Synairgen PLC: Admirable aim but financially off the mark

Synairgen (LON:SNG) is a respiratory drug discovery and development biotechnology company, whose strategy is to identify novel drug targets, progress them through early stage clinical trials and license them to partners to advance through to commercialisation.

The Group currently has two programmes – the interferon beta (IFN-β ) programme targeting chronic obstructive pulmonary disease (COPD) patients, and a share of Pharmaxis’ LOXL2 programme.  

Operationally the company is wholly focussed on its inhaled IFN-β programme in COPD and engaging with potential partners for this programme in advance of Phase II data availability.

An equity fund raising in 2017 helped fund the progression of the IFN-β programme. Of course, the speed of the trial is dependent upon the rate of recruitment into the pre-treatment pool and the rate at which such patients contract colds. Overrunning of the trial into 2020 would result in extra costs to complete the trial.

In December 2017, the company sold its LOXL2 programme to its partner Pharmaxis, in return for £5m and a share of at least 17% (net of allowable expenses) of any licensing receipts.

Revenues in 2018 and 2017 were nil (excluding the Pharmaxis exceptional income), but R&D and administration are £3m to £4m per annum, giving a loss per share of 3.5p in 2018.

Until the Group generates positive net cash inflows from successful licensing of transactions and commercialisation of its products, it remains dependent upon securing funding through the injection of capital from share issues. No dividend is being paid.

Retained deficit has accumulated to £23m, eating up most of the share premium account.

The Group may not be able to generate positive net cash flows in the future or attract such additional funding required at all, or on suitable terms. In such circumstances, the Group’s discovery and development programmes may be delayed or cancelled and the business operations curtailed.

For: It has progressed with its IFN-β programme. It has shown it can transform R&D into money.  

Against: There is no certainty when its IFN-β programme will end as it is dependent, in part, on patients becoming ill. There is no certainty Synairgen will identify new research projects, and then successfully realise their intrinsic value. In the meantime it is burning cash.

Conclusion: Though the company is seeking to improve the lives of patients with respiratory disease, the company itself is not financially healthy, and one to avoid for investors seeking viable plays.