Synergy Pharmaceuticals Inc Is Gunning for Linzess Now That Trulance Won a Label Expansion; Analyst Tim Chiang Shares Two Cents

BTIG's Tim Chiang says Synergy has a "differentiated product" on its hands compared to the current winning market player: Ironwood/Allergan's Linzess.

Synergy Pharmaceuticals Inc (NASDAQ:SGYP) garnered approval from the FDA on an expanded label for its Trulance asset: a drug that now has the green light to treat constipation-predominant Irritable Bowel Syndrome (IBS-C). Considering the market leader is rival Ironwood and Allergan’s drug Linzess, a company seeing roughly $700 million in yearly sales, one bull believes this is a key stride forward for SGYP.

BTIG analyst Tim Chiang commends SGYP’s win for placing “GI treatment more on par” with is competitors and takes his bullish praise one step forward. As far as pessimistic whispers apprehensive on Synergy’s funding needs are concerned, the analyst dismisses these as “overdone.” Keep in mind, Synergy’s debt financing deal requires the company have $128 million or more of cash- and the analyst bets on “sufficient cash” for the company to acquire access to the second loan tranche of $100 million by February.

Therefore, with full confidence, the analyst reiterates a Buy rating on SGYP stock with a $7 price target, which implies a 183% upside from where the shares last closed. (To watch Chiang’s track record, click here)

Chiang notes, “For 2018, we think new CEO Troy Hamilton will focus on successfully executing the launch of Trulance, with the key drivers being expanding payor access, and increasing patient awareness on the benefits of Trulance vs. existing Rx and OTC products. We estimate there are ~40M Americans that suffer from IBS-C and chronic constipation, with the majority of patients currently taking OTC medications. For 2018, we see Trulance benefiting from increased payor access with major insurers like Aetna […] moving to Tier 2 preferred status, UnitedHealthCare […] removing its new to market block, and Cigna (CI, Not Rated) removing its prior authorization requirement for Medicare Part D Plans.”

With the new updated product label, Chiang adds that the greatest distinction here is a low incidence of diarrhea side effect, listed at roughly 4% compared to the 1% seen in the placebo.

“In sum, we believe Trulance is a differentiated product vs. Linzess, which will benefit from an expanded product label and increased payor access,” contends the analyst.

TipRanks highlights strong confidence on the Street when it comes to this drug maker’s opportunity at play. Out of 5 analysts polled in the last 3 months, 4 are bullish on Synergy stock while just 1 is sidelined. With a whopping return potential of 274%, the stock’s consensus target price stands at $9.25.  

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