In a research report released yesterday, Rodman & Renshaw analyst Ram Selvaraju initiated coverage on shares of Synergy Pharmaceuticals Inc (NASDAQ:SGYP), with a Buy rating and price target of $20, which implies an upside of 228% from current levels.
Selvaraju wrote, “We consider Synergy an attractive investment from three perspectives—its risk-mitigated status as a biotech company with positive Phase 3 data already in hand for its lead product candidate; its potential for significant revenue growth through the approval of a product relying upon a well-validated mechanism of action for new indications (e.g., IBS-C); and, most speculatively, the potential of its earlier-stage clinical candidates, specifically SP-333, in other GI tract disorders, particularly OIC and UC.”
The analyst continued, “We have valued Synergy according to a risk-adjusted net present value (rNPV) approach, which ascribes a 12% discount rate and $2.3B peak annual sales number to plecanatide. The rNPV for plecanatide alone is estimated to be $1.7B. Synergy is also developing a second pipeline candidate, dolcanatide (formerly known as SP-333), to treat ulcerative colitis (UC) and opioidinduced constipation (OIC). We value this second agent at $750M, since it has successfully demonstrated positive proof-of-concept data in the OIC indication and generated strong preclinical evidence of efficacy in a mouse model of moderate-to-severe UC. Our valuation yields a total firm value of $2.5B, assuming 127M shares outstanding as of mid-2016, which translates into a price per share of $20.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ram Selvaraju has a total average return of 3.2% and a 41.9% success rate. Selvaraju has a 34.7% average return when recommending SGYP, and is ranked #1064 out of 3755 analysts.
All the 5 analysts polled by TipRanks rate Synergy Pharmaceuticals stock a Buy. With a return potential of 106%, the stock’s consensus target price stands at $12.50.