Shares in mid-cap ASX biopharmaceuticals company Starpharma Holdings Limited (ASX: SPL) have endured a volatile start to 2021. After surging to an all-time high of $2.52 by mid-February, the company's shares have now plunged more than 35% to just $1.62 as at the time of writing.
While this still means they have risen close to 70% over the last 12 months, it's a disappointing result for shareholders who may have thought 2021 would be a breakout year for Starpharma.
Company background
Before we look at the reasons behind the volatility, it's probably worth taking some time to explain what Starpharma actually does – particularly since this is a junior healthcare company that may be flying under the radar for many investors.
Starpharma is an Australian healthcare company specialising in dendrimer-based nanotechnologies. Dendrimers are essentially man-made synthetic compounds: well-defined collections of molecules that have been created in a lab to serve a particular purpose. Because scientists can precisely select the molecules included in the dendrimer, they can be developed to address specific needs in medicine and life sciences.
Starpharma's flagship product is called Viraleze, a nasal spray that has been shown to provide strong protection against a range of respiratory viruses, including the virus that causes COVID-19. Viraleze works by targeting areas in the nasal cavity where viruses typically multiply, providing a physical barrier against infection and preventing the virus from spreading to the lungs.
The company also develops a number of other products, including dendrimer drug delivery systems. Dendrimer technology can also be used to enhance the properties of other drugs by ensuring that they target the right areas of the body. The company's dendrimer drug delivery products are currently being trialled with cancer patients.
What's been going on with the Starpharma share price?
The February surge in the Starpharma share price came on the back of a flurry of company announcements.
First, Starpharma released its activities report for the quarter ended 31 December 2020. The report provided a number of positive updates, including that Viraleze was on track to be registered for use in Europe, and clinical trials of its other dendrimer-based products were also progressing.
Shortly afterwards, Starpharma announced that a clinical trial of one of its drug delivery products was progressing to a global phase 1 clinical study. The trial was being run in partnership with international pharmaceutical company AstraZeneca (LSE: AZN) and was investigating the efficacy of Starpharma's products for patients with forms of acute leukaemia.
Starpharma also announced it had signed a research agreement with US-based pharmaceutical company Merck & Co Inc (NYSE: MRK). Under the agreement, Merck & Co will seek to evaluate whether Starpharma's dendrimer technology provides advantages for oncological medicine.
Despite these positive announcements – and a number of others since, including the news that Starpharma is set to partner with LloydsPharmacy for the UK launch of Viraleze – the Starpharma share price has continued to slide lower.
Although this might leave some loyal shareholders frustrated, it's worth noting that Starpharma is still a young biotech. It is yet to book any meaningful sales revenue, and many of its products are still progressing through trial phases. This makes it a very speculative investment, and ups and downs in its share price are to be expected.
However, if the company can successfully launch Viraleze in Europe, the Starpharma share price could be worth watching over the next few months.
