4D pharma (AIM: DDDD) is a pharmaceutical company leading the development of live biotherapeutics. This is a new class of medicine and way of treating disease, that involves introducing strains of bacteria into a patient’s gut.
Last week 4D announced it received expedited acceptance from the UK Medicines and Healthcare products Regulatory Agency to begin a phase II study of a single-strain live biotherapeutic in patients with COVID-19. The company’s share price rose on the announcement.
The relevant single-strain live biotherapeutic is already in trials for treating patients with partly controlled asthma. Although only 20 patients have tested so far, there have been no serious adverse effects reported.
Previous testing showed it could significantly reduce lung inflammation and impact particular immune cell types and pathways similar to SARS-CoV-2 infection. It has also shown potential signs of future use in combating other inflammatory diseases such as multiple sclerosis and rheumatoid arthritis.
There is no doubt, this is a promising development for a British pharmaceuticals company.
Long-term potential
Investing in pharmaceuticals should be a long-term commitment. These companies work at a slow pace compared to other sectors. There is a lot of red tape to work through. Research and development costs are significant and when dealing with human health a multitude of factors must be considered. There is often a delicate balance between solving serious health problems and avoiding the introduction of unwelcome side-effects.
Commercial success is necessary for a pharmaceuticals company to generate shareholder wealth. With the world’s eye on a COVID-19 vaccine or medicine, the race to success is on. Ordinarily, this would take a long time, but, I imagine it will be sped up by outside influence and cash if the likelihood of success for 4D pharma is apparent. I think it will be a couple of months before the outcome of the COVID-19 phase II trial is discernible.
4D pharma share price fluctuations
The 4D pharma share price has rebounded 127% since its March low of 23p after the stock market crash. However, it is still down 45% year-to-date. With gross gearing of 14%, this company is fairly low on debt, which is a good sign.
One of 4D pharma’s biggest shareholders is the US pharma giant MSD, the tradename of Merck & Co, a leader in medicines and vaccines for some of the world’s toughest diseases. In October they entered into a research collaboration and option-to-license agreement to develop vaccines based on delivering live bacteria to the gut.
Last week, the World Health Organization said there is no evidence that people who have recovered from COVID-19 will be protected from a second infection of the disease. If this is true, then any drug that can help control the virus will be more welcome than ever.
Time will tell, and a lot will depend on the success of the trials going forward. 4D pharma is still a relatively small player in UK pharmaceuticals. Although this is a promising development there are no certainties, particularly when it comes to AIM stocks.
I think this is a share worth watching and I hope it continues to achieve positive outcomes. Value investing is a long-term commitment and one in which you should be confident in the companies you are buying shares in.
