Synergy Pharmaceuticals (SGYP) GI Asset Trulance Volumes Just Keep Getting Better; BTIG Weighs In

BTIG's Tim Chiang is out with a positive research note, singing the praises of SGYP and 1Q earnings that put Trulance's potential in the limelight.


Synergy Pharmaceuticals Inc (NASDAQ:SGYP) investors celebrated the drug maker’s first quarter outclass served up Thursday, sending the stock on an almost 16% bounce Friday. Volumes are on a steady jump for chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C) lead drug Trulance, having grown even stronger since winning the IBS-C nod from the FDA. From the perspective of BTIG analyst Tim Chiang, all this with a new U.S. market alliance anticipated in the short-term makes for a confident bullish bet in the biotech sector.

In reaction, the analyst reiterates a Buy rating on SGYP stock with a $7 price target, which implies a 270% upside from current levels. (To watch Chiang’s track record, click here)

For the first quarter, Synergy posted $8.6 million in Trulance sales, outclassing the analyst’s forecast of $7.5 million, along with $0.15 in loss per share against the analyst’s estimate calling for $0.18 in loss per share. The company’s operating expenses circled $6 million hit far under the analyst’s roughly $41 million estimate. Moreover, the SGYP team cut its 2018 operating expenses guide from a range of $175 to $185 million down to $165 to $175 million. For 2018, the analyst calls for $68 million in Trulance sales from Synergy as well as $145 million by 2019, with a loss per share of ($0.53) for this year and ($0.32) by next year.

Chiang writes, “On a positive note, Trulance prescription volumes have continued to increase (~24% since receiving the IBS-C treatment indication) with the number of prescribers also increasing (to almost 12,000) along with expanded payer access. Coverage is now at over 70% of commercial and Medicare Part D plans […] We remain positive SGYP shares and believe management will deliver on a near-term partnership for the US market. With a larger commercial organization behind Trulance, we think sales could accelerate.”

The company noted its priority in the upcoming two to three months is on a partnership for the U.S. market, to expand upon strategic options for Trulance. Considering Trulance’s only other competition having been given the green light for treating both IBS-C and CIC boils down to Linzess and Amitiza, Chiang wagers Synergy has a solid probability of landing a marketing partner for the U.S. as well as Japanese markets. Chiang spotlights Ironw00d and Allergan’s Linzess as the market’s current treatment leader, and now that Trulance triumphed in its expanded treatment indication, this drug has good grounds to compete. Notably, Trulance’s launch only just kickstarted last March, and ever since, physician numbers have spiraled up to close to 12,000 prescribers.

Closing out the first quarter with roughly $99 million of cash, Synergy can gain access to as much as $100 million of debt financing through its amended credit deal with CRG. Synergy is eyeing as many as three cash installments in this year: $25 million by June 30th, $25 million by September 30th, and $50 million by December 31st. Additionally, SGYP has inked a licensing deal with Cipher Pharmaceuticals in Canada, which offered an upfront payment of $5 million along with the opportunity to tap into future milestone payments.

Bottom line, “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 payer access with major insurers like Aetna […] moving to Tier 2 preferred status, UnitedHealthCare […] removing its new to market block, and Cigna […]  removing its prior authorization requirement for Medicare Part D Plans,” contends the analyst, who forecasts yearly Trulance sales to soar past $500 million within four years.

TipRanks reveals a strong bullish consensus betting on Synergy. Out of 4 analysts polled in the last 3 months, 3 rate a Buy on the biotech player with only 1 playing it safe on the sidelines. With a monster return potential of nearly 359%, the stock’s consensus target price towers at $8.67, indicating high enthusiasm is baked into these analysts’ expectations.

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