Sareum Holdings (LSE:SAR) shares have been falling for some time now. This is also the case for many other FTSE stocks. At current levels, could the current Sareum Holdings share price be a good opportunity to add shares to my holdings? Let’s take a closer look.
Drug discovery and development
As a quick reminder, Sareum is a drug discovery and development business. It focuses specifically on cancer and autoimmune diseases. Once the drugs are developed, it then licences them to pharma and biotech companies to manufacture on a larger scale and sell.
So what’s happening with the Sareum Holdings share price? As I write, the shares are trading for 175p. At this time last year, the shares were trading for 345p, which is a 49% drop over a 12-month period.
The bear case
Drug development and discovery is a very lengthy and risky process. Aside from the time invested into the venture, there is every chance that the drug in question may not be fit for purpose and lots of time and cash could be wasted. This is a risk for all drug development businesses, and not just Sareum Holdings, however.
Despite the fact Sareum has many approved patents and agreements with licensed pharmaceutical companies, it looks to me like its growth and future pipeline is still very much in the discovery phase. This uncertainty does not sit well with me.
The bull case and my verdict
Looking at more recent events, I noticed that the Sareum Holdings share price did spike in April. I believe this was directly linked to pharma giant GSK purchasing a business that Sareum collaborated with, called Sierra Oncology. Together, Sareum and Sierra created a cancer drug known as SRA737. Some people think that GSK’s takeover could mean significant investment behind the project and that Sareum would benefit financially because of its agreement with Sierra. There is no concrete evidence of this yet, however, and I will keep a close eye on developments.
One thing I did note about Sareum is that, based on its business models and agreements, it doesn’t actually front much cash in drug development projects. Its partners do in most cases. It has also recently been granted patents for some of its other projects such as its SDC-1802 TYK2/JAK1 inhibitor programme. This is linked to protecting any drugs developed to treat acute lymphoblastic leukaemia.
Considering all the pros, cons, and recent events, I would not buy Sareum Holdings shares for my portfolio. Despite some positive events recently, my knowledge of the drug discovery market is limited. In addition to this, the other major factor putting me off is the fact that much of Sareum’s outlook ahead is in the discovery phase and a pipeline in the drug discovery market is not guaranteed.
Sareum is one stock I will put on my watch list and will continue to monitor developments and perhaps revisit in the future.