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Synergy Pharmaceuticals (SGYP): Can Trulance Uptake Grow Stronger? Oppenheimer and Cantor Weigh in

Oppenheimer's Christopher Liu and Cantor's William Tanner see potential in Synergy's Trulance, even if its momentum is not full steam ahead just yet.


Synergy Pharmaceuticals (NASDAQ:SGYP) has two analysts from the Street intrigued by chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation  (IBS-C) lead asset Trulance- even if one is surveying from the sidelines and the second analyst is lowering his target expectations on lower initial uptake.

Oppenheimer analyst Christopher Liu sees a standout candidate in Trulance and various “positives” at play for the drug maker.

“As previously mentioned, we continue to think that Trulance is a differentiated product for CIC and IBS-C, with certain benefits in tolerability as compared to brands on the market currently. SGYP’s Trulance sales could see an inflection point as managed care wins come through and script growth may start to gain momentum. However, despite the positives, we think that we would rather remain on the sidelines as we consider the need for additional financing to reach breakeven and as we wait for the material acceleration in Trulance sales,” writes Liu, who reiterates a Perform rating on SGYP rating without a price target. (To watch Liu’s track record, click here)

Keep in mind, the analyst notes, around $2 million of Trulance’s sales in the fourth quarter of 2017 stemmed from once deferred revenue, translating to volume sales that actually hit closer to $7 million. In other words, Trulance sales vaulted approximately 18% quarter-over-quarter, with Liu calculating $8.6 million instead of just $7.3 million. That said, “Trulance sales could accelerate as managed care initiatives start to bear fruit, but we remain on the sidelines until we start to see Trulance sales inflect,” explains the analyst.

“As expected, based on previous talks with management, Trulance scripts in January and February were weak, partially due to the overall market access reset,” continues Liu, who spotlights a prescriber base that rose by around 20%. This leads Liu to anticipate even more growth down the line, especially “as managed care wins come through and national/regional coverage is expanded.”

Additionally, the SGYP management has cut the guide for operating expenses this year from a range of $165 to $175 million down to $175 to $185 million. Liu angles for $173 million in operating expenses from Synergy for 2018, believing that the company is able to meet its outlook for the year. Keeping these operating expenses at a minimum is key from where Liu stands to the company’s goals to keep costs under control and make operating efficiencies smoother. The analyst commends Synergy’s investments in boosting managed care access, which Liu wagers “should bear fruit soon.”

“We like the openness to partnering and BD from SGYP,” adds the analyst, who notes that the company’s Canadian alliance Cipher Pharmaceuticals could submit a new drug application in the back half of the year, pointing to a review process of one year. Additionally, SGYP has a partnership in the works with NCI to investigate dolcanatide and its opportunity in treating colorectal cancer. Liu points to these alliances as a basis of non-dilutive financing coupled with budding new prospects.

Synergy closed out the quarter with around $98.7 million in cash. Should the company secure a further around $100 million from its deal with CRG this year and achieve consensus expectations over the next two years, the analyst projects a cash runway through 2020. This would translate to odds on gaining access to extra capital at some point in the course of 2019, according to Liu’s calculations.

Cantor analyst William Tanner may be a bull backing Synergy, but he chimes in from a less upbeat corner, not blown away by Trulance’s uptake so far.

In reaction to the print, the analyst maintains an Overweight rating on SGYP while dialing down the price target from $8 to $6, which implies a 231% upside from current levels. (To watch Tanner’s track record, click here)

Overall, “Based on clinical data, we believe Trulance could be an attractive option for treating chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). That said, the early uptake of the drug is not overly impressive, in our view. We appreciate that the payer access is improving (we have an affinity for the model of gaining access prior to launching a drug product), but we believe investors are apt to desire evidence of brisker uptake before becoming more aggressive buyers of the stock. At some point, perhaps over the next few quarters, absence of market uptake could reflect negatively on the product or execution, or both, in our opinion. We also believe that the need to temper spending amid a drug launch is particularly ill-timed,” contends Tanner.

TipRanks reveals this biotech player is ultimately a compelling bet, based on sell-side analysts’ confident votes. Out of 5 analysts polled in the last 3 months, 4 are bullish on SGYP stock while 1 remain sidelined. With a whopping return potential of 348%, the stock’s consensus target price stands at $8.25.