Synergy Pharmaceuticals Inc (SGYP) Releases Q4 and Full-Year Financial Results


Synergy Pharmaceuticals Inc (NASDAQ:SGYP) reported its financial results and business update for the full year and the three months ended December 31, 2016.

“The approval of TRULANCE™ (plecanatide) in the United States for the treatment of adults with chronic idiopathic constipation was a tremendous event not just for Synergy, but also for the millions of patients with CIC who have been in need of a new therapeutic option,” said Gary S. Jacob, PhD, Chairman and Chief Executive Officer of Synergy Pharmaceuticals Inc. “I am pleased with the progress our team has made implementing a strong and compelling commercial plan, a robust high quality supply chain, and ensuring that the Synergy organization, healthcare providers and payers, are well prepared for the launch of TRULANCE this month. In addition, we are continuing our efforts to bring TRULANCE to patients with irritable bowel syndrome with constipation, as we remain on-track to file a supplemental new drug application (sNDA) this month.”

“Together with the approval of TRULANCE, the fourth quarter of 2016 and beginning of 2017 were marked by several key accomplishments, including positive top-line results in two Phase 3 trials of TRULANCE in IBS-C which will support the sNDA filing and the recent publication of our Phase 3 CIC data in the American Journal of Gastroenterology. We’ve also strengthened our balance sheet and enhanced our strategic options as we completed a $125 million financing, continued to reduce our convertible debt and successfully eliminated restrictive covenants associated with that debt. These achievements put Synergy in an excellent position for future growth as we begin to commercialize our first product, TRULANCE.”

Fourth Quarter 2016 and Recent Highlights

TRULANCE™ (plecanatide) CIC Update

  • On January 19, 2017, the United States (U.S.) Food and Drug Administration (FDA) approved our first product, plecanatide, under the trademarked name TRULANCE, for the treatment of adults with chronic idiopathic constipation (CIC). The efficacy and safety of TRULANCE was evaluated in the largest Phase 3 CIC clinical trials to date, which included more than 2,600 patients in two randomized, 12-week, double-blind, placebo-controlled studies of TRULANCE. In an integrated analysis of both studies, diarrhea was the most common adverse reaction, reported in 5% of patients treated with TRULANCE compared to 1% of patients treated with placebo. The recommended adult dosage of TRULANCE is 3 mg taken orally, once daily, with or without food. TRULANCE will be available in the U.S. this quarter.

TRULANCE IBS-C Development Update

  • In December 2016, we announced positive top-line results in the two Phase 3 clinical trials of TRULANCE for the treatment of adults with IBS-C. In both trials, TRULANCE met the study’s primary endpoint showing statistical significance in the percentage of patients who were overall responders compared to placebo during the 12-week treatment period. An Overall Responder, as defined by the FDA, is a patient who fulfills both ≥ 30% reduction in worst abdominal pain and an increase of ≥ 1 complete spontaneous bowel movement (CSBM) from baseline, in the same week, for at least 50% of the 12 treatment weeks. This is the current primary endpoint required for FDA approval in IBS-C. In both studies, the most common adverse event was diarrhea (Study 1 = 3.2% at 3 mg and 3.7% at 6 mg compared to 1.3% at placebo; Study 2 = 5.4% at 3 mg and 4.3% at 6 mg compared to 0.6% at placebo). We plan to file a new drug application supplement with clinical data (sNDA) in the first quarter of 2017 and expect a 10-month review period from submission. We plan to present additional Phase 3 data from the two IBS-C trials at an appropriate scientific meeting later this year.

TRULANCE Launch Update

We are focused on three key strategic imperatives to achieve our objective of ensuring that TRULANCE is ready for launch this quarter:

  • Product Readiness
  • Market and Brand Readiness
  • Organizational Readiness

Product Readiness

  • Established a robust supply chain process and quality management system.
  • Implemented our third party logistics (3PL) distribution network.
  • Trade and sample stock manufactured and on-track for launch this quarter.
  • Launching TRULANCE 3 mg in an innovative 30-count blister pack.

