Synergy Pharmaceuticals Inc (NASDAQ:SGYP) reported its financial results and business update for the three months ended June 30, 2017. Synergy will host a conference call and webcast at 4:30 p.m. Eastern Time on Thursday, September 7, 2017 to discuss its corporate and financial strategy, and provide a general business update. Further details about this conference call can be found below.

“The first half of 2017 was a truly transformative period for Synergy, as we transitioned into a commercial organization and launched our first product, TRULANCE, in the U.S. for the treatment of adults with chronic idiopathic constipation (CIC),” said Gary S. Jacob, Ph.D., Chairman and CEO of Synergy Pharmaceuticals Inc. “We are pleased with the execution of our commercial strategy, and the strong initial demand for TRULANCE, reinforcing the need for new treatment options for patients suffering from CIC. And we are making significant progress in ensuring broad access to TRULANCE, highlighted by a number of favorable early decisions from key national payers.”

“During the second quarter, we also made significant progress towards broadening the TRULANCE label with the FDA acceptance of our sNDA for the treatment of adults with IBS-C,” continued Dr. Jacob. “These achievements put Synergy on excellent footing as we look to drive further long-term growth and value for the TRULANCE brand.”

Gary Gemignani, Synergy’s EVP and Chief Financial Officer added, “We believe Synergy is well-positioned to efficiently capitalize on the substantial opportunity we have in front of us with our core, high value asset, TRULANCE. We are currently evaluating financing options that will provide flexibility and allow us to continue to execute on our business objectives, which we are confident will ultimately maximize shareholder value. We are pleased with our progress on this front and look forward to providing further updates in the near-term.”

Second Quarter 2017 and Recent Highlights

TRULANCE (plecanatide) Commercial Launch Update

Driving Awareness of TRULANCE and Stimulating Trial and Adoption

  • Since our launch of TRULANCE on March 20, 2017, our commercial team continues to introduce TRULANCE to more than 27,000 gastroenterologists, primary care physicians, nurse practitioners and physician assistants that represent approximately 70% of the branded prescription business. As of June 30, 2017, we had reached 66% of our targeted prescriber base and over 90% of the high volume prescribers (deciles 8-10). According to QuintilesIMS data as of June 30, 2017:
    • More than 12,600 TRULANCE prescriptions have been filled and total monthly prescription volume has increased on average more than 182% month-over-month during that period.
    • More than 32% of all high prescribers had written a TRULANCE prescription during that period with an average increase for all prescribers of approximately 140% month-over-month.
    • TRULANCE achieved 6.8% new-to-brand prescription (NBRx) total market share and 12% NBRx market share among gastroenterologists.
    • As of June 30, 2017, more than half of new TRULANCE prescriptions filled since launch were coming from new patients not previously on a branded prescription treatment and 45% were patients that converted from other branded prescription treatments.

Ensuring Market Access

  • As of June 30, 2017, over 61% of adult CIC patients with commercial insurance will have unrestricted access to TRULANCE for 2017 based on the top 20 pharmacy benefit managers (PBMs) and payers. Additionally, approximately 95% of people with commercial insurance had access to TRULANCE for a co-pay of $25 or less through the TRULANCE Savings-to-Go-Program.
  • We have secured a 2018 managed care contract with CVS Caremark, which manages approximately 50 million commercial lives in the U.S., that will place TRULANCE on formulary without restriction (non-preferred) for its Commercial Template Clients or Employer Groups, representing approximately 24 million lives. We are in contract discussions with CVS Caremark for the remaining commercial lives.
  • TRULANCE is currently available through Express Scripts (ESI), which manages approximately 80 million total lives in the U.S., and this commercial formulary status will continue for the remainder of 2017. ESI recently released its 2018 National Preferred Formulary List and introduced 64 new drug exclusions, including TRULANCE. This change only affects access to the ESI National Formulary for non-custom clients, representing approximately 22 million lives, effective January 1, 2018. TRULANCE will remain available to ESI lives covered under the National Preferred Formulary via the “Non-Formulary Exception Request” prior authorization process, for which we currently have a support program in place to ensure patient access. ESI also manages a larger book of business with its Custom Clients, representing approximately 49 million lives. We are still in active discussions with ESI to determine 2018 formulary status for individual plans under their Custom Clients book of business.
  • We are in active contract negotiations with other PBMs and payers for 2018 coverage to ensure our goal of broad access to TRULANCE.
  • Med D and Medicaid discussions are ongoing and we expect several major accounts to include TRULANCE on formulary in 2018.

