Late last week, Synergy Pharmaceuticals Inc (NASDAQ:SGYP) announced the FDA approval of its lead drug Trulance (plecanatide) for the treatment of adults with chronic idiopathic constipation (CIC), which affects 33 million Americans and ~14% of the global population.
In reaction, Roth Capital analyst Michael Higgins raised his price target for the stock from $6.50 to $10.50, while reiterating a Buy rating on the stock. The new price target represents a potential upside of 83% from where the stock is currently trading.
Higgins commented, “While our expense and revenue estimates are unchanged, we are increasing our price target following a number of changes to our discounted EPS valuation model, including a reduction in its risk rate from 25% to 20%, a reduction in our PE from 35 to 30 to better align with its peers, as well as expanding our EPS estimates from 2018 and 2019 to now include 2020. Our PT may increase over the next few years as we place more value on its later years’ EPS.”
“We look to management to provide a more comprehensive picture of its internal marketing strategy, which may reduce our PT if our marketing expense estimates are too low. We continue to expect Trulance can benefit if its reps target Linzess’ early adopters as well as its current high prescribers. Also, Trulance’s adoption should benefit from the DTC spending on Linzess by its marketer, Allergan. According to iSpot, in 2016, Allergan spent $61.5M on Linzess’ DTC campaign. We are not looking for Synergy to match that effort but can benefit from it nonetheless, because we suspect many physicians have constipation patients that are reporting breakthrough diarrhea. As we’ve mentioned in prior notes, we believe Trulance will become a constipation drug that physicians and patients can live with, unlike Linzess, which is our experience with physicians is a drug known to produce diarrhea,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Higgins has a yearly average return of -17.6% and a 29% success rate. Higgins has a 32.4% average return when recommending SGYP, and is ranked #4247 out of 4361 analysts.
Out of the 6 analysts polled by TipRanks (in the past 3 months), 5 rate Synergy Pharmaceuticals stock a Buy, while 1 rates the stock a Hold. With a return potential of 94%, the stock’s consensus target price stands at $11.17.