William Blair Maintains Buy on Synthetic Biologics Inc (SYN) Despite Financial Overhang Concerns

Synthetic Biologics Inc (NYSEMKT:SYN) is steaming right along with key programs gearing toward pivotal studies. Despite financing continuing to be the real stand-out risk, William Blair analyst Y Katherine Xu is bullish on the firm’s clinical potential. As such, the analyst reiterates an Outperform rating on SYN with a fair value assessment of $5, which represents a nearly 537% increase from where the shares last closed.

Xu notes, “Financing remains a major overhang on Synthetic Biologics shares, and the company has been pursuing partnerships for SYN-010, attempting to bring in nondilutive capital in the near term.” Within an upcoming Phase IIb/III trial of SYN-010, designed to treat irritable bowel syndrome with constipation (IBS-C), circling $25 million, there is a time strain to finance funding for the trial coupled with the ongoing development of Clostridium difficile infection drug ribaxamase within the upcoming few months. Meanwhile, “Both lead programs are pushing toward registrational trials, pending adequate financing,” elaborates the analyst.

Ultimately, “The financing overhang and dilutive effect from the warrants are one of the major causes for pressure on the stock, in our opinion. […]Management has been in discussions with potential partners for SYN-010’s commercial rights outside the United States, and a potential partnership for SYN-010 that brings in up-front capital could remove some of the overhang in addition to boosting confidence in the program, in our view. If the company is not able to execute a partnership in the next few months, it has to resort to other means to secure financing,” Xu concludes.

Synthetic Biologics closed its fourth quarter with $19.1 million in cash, which the analyst anticipates will be enough to fund operations through the fourth quarter of this year.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Y Katherine Xu is ranked #616 out of 4,513 analysts. Xu has a 51% success rate and earns 13.5% in her annual returns. However, when recommending SYN, Xu forfeits 25.9% in average profits on the stock.

Additionally, Edward White of FBR Capital rates a Buy on SYN with a $6 price target, which represents a 664% increase from where the shares last closed; Keith Markey of Griffin rates a Buy with a $5.75 price target, which represents a 664% increase from where the shares last closed; and Josh Silverstein of Deutsche Bank rates a Hold with a $14 price target, which represents a 1,683% increase from where the shares last closed.


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