William Blair Bullish on Synthetic Biologics Inc (SYN) on Back of FDA Phase IIb/III Trial Design Approval


Synthetic Biologics Inc (NYSEMKT:SYN) revealed Wednesday, January 18th after market close that the FDA has green-lighted its Phase IIb/III adaptive trial design of SYN-010 for the treatment of constipation-predominant irritable bowel syndrome (IBS-C).

With the company set to commence the 840-patient study by the close of the first quarter of 2017, William Blair analyst Y Katherine Xu maintains a bullish perspective on the biotech firm, reiterating an Outperform rating with a fair value assessment of $5, marking a just under 508% upside from where the shares last closed.

From Xu’s eyes, this agreement with the FDA is a significant stride for SYN and its collaborative prospects. The analyst believes, “We view the agreement with the FDA and impending initiation of the trial as a major step forward for the SYN-010 program, and should accelerate the advancement of partnership discussions. The agreement on the study design clears the regulatory uncertainty on SYN-010’s potential path to approval, which we believe could remove an impediment to partnership discussions. The company desires to partner SYN-010 to accelerate its development and also bring in non-dilutive capital.”

Worthy of note, the firm recently released a positive top-line data readout from the Phase IIb trial of ribaxamase for the prevention of C. difficile infection (CDI).

The only risk the analyst spotlights is a potential financial overhand, as she explains, “With two Phase III-ready product candidates in ribaxamase and SYN-010, we view the financing overhang as the major impediment to near-term share price appreciation.”

“The Series A warrants expire four years from issuance and the Series B warrants expire at the end of 2017. The financing overhang and dilutive effect from the warrants are one of the major causes for pressure on the stock, in our opinion. A potential partnership for SYN-010 which brings in upfront capital could remove some of the overhang in addition to boosting confidence in the program, in our view,” Xu surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based upon how their calls perform, four-star analyst Y Katherine Xu is ranked #920 out of 4,365 analysts. Xu has a 46% success rate and earns 7.9% in her annual returns. However, when recommending SYNC, Xu loses 26.3% in average profits on the stock.

Additionally, Edward White of FBR Capital rates a Buy on SYN without listing a price target; Keith Markey of Griffin rates a Buy with a $5.75 price target, which represents a nearly 599% increase from where the shares last closed; Josh Silverstein of Deutsche Bank rates a Hold with a $14 price target, which represents a 1,601% increase from where the shares last closed; and Adnan Butt of RBC Capital rates a Buy with an $8 price target, which represents an 872% increase from where the shares last closed.

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