Synergy Pharmaceuticals Inc Has New IBS-C Indication Under Its Belt, But Can Trulance Succeed Long-Term?

Canaccord's John Newman finds SGYP's Trulance commercial potential enticing down the line against its competitors.

Synergy Pharmaceuticals Inc (NASDAQ:SGYP) shares are falling 3% even though this drug maker scored a slam dunk with the FDA today on Trulance’s expanded indication to the constipation-predominant Irritable Bowel Syndrome (IBS-C) market. Considering the Street had largely been betting on Synergy to win approval on this sNDA, it seems to be a case of “buy on the rumor, sell on the news,” with investors turning over a hefty profit today.

Read more: Synergy Enters a Fiercely Competitive IBS-C Market, But “Attractive Commercial Opportunities” Exist, Says William Tanner

Canaccord analyst John Newman weighs in noting that this victory went “as expected,” and adds that “on-label use should boost script growth” for Synergy.

In reaction to the “positive” news, the analyst reiterates a Buy rating on SGYP stock with a $13 price target, which implies a 428% upside from current levels. (To watch Newman’s track record, click here)

“We expect direct-to-consumer (DTC) promotion and the new indication approval could help steepen its launch curve. Particularly, given that Linzess is also promoted via DTC channel, we believe that DTC could help Trulance level the competition field to some extent. We remind investors that Trulance continues to grow at a steady pace against competition, such as the introduction of AGN’s Linzess 72 mcg,” highlights the analyst.

Additionally, Newman will keep an eye on the removal progress of new-to-market (NTM) blocks in the first half of this year, which he believes would stand to offer Synergy’s Trulance better access throughout commercial to Medicare Part D to Managed Medicaid plans. The analyst asserts, “This would help further support Trulance’s growth trajectory.”

Worthy of note, the third quarter saw Trulance experiencing a rocket of script growth, a solid 105% jump from the second quarter, hitting a total of around 38,000 scripts from the first days of its launch back in March of last year. With script growth taking off on back of more and more physicians willing to prescribe the treatment, this growth indicates to the analyst a compelling value proposition recognized by physicians- a pattern and “sentiment” he sees no signs of stopping.

Bigger picture, “Trulance will be a successful product long term, with the IBS-C indication approval further bolstering Trulance’s commercial potential. We recognize that GI launches for oral products take time to build momentum, but we continue to believe Trulance is a safer and easier-to-use drug than AGN’s Linzess, which we believe physicians and patients would prefer in the long run,” Newman contends.

TipRanks points to confidence on Wall Street circling this biotech player, with 4 out of 5 analysts polled in the last 3 months rating a Buy on Synergy stock and just 1 maintaining a Hold. The 12-month average price target stands at $9.25, marking a nearly 281% upside from where the stock is currently trading.

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