Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Synergy Pharmaceutical (SGYP) on Sale Ahead of Upcoming PDUFA Date

Shares in gastrointestinal biopharma Synergy Pharmaceuticals Inc (NASDAQ:SGYP) are plunging by 30% this week, following the announcement of an equity offering to raise money. The move will certainly improve Synergy’s balance sheet, but it will also dilute current shareholdings. From a financial perspective, the decision seems to make sense. Without a big pharma’s backing, Synergy needs cash to finance the commercialization of its key product Trulance. This drug has already been approved for the treatment of chronic idiopathic constipation (CIC) and is now being reviewed by the FDA for the treatment of irritable bowel syndrome with constipation (IBS-C).

So for investors looking for high-potential stocks does this dip make a neat buying opportunity? Let’s take a closer look at this healthcare stock and see what analysts are forecasting.

At the moment, SYGP is battling to steal market share from Allergan and Ironwood Pharmaceuticals’ rival drug Linzess. If we take a look back at the third quarter, we can see that Trulance is nonetheless making a firm start with sales doubling quarter over quarter. At the same time, Allergen is a fierce rival that can afford to invest in its drug Linzess and keep Trulance in the shadows. Something that should help Synergy push Trulance further is if it succeeds in its application for Trulance to treat IBS-C as well as the current offering for CIC.

Indeed, approval from the FDA would represent a key catalyst for the stock. Moving into IBS-C would open up a whole new- and very sizeable- market with around 17 million potential new patients. It could also increase the positive perception and knowledge of the drug from physicians. The key crunch date to look out for is in this respect is January 24 2018. On this date, the FDA will approve or reject the application- potentially causing considerable share price volatility for investors. The initial signs appear promising. The application was based on Phase 3 clinical trials for Trualance for IBS-C where both the 3mg and 6mg dosages met the primary endpoint showing statistical significance which includes an over 30% reduction in worst abdominal pain.

Furthermore, two analysts have recently issued very encouraging reports on the stock. Oppenheimer’s Derek Archila assigned a buy rating with a $6 price target (195% upside from current share price). Archila says: “We continue to be encouraged by Trulance’s launch progress, particularly around SGYP’s recent coverage wins which should bode well for Trulance in 2018.” He expects Trulance to begin to accelerate in early-to-mid 2018 post the IBS-C PDUFA in January. Ultimately Trulance could reach peak sales of $695 million by 2029 says Archila, after which time generic competition would begin to impact sales potential.

Crucially he is bullish on how Trulance shapes up against other players in the market: “We remain convinced of Trulance’s differentiation relative to existing branded agents for constipation, based on our positive physician checks and continue to see value in shares.” However, management’s 2019 breakeven timing seems aggressive says Archila- listing 2021 as a more realistic date. Interestingly the analyst also adds that “While takeout is not core to our thesis, we believe SGYP does represent an attractive potential acquisition target.”

Similarly, Cantor’s William Tanner has a buy rating on the stock with an even higher price target of $10- this is down from $11 but still represents a whopping 392% upside from the current share price. He says it is likely that the FDA will approve Trulance for IBS-C, and is also confident about Trulance’s prospects for CIC: “We continue to believe that Trulance will become an important therapy for treating chronic idiopathic constipation (CIC).” Two attractive elements to the Trulance-uptake story are the number of IBS-C patients untreated and the dissatisfaction of those who are being treated with the available therapies says Tanner.

Overall, TipRanks shows that the stock has a relatively optimistic analyst consensus rating of Moderate Buy. This breaks down into 5 buy ratings and just 1 lone sell rating. Meanwhile the stock’s average analyst price target of $7.75 translates into huge upside of 220% from the current share price.

  • upndown1313

    This CEO and BOD are morons at best. Stay away from this disaster unless you are shorting

    • Alvaro De Campos

      That is correct! But if you make the point some analysts say you are emotional. Look at Tepper´s answer to my comment. It seems sales´ potential realized with or without marketing competencies! That is unbelivable!

      • May Tepper

        Well, if you’re cheering comments like “they are morons” it says a lot about you.

        • Alvaro De Campos

          jaja! I am not cheering anything…I was just saying that you had to say if they have enough mktg competencies or not. You said now they have…I do respect that…but your opinion is hardly shared among many analyst and investors. Please, analyst are emotional beings…read what you write…do not pretend you are an “objective” being. This is just funny!

          Tell me about this article. Is it emotional?

          https://seekingalpha.com/article/4125292-synergy-pharmaceuticals-destroy-shareholder-value?app=1&auth_param=1ddma0:1d0pkds:4098974e52c81d47ac831e260c528650&dr=1

          • May Tepper

            Are you kidding? This author is talking about acquisition at $4, which is over 100% premium. Instead of complaining….. I would run and buy shares at these levels.

          • Alvaro De Campos

            The author talks about destroying stock value…It wat at 7.15! You are just talking crap…

  • Alvaro De Campos

    Perhaps, you should take into account managerial competencies. It is clear that analysts do not consider them.

    • May Tepper

      Analysts consider sales’ potential. And the potential here is quite big. Also, sooner than later the stock will attract more catalyst traders and the share price will obviously rise (as always). It’s unfortunate that people get emotional because of comments like yours and run to sell just before the stock recovers.

      • Alvaro De Campos

        Is it emotional to ask for managerial competencies? Well…That is a discovery for me. You say nothing about the competence of the management team. You should. Perhaps, you are getting emotional. My point is a fair point you like it or not. It is not emotional!

        • May Tepper

          Well, I believe the management is doing a great job. As a reminder, they just posted an earnings beat and as far as I concerned they are leading the company to success. However, comments like yours do nothing but get people emotional. That said, we are here to make money, and we both know the stock will skyrocket heading into January.

  • Logical One

    The CFO and CEO should be fired. Period. The fact that they mention nothing on the CC about doing another secondary just 2 days after earning, in order to cover the upcoming 100mil tranche requirements is deceiving. they will also be about 30+ million short, even with the proceeds from the secondary which just shows total incompetence from CFO. Yea, trulance is a superior drug to anything on the market but if this company doesn’t get bought out soon or cut their sales force they will be BK in less than 2 years.