A former Woodford Equity Income biotech holding that was sold by Link Fund Solutions to a US investor at a steep discount has seen its share price more than quintuple after a major breakthrough for its Covid-19 treatment drug.
Synairgen’s share price went through the roof on Monday as it revealed initial tests of its Covid-19 drug, SNG001, had drastically reduced the chances of infected patients requiring intensive care.
Around 80% of patients who inhaled additional amounts of the interferon beta protein, which is produced naturally by the body when it gets an infection, progressed from “requiring oxygen” to “requiring ventilation” and were twice as likely to recover from the coronavirus compared with patients on a placebo
Shares in the Aim-listed business were up 426% at the end of trading on Monday at 192p, quintupling in value from 37p at the start of the day. At one point the company’s share price was up 553%, hitting a record 239p a share.
Another ‘kick in the teeth’ for Woodford Equity Income investors
Synairgen’s meteoric share price rise has seen its two academic co-founders, Stephen Holgate and Ratko Djukanovic, sitting on stakes worth £1.5m. Meanwhile the Southampton based-firm’s largest shareholder Lansdowne Partners’ 11.7% stake in the business is now worth £33m.
But news of Synairgen’s surging share price has dealt another painful blow to Woodford Equity Income holders who held the stock only a month ago.
The fund’s authorised corporate director (ACD), Link, sold Woodford’s remaining 14.3% stake in the respiratory drug company to Acacia Research in mid-June along with 18 other biotech holdings for £224m, an estimated 50% write–down on the value of the assets.
Acacia promptly sold 2.6 million shares in Synairgen valued at £926,000 a day after acquiring them. Regulatory filings from this month show that Acaica has continued cutting its stake in Synairgen, bringing it down to 7.5% from 12.6% the first week of July and down to 6.9% last Wednesday.
“This is yet another kick in the teeth for Woodford investors, who are still waiting to find out when they’ll get the rest other money back,” said fees campaigner Robin Powell.
While there may have been no indication of a breakthrough in Synairgen’s Covid drug when Link offloaded the holding six weeks ago, the ACD should be trying to recoup as much money as it can for investors, he said. “The impression given is that it just wants to get the job done and move on.”
Link declined to comment on Synairgen’s share price movement.
‘We would all be millionaires if we could invest with the benefit of hindsight’
Peter Sleep, senior portfolio manager at 7IM, believes it was reasonable for Link to have sold out when it did. “We would all be millionaires if we could invest with the benefit of hindsight.”
Sleep pointed out the value of Synairgen’s share price could easily have tanked if the new treatment had been ineffective. The healthcare company completed a rights issue back in March, around the time it began trialling its Covid drug, “and anything but an unequivocal success could have been disastrous for the stock price,” he said.
The binary nature of drug tests is one of the reasons why investing in the biotech space is so difficult, said AJ Bell head of active portfolios Ryan Hughes. “Find the magic cure and the shares rocket or run out of money and the shares tank.”
“It would be easy to criticise Link here,” Hughes continued, “but it would have been impossible for them to know that Synairgen would get promising results on a Covid-19 vaccine.”
Willis Owen head of personal investing Adrian Lowcock notes that Link “doesn’t know the ins and outs of the companies in the fund” so probably wouldn’t have known the best time to sell regardless.
See also: Link sells Woodford stock surging more than tenfold amid coronavirus outbreak
As the ACD overseeing the liquidation of the Woodford Equity Income fund, Link must wind-up the company in the most efficient and cost-effective manner possible, said Lowcock. They cannot wait around for the possibility of good news, he said.
Sleep added that compared with Woodford Equity Income’s losses on holdings like Provident Financial, which has not seen shares recover since plummeting over 70% in 2017, the value of the lost opportunity from Synairgen is “a drop in the ocean”.
