at the closing price of GBX 50.00 (as on 26^th May 2020), while we look for any upcoming catalysts in the near term.
 
4D Pharma PLC – Pioneering in Bacteria Harnessing for Development of Revolutionary Medicines

4D Pharma PLC (LON: DDDD) is a pharmaceuticals & biotechnology company offering product and services through harnessing bacteria. The company developed a new class of medicines and named it as Live Biotherapeutics.

Financial Highlights – First Revenue Generated in FY2019 (31^st December 2019)

(Source: Annual Report, Company Website)

For the financial year ending 31^st December 2019, the group generated revenue for the first time, the revenue stood at GBP 211 thousand for the period. The company’s operating loss after non-recurring income stood at GBP 28,973 thousand in the Financial Year 2019 as against an operating loss after non-recurring incomeof GBP 28,371 thousand in the Financial Year 2018. The LBT (Loss before tax) stood at GBP 29,426 thousand in the financial year 2019 versus an LBT (Loss before tax) of GBP 28,437 thousand in the Financial Year 2018. The LAT (Loss after tax) stood at GBP 24,066 thousand in the financial year 2019 versus a LAT (Loss after tax) of GBP 23,690 thousand in the Financial Year 2018. The basic and diluted loss per share for the financial year 2019 was 36.75 pence versus a basic and diluted loss per share of 36.17 pence in the financial year 2018. As on 31^st December 2019, the company’s cash reserves stood at GBP 3,836 thousand as against a cash balance of GBP 16,053 thousand as on 31^st December 2018. The company’s total assets for the financial year 2019 was GBP 30,610 thousand versus GBP 52,605 thousand in the financial year 2018.

Share Price Performance
 
Daily Chart as of May 27^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

4D Pharma’s shares were trading at GBX 47.13 at the time of writing before the market close (at 9.53 AM GMT+1) on 27^th May 2020 and up by 3.58% versus the previous day closing price. Stock's 52 weeks High is GBX 131.00 and Low is GBX 23.50.

From the technical standpoint, its shares were trading well below its short-term support level of 20-day simple moving average prices, which reflects a downward in the stock and carrying the potential risk to move down further.

Key Risks
Any change in regulations and government policies could affect the overall business of the company. Liquidity and interest rate risks which could affect the operations of the company.

Conclusion
The group generated revenue for the first time in the financial year 2019. Despite the revenue generation, the bottom-line performance had declined, and the profitability margins remained in the negative zone for the period. The company need to manage its operating costs effectively unless it impacts the operational performance in the coming years. The group is pioneer in research collaborations and looking to make progress in clinical studies related to asthma, IBS, and oncology to bring new class of revolutionary medicines to patients. Due to covid-19 outbreak, the company’s activities were impacted and resulted in delays to clinical readouts. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. DDDD is carefully monitoring the situation and will re-evaluate its strategies for short to mid-term objective.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 49.70 (as on 27^th May 2020, before the market close at 10.02 AM GMT+1), with support from few catalysts needs to be evaluated at a later stage.

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