Shares of Sareum Holdings Plc (LON: SAR) are down 33.2% from their August highs after the stock sold off significantly in recent weeks as the bullish momentum waned.
The stock’s rally was fueled by investor expectations of one of the biotech firm’s cancer treatments was on the verge of receiving a patent from the relevant authorities.
Investors also reacted positively to news that Sareum’s COVID-19 treatment SDC-1801 would start phase 1 clinical trials in early 2022, a significant milestone for the drug development company.
However, the rally has since lost momentum as investors sold their holdings to cash in on their profitable traders, while others may have become impatient with the upcoming cancer treatment patent award.
Sareum’s fundamentals are quite promising, but there are some risks associated with the company including the fact that it is a pre-revenue company, hence is constantly raising cash either via debt or share placements diluting current shareholders.
The company’s drugs are also quite far from being commercialised since many are still in the pre-clinical stages of development. Statistics indicate that over 90% of phase 1 drug trial candidates fail to proceed to phase 2 trials despite their pre-clinical results.
Therefore, Sareum has a long way to go before it can commercialise its drugs with the company focused on partnerships with other larger pharmaceutical companies to help it develop and commercialise its drugs.
From a technical perspective, Sareum’s shares price has formed a bearish triangle pattern that could result in a break lower. Still, triangle patterns are generally quite volatile and we cannot rule out a break higher.
Therefore, investors looking to buy Sareum stock should wait for a convincing break out of the triangle pattern before deciding on whether to buy or short the stock.
*This is not investment advice.
Sareum share price.
Sareum shares are down 33.23% from their August high of 9.75p, having fallen to their current price of 6.51p.
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Sareum shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Sareum shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies