Synergy Pharmaceuticals Inc (SGYP): Trulance Picking Up Steam


Synergy Pharmaceuticals Inc (NASDAQ:SGYP) served up a strong fourth quarter earnings beat last Thursday that had investors firing up confidence on this drug maker. In reaction, shares vaulted almost 24% on Friday.

Considering the fourth quarter saw the company’s chronic idiopathic constipation (CIC) asset Trulance gain approval to now treat constipation-predominant Irritable Bowel Syndrome (IBS-C), it is a great time to be a Synergy investor.

H.C. Wainwright analyst Ram Selvaraju continues to be bullish, taking note that the “Trulance ramp [is] accelerating.”

In fact, the analyst notes that the impressive earnings show was just one shining note in Synergy’s favor last week: “We believe that one of the most significant developments from last week was the news that Synergy has substantially amended its debt facility with CRG LP.” Selvaraju wagers “debt restructuring should allay investor concerns.”

Therefore, the analyst reiterates a Buy rating on SGYP stock with a $7 price target, which implies a 215% upside from current levels. (To watch Selvaraju’s track record, click here)

Worthy of note, the CRG facility total amount offered has been scaled back from $300 million to $200 million. Under the terms of the original plan, SGYP needed to draw down $100 million by the close of last month. Now, the company can draw down $25 million by the end of this June, $25 million by the end of September, with a final tranche of $50 million due by the close of December 2018.

For the fourth quarter, SGYP earned $9.4 million in topline revenue, which basically met the analyst’s estimate, as did full-year revenues of $16.8 million. R&D spending took a meaningful step back in the fourth quarter, performing “substantially better” than the analyst’s expectations at $5 million. With this in mind, Synergy hit a net loss per share of $0.16, which is just a bit of an improvement of the analyst’s estimate calling for $0.18. For full-year 2017, SGYP reported $1.00 in loss per share against the analyst’s projection of $1.02. Synergy closed out the year with around $137 million in cash and equivalents.

Selvaraju underscores, “We note that the reported fourth quarter revenue number represent the first time that Trulance sales met our estimates, and we believe that this represents a solid indication that the drug has started to turn the corner and pick up steam from a commercial trajectory standpoint. As we previously indicated, most of the new product blocks have now expired, and we anticipate meaningfully better formulary access and payer coverage for Trulance going forward. Thus, we expect Trulance sales to substantially accelerate this year, with the possibility for cash flow-positive status to be achieved in 2019.”

“There are no longer any minimum cash balance requirements associated with any of these tranches, which we believe is a significant improvement over the original debt facility terms,” adds Selvaraju who continues to believe capital made under this “smaller” debt facility ought to be enough to fuel the company’s operations through to garnering a cash flow-positive status.

On a final encouraging note, commercial metrics are also firing well, with total Trulance prescription volume in the fourth quarter including 42,486 30-count packs, according to IQVIA.

Wall Street likes the risk/reward factor at play here, as TipRanks showcases a strong bullish consensus rooting for Synergy’s success. Out of 5 analysts polled in the last 3 months, 4 are bullish on Synergy stock’s market opportunity while only 1 is playing it safe on the sidelines. With a whopping return potential of nearly 315%, the stock’s consensus target price stands at $9.25.


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