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The advent of three viable coronavirus vaccines is great news – unless, like London-quoted Synairgen, you make treatments for the disease.
On Nov 9, when the success of the Pfizer/ BioNTech vaccine was announced, shares in the firm fell by 39pc. They had jumped more than fivefold on July 20, when the success of its own treatment for Covid-19 in hospital trials was reported.
It is easy to see investors’ logic: if we are all going to be vaccinated against the virus over the next few months, there will be far fewer people admitted to hospital with the disease and much less need for treatments.
That may be true. But the success against coronavirus of Synairgen’s treatment, a drug called interferon beta in a form delivered directly to the lungs, suggests that it could be effective against other respiratory diseases that we cannot expect to disappear in the next year or so.
This at least is the view of one fund manager Questor spoke to and also of analysts at Numis, the broker.
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Now stockbrokers’ analysts can get carried away so perhaps we should take Numis’s share price target of 990p – more than 11 times the current price – with a pinch of salt. But the stock, which is quoted on Aim, may be worth a flutter with a small slice of your Isa or pension.
We would say the same of Avacta, another Aim firm. It too has had the wind taken out of its sails by the vaccines because it had hoped to supply large numbers of the rapid “lateral flow” coronavirus tests on which so many hopes were pinned. Again, if the vaccines can get the epidemic under control, there will be less need for testing.
But this time, too, there is more to the story. Avacta has a second, completely unrelated string to its bow: it has adapted an existing cancer treatment called doxorubicin so that it becomes active only once it is actually in a tumour, which means that it causes much less collateral damage and can therefore be tolerated at higher doses and for longer.
Adapting existing drugs in this way is much less risky than producing new ones from scratch. The firm is also well funded – the biggest risk for biotech start-ups is running out of money.
That said, it is an inherently risky area and, although the shares fell heavily on news of the vaccines, they stand very much higher than before the pandemic. Another candidate for a small punt.
Still on the hunt for a less obvious vaccine winner, Questor chanced on an interesting snippet of information.
Vaccines and other drugs are often contained in phials, and these phials cannot be made of any old glass, which contains impurities that can taint the vaccine itself and potentially affect its effectiveness or even safety. So phials for vaccines or other pharmaceuticals are made from special “borosilicate” glass. This renders the glass inert and unable to interfere with the vaccine.
It turns out that there are very few companies able to make phials suitable for pharmaceuticals. Even fewer are listed, as some are owned by private equity investors.
In fact, Gerresheimer, a German firm, is the only one we found.
Jens Kuerten, a spokesman for the company, told Questor: “Phials may look simple but there are quite high quality and regulatory barriers on any drug that is injected into the body and on anything that comes into contact with the drug, such as the container it is supplied in.”
Gerresheimer’s shares, listed in Frankfurt, have risen by 39pc this year, so some investors have cottoned on to its potential in the fight against the virus.
The firm also does a lot more than make phials; although €625m (£556m) of its €1.4bn sales last year came from glass packaging for pharmaceuticals or cosmetics, phials accounted for only a fraction of the former sum. Mr Kuerten said he could not give an exact figure but phials accounted for a “double-digit” percentage of the group’s sales.
Again, it is worth a small flutter.
Questor says: speculative buy
Ticker: SNG, AVCT, ETR: GXI
Share prices at close: 89p, 113p, 96.9 euro cents
Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.