Synergy Pharmaceuticals Inc (SGYP): Analysts Weigh in on Trulance’s 4Q Beat

Investors snapped up Synergy Pharmaceuticals Inc (NASDAQ:SGYP) shares a day after the drug maker released its fourth-quarter results. Surprisingly, SGYP reported 4Q17 Trulance sales of $9.4 million, which came in ahead of the consensus ~$7 million estimate. In addition, the company provided operating expense guidance of ~$175-$185 million, which was ~$30 million below consensus. As of this writing, Synergy shares are up nearly 23% to $2.16.

However, Oppenheimer analyst Derek Archila remains sidelined, reiterating a Perform rating on the stock. (To watch Archila’s track record, click here)

Archila commented, “We still remain cautious on shares as the newly amended debt agreement reduces the total amount of capital available to the company by ~$100M, though does provide more flexibility around the minimum market cap requirement for the next $100M. Based on our/consensus Trulance sales forecasts for 2018-2020, we believe SGYP will still require an additional ~$100-$125M in capital in order to reach breakeven. We prefer to remain on the sidelines until an inflection in Trulance sales.”

Canaccord analyst John Newman took the other route, maintaining a Buy rating on SGYP with a $13 price target. (To watch Newman’s track record, click here)

Newman stated, “Trulance revenues were $9.4M in the US during 4Q17, with 50% of prescriptions continuing to come from new patients, a meaningful positive. We forecast $62M in US Trulance sales during 2018. Prescriptions tend to be lower in Jan. and Feb. due to copay resets, etc., but we expect scripts to reaccelerate in March. Synergy also expects an uptick from the newly added IBS-C indication during 2018. Finally, we believe that the gross to net for Trulance may continue to fluctuate in 2018 — we currently model 30%.”

“Synergy has favorable restructured its debt agreement, lowering interest expense and financial pressure during 2018 and beyond. Importantly, SGYP is no longer required to draw the full $100M tranche by Feb. 28, 2018, but instead may choose to access $25M by June 30, $25M by Sep. 30, and $50M by Dec. 31 2018, but is not required to do so. Market cap requirements have also changed, with SGYP now required to have a market cap of 3x the amount of principal outstanding. Finally, we are confident that SGYP will meet the $61M 2018 revenue target in the covenants,” the analyst added.



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