Express Scripts, a company that controls about 40 percent of the pharmacy benefit market, will exclude an additional 64 drugs from its national listing of preferred drugs next year, including Synergy Pharmaceuticals Inc (NASDAQ:SGYP) constipation drug Trulance. In reaction, Synergy’s shares are down nearly 4% in Monday’s trading session.
Canaccord analyst John Newman commented, “Higher discounting is probably the reason that Linzess is included on the Express Scripts preferred formulary, not because Express Scripts views Linzess as a better therapy. Pharmacy benefit managers would rather have patients receive less expensive (although often less effective) therapies for a condition first, especially when new therapies enter a space.”
“Trulance will still be available to Express Scripts patients, despite being excluded from its “preferred formulary,” therefore we see the move as only a moderate concern. It is very common for newer drugs to be placed on higher tiering when introduced to market,” the analyst added.
Newman reiterates a Buy rating on SGYP, with a price target of $13.00, which implies an upside of 232% from current levels. (To watch Newman’s track record, click here)
Out of the 6 analysts polled in the past 3 months, 5 rate Synergy Pharmaceuticals stock a Buy, while 1 rates the stock a Sell. With a return potential of nearly 181%, the stock’s consensus target price stands at $10.95.