Synergy Pharmaceuticals (SGYP) Trulance Launch Looks Positive from the Eyes of Canaccord

Canaccord's John Newman is out with bullish praise for Synergy, even if investors are less-than-enthused on back of Q1 results.


Synergy Pharmaceuticals (NASDAQ:SGYP) investors gritted their teeth as shares plunge almost 13% in pre-market trading today. Compared to the fourth quarter of 2017 that saw Trulance sales hit roughly $9.4 million in the U.S., the first quarter reached around $8.6 million and hit a loss per share of $0.15. Canaccord analyst John Newman is unfazed by investor skittishness, continuing to bet on this stock and its chronic idiopathic constipation and irritable bowel syndrome with constipation asset Trulance’s market potential.

Finding the “Trulance prescription remains steady” and encouraged as the company seeks out strategic options, the analyst reiterates a Buy rating on SGYP stock with a $13 price target, which implies a massive 815% upside from current levels. (To watch Newman’s track record, click here)

Modeling in deferred net sales into the equation, the analyst notes that the fourth quarter’s non-GAAP net sales totaled around $7.3 million, suggesting an 18% quarter-over-quarter sales jump. Newman asserts, “Furthermore, we see the flattish 1Q vs 4Q as due to the Medicare Part D doughnut hole as well as insurance deductibles, which was also observed for Linzess prescriptions. SGYP also indicated that Trulance was the only prescription brand for CIC and IBS-C to show positive total and new prescription volume growth, with total number of unique prescribers increasing by more than 20% Q/Q to 12,000 prescribers. We view this as a positive indicator for Trulance‚Äôs clinical differentiation from Linzess.”

Another big positive from Newman’s eyes: “debt restructuring lifts financial pressure” for the drug maker’s shares. The company’s credit facility is notably “flexible,” which means the company can access $25 million by June 30th, $25 million by September 30th, and $50 million by December 31st, without being obligated to do so. For 2018, the analyst continues to anticipate Synergy can achieve its $61 million revenue target in the covenants.

Additionally, Synergy has a key new alliance in the works with National Cancer Institute- a partnership Newman praises as “interesting” as they come together on a biomarker trial to investigate dolcanatide’s opportunity to prevent colorectal cancer in healthy volunteers. This would mean new knowledge regarding the development plan down the line regarding feasibility as well as prospective design.

Ultimately, Newman predicts “continued growth in unique Trulance prescribers and our expectation of its long-term success, since it is simpler for physicians and patients to use with a better safety profile than Linzess,” underscoring: “We would expect Synergy to make the best strategic decision to enhance shareholder value, which could involve an outright sale of the company, a US partnership, ex-US partnership, or other path forward.”

TipRanks showcases this drug maker is well-liked by sell-side analysts on Wall Street. Out of 4 analysts polled in the last 3 months, 3 are bullish on SGYP stock while 1 remains sidelined. With a return potential of 472%, the stock’s consensus target price stands at $9.33.

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