Market and Brand Readiness

  • We are very encouraged by the feedback we have received from our market research, advisory boards and field-based customer meetings.
    • Completed extensive market research with more than 2,700 healthcare providers and over 5,300 patients.
    • Conducted multiple advisory boards with national and regional GI key opinion leaders, other healthcare providers and payers.
    • Since January 2016, our market access team has been meeting with key payer customers that represent over 230 million covered lives in the U.S.
  • Initiated pre-launch multimedia and digital campaigns to drive company awareness and disease education, focusing on current unmet needs of patients with CIC.
  • Finalized TRULANCE core marketing strategies and launch tactics, including a compliant, value-optimizing, cost effective promotional mix to reach the broadest universe of prescribers.
  • Co-pay card programs and other patient assistance programs in place which will help us achieve access in 2017.
  • Finalized pricing strategy for TRULANCE and will launch with a wholesale acquisition cost (WAC) of $353.48.

Organizational Readiness

  • Utilizing a hybrid sales model to reach key prescribers and influencers at launch.
    • Less than 20% of prescribers in the U.S. currently account for over 70% of the branded constipation prescription market. These prescribers, which include gastroenterologists and primary care physicians, will be the focus of our field force at launch.
  • Hired Synergy Regional Business Directors averaging 11 years of management experience and over 10 years in relevant GI fields.
  • Hired Synergy Regional GI Account Specialists averaging 13 years of pharmaceutical experience and 8.5 years of GI experience.
  • Partnered with Publicis Touchpoint Solutions, Inc. who have hired highly experienced sales representatives that will be fully dedicated to TRULANCE at launch.
    • Our Publicis Touchpoint sales representatives have an average of 11.5 years of pharmaceutical experience, and nearly 6 years of GI experience, with over 90% coming from other peer GI and PCP companies.
  • Medical education efforts have been ongoing since March 2016.

Financial Results

  • As of December 31, 2016, we had approximately $82.4 million of cash and cash equivalents on hand as compared to approximately $111.8 million cash and cash equivalents and available for sale securities as of December 31, 2015.
  • Net cash used in operating activities was $129.8 million in the year ended December 31, 2016, as compared to $101.0 million in the year ended December 31, 2015.
  • Research and development expenses in the fourth quarter of 2016 were approximately $17.2 million, as compared to $19.9 million in the fourth quarter of 2015. These decreased expenses were primarily a result of completion of IBS-C studies.
  • Selling, general and administrative expenses were approximately $25.2 million in the fourth quarter of 2016, as compared to approximately $7.1 million in the fourth quarter of 2015. These increased expenses primarily reflect commercial preparedness and planning expenses to support an anticipated launch of Trulance during the first quarter of 2017.
  • On January 31, 2017, Synergy entered into an underwriting agreement to issue and sell 20,325,204 shares of common stock of the Company in an underwritten public offering. The Offering closed on February 6, 2017, yielding net proceeds of approximately $121.6 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
  • As of December 31, 2016, the principal balance on our 7.50% Convertible Senior Notes (“Notes”) due 2019 was $23.5 million as compared to $159.0 million at December 31, 2015.
  • We had 202.7 million and 113.7 million common shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively, which reflects primarily an increase in the issuance of shares from the conversions of Notes, equity offering in May 2016 and exercise of warrants.
  • Net loss in the fourth quarter of 2016 was $59.9 million, as compared to a net loss of $30.4 million incurred in the fourth quarter of 2015.

Shares of Synergy Pharmaceuticals are down 2.5% to $5.54 in after-hours trading Wednesday. SGYP has a 1-year high of $7.15 and a 1-year low of $2.50. The stock’s 50-day moving average is $6.17 and its 200-day moving average is $5.50.

On the ratings front, SGYP has been the subject of a number of recent research reports. In a report issued on January 27, H.C. Wainwright analyst Ram Selvaraju reiterated a Buy rating on the stock, with a price target of $18.00, which represents a potential upside of 217% from where the stock is currently trading. On January 26, Oppenheimer’s Derek Archila reiterated a Buy rating on SGYP and has a price target of $10.00.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ram Selvaraju and Derek Archila have a yearly average loss of 1.8% and a return of 0.7% respectively. Selvaraju has a success rate of 39% and is ranked #3983 out of 4503 analysts, while Archila has a success rate of 58% and is ranked #2825.

Overall, one research analyst has assigned a Hold rating and 5 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $8.75 which is 54% above where the stock opened today.

Synergy Pharmaceuticals, Inc. is a biopharmaceutical company, which focuses on the development and commercialization of novel gastrointestinal therapies. Its product includes plecanatide and dolcanatide. 

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