The SAR share price has grown dramatically in 2021. Anyone who bought just a few months ago will have more than doubled their money. So what’s behind the peak, and is it too late to buy now?
Sareum Holdings (LSE: SAR) is a mid-sized UK pharmaceutical company founded in 2004. It is a small molecule drug developer focused on cancer and autoimmune diseases.
Over the past 10 years, the Sareum share price has moved without doing much. But over the past 12 months, he has leapt surprisingly fast. This has led this unprofitable business to a market cap of over £ 200million.
Why the SAR share price has skyrocketed
On January 7, 2021, Sareum learned that it had obtained US patent approval for an invention associated with its proprietary SCD-1802 kinase inhibitor program.
“The grant of this patent in the United States complements the intellectual property protection of our proprietary program SDC-1802 in all major markets.“said Scientific Director Dr John Reader.
Small molecule drugs have been the cornerstone of modern pharmaceuticals for over a century. Aspirin, for example, is a small molecule drug. They can easily enter cells due to their size, and with the help of a science robot, they can even be “programmed” to perform specific functions.
On June 15, 2021, the SAR issued a statement stating that it had received nearly £ 1.5million for 30million shares at 4.9 pence per share “by the same high net worth individual who subscribed for shares valued at £ 900,000 as announced by the Company on June 1, 2021”.
The money will be used to advance its SDC-1801 and SDC-1802 TYK2 / JAK1 inhibitor drug development programs, the company said.
This white knight, whoever they are, clearly believes in the potential here. This has left a lot of small investors with the fear of missing their chance. Since that time last year the SAR share price has gone over 10. So £ 5,000 invested in June 2020 would be worth around £ 55,250 today.
What the future holds
In December 2020, the UK’s Research and Innovation branch gave Sareum £ 174,000 to study the therapeutic potential of SDC-1801 for Covid-19.
Sareum aims to complete preclinical studies of SDC-1801 by the end of the third quarter of this year.
It indicates that clinical trials as well as a potential Covid-19 application of the program will also be developed. This will require more funding, however, so shareholders should expect to be further diluted.
The company has recorded only one year of profit out of the last six. This is not unusual for a growing company and especially not for a company specializing in investigational drugs. The R&D costs are very high, which makes the risk very high as well. However, the associated rewards can be incredibly good if the company chooses a winning product.
Like all early stage drug developers, it takes huge sums of money to get these products out of the lab and put them into production. There is never 100% certainty that a product will work. And there are several points of potential failure along the road to the market. The drugs may prove ineffective in clinical trials. The failure of its main potential money spinners could cause the Sareum share price to fall.
There is clearly more to come from Sareum. The purchase now offers potentially very high rewards, albeit at high risk. I would wait to hear more developments on the main results of the SDC-1801 studies before I buy more, to be honest.
The post The SAR share price jumped 1000%. Should I buy now? first appeared on The Motley Fool UK.
Tom Rodgers owns shares of Sareum Holdings. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a wide range of ideas makes we are better investors.
Motley Fool United Kingdom 2021