Following the launch of its inaugural drug Trulance, Synergy Pharmaceuticals Inc (NASDAQ:SGYP) second quarter earnings fell short of expectations, leading to a 16% decline in shares since the tenth of August. Despite the lackluster quarter and continued drop in share price, analyst William Tanner of Cantor builds a bullish case for SYGP. While the company’s reported $2.3 million in second quarter revenue well missed the consensus estimate of $3.6 million, it did it beat out Tanner’s own forecast of $1.4 million. Moreover, second quarter EPS of $0.33 beat out both the analyst and consensus expectations of $0.25 and $0.21 respectively.
Tanner is maintaining a bullish perspective on Synergy, as he believes the company has repositioned itself from market mimicker to a potential market leader via the release of Trulance. The drug, which treats CIC (chronic idiopathic constipation), enters an underpenetrated market, whose patients struggle to tolerate current available treatments. Considering that 95% of the estimated 45 million people afflicted with CIC in the United States currently go untreated, possibly due to these tolerability concerns, and that the company has already reached out to 27,000 prescribers, Synergy has an opportunity to outrun its competitors.
The analyst asserts that “Trulance could be an important therapy for treating chronic idiopathic constipation (CIC) given the unmet medical need, notwithstanding the existence of approved therapies […] The notion that existing treatments and their marketers create insurmountable competition may underestimate the opportunity for a drug that appears to have an importantly differentiated profile.”
Countering the common fear that Trulance is yet another copycat drug similar to its primary competitor Linzess marketed by Allergan, the analyst opines: “Were Trulance a ‘me-too’ product and the CIC market highly penetrated, we believe that viewpoint could merit consideration. In our conversations with medical consultants who treat gastrointestinal disorders, including CIC, it is clear that existing treatments, pre-Trulance, leave much to be desired from a tolerability standpoint.” Moreover, Tanner points out that “GYP’s primary focus is on detailing to high-prescribing physicians […] we believe those are the physicians who may be discriminating as to the differential side-effect profile for Trulance vs. alternative treatments.”
Tanner believes that, while the launch is still in its early stages, “investors should view metrics provided by the company as evidence that the market debut is proceeding well.”
As such, the analyst maintains an Overweight rating on SGYP with a price target of $11.00 representing a 276% rise over current trading levels. (To watch Tanner’s track record, click here)
TipRanks analytics show SGYP as a Buy. Based on 6 analysts offering recommendations for this stock, 5 are bullish and 1 is bearish on Synergy stock. The 12-month average price target stands at $10.74, marking a 270.34% upside from current trading levels.