Sales Force Update

  • As planned and with the continued progress of the launch, we have initiated the process to transition our Publicis Touchpoint contract sales representatives over to Synergy in preparation of our anticipated approval of TRULANCE in the IBS-C indication this coming January.

TRULANCE IBS-C Development Update

  • The FDA has accepted for review our sNDA for TRULANCE for the treatment of adults with IBS-C. The Prescription Drug User Fee Act (PDUFA) date is January 24, 2018.

Financial Results

Revenues

  • Net sales were $2.3 million in the second quarter of 2017, pursuant to the product launch on March 20, 2017. The Company also recorded approximately $1.5 million in net deferred revenues on its balance sheet, which it expects to recognize in future periods. The Company currently recognizes revenue based on patient demand (prescription sales).

Expenses

  • Research and development expenses (“R&D”) were approximately $22.3 million for the second quarter of 2017 compared to approximately $26.6 million for the second quarter of 2016. This decrease was primarily due to the cost of validation batches as well as pre-commercial inventory build being classified as R&D in 2016.
  • Selling, general and administrative (“SG&A”) expenses were approximately $50.7 million for the second quarter of 2017 compared to approximately $10.2 million for the second quarter of 2016. These increased expenses primarily reflect the cost of marketing and promotional activities to support the product launch of TRULANCE on March 20, 2017. These costs include an approximately $23.1 million increase in marketing and sales expenses, an increase of $4.7 million in employee compensation and benefits costs, and an increase of $11.5 million in stock compensation expense ($9.3 million related to the modification of Change of Control and terminated employee stock options). There are no remaining Change of Control options outstanding as of June 30, 2017.
  • Cost of goods sold (COGs) were approximately $2.9 million for the second quarter of 2017. COGs for the quarter are primarily related to technical operations overhead costs.
  • Net interest expense was approximately $0.3 million in the second quarter of 2017, related to the $200 million convertible debt financing executed in November 2014. As of June 30, 2017, the Company had approximately $18.6 million in total debt outstanding compared to approximately $79.2 million a year ago.

Net Loss

  • Synergy reported a net loss of approximately $73.9 million for the three months ended June 30, 2017, compared to a net loss of approximately $38.6 million for the three months ended June 30, 2016. This increase was a result of the operating items discussed above.

Cash Position

  • Net cash used in operating activities were approximately $57.3 million in the second quarter of 2017 compared to approximately $63.5 million in the first quarter of 2017.
  • As of June 30, 2017, we had approximately $82 million cash and cash equivalents compared to approximately $82.4 million cash and cash equivalents as of December 31, 2016.

Shares of Synergy Pharmaceuticals are up nearly 2% to $3.60 in after-hours trading Wednesday. SGYP has a 1-year high of $7.15 and a 1-year low of $3.34. The stock’s 50-day moving average is $4.28 and its 200-day moving average is $4.67.

On the ratings front, SGYP has been the subject of a number of recent research reports. In a report issued on August 1, BTIG analyst Tim Chiang reiterated a Buy rating on SGYP, with a price target of $11.00, which represents a potential upside of 212% from where the stock is currently trading. On July 31, Canaccord’s John Newman assigned a Buy rating to the stock and has a price target of $13.00.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Tim Chiang and John Newman have a yearly average return of 10.1% and 0.0% respectively. Chiang has a success rate of 49% and is ranked #842 out of 4628 analysts, while Newman has a success rate of 43% and is ranked #3275.

Sentiment on the street is mostly bullish on SGYP stock. Out of 6 analysts who cover the stock, 5 suggest a Buy rating and one recommends to Sell the stock. The 12-month average price target assigned to the stock is $8.57, which represents a potential upside of 143% from where the stock is currently trading.

Synergy Pharmaceuticals, Inc. is a biopharmaceutical company, which focuses on the development and commercialization of novel gastrointestinal therapies. Its product includes plecanatide and dolcanatide.