Here is part of the article:
The average for a non-first to market drug is 6.93 years. If Trulance is on track to make $300m+ in 2019 based on our premise, then another four years to peak would sensibly land over the $600m figure.
This is important because unlike IRWD and SCMP, SGYP owns ALL of their rights. Should these projections be reached, profitability is not a question but rather only a matter of pinpointing the when.
IRWD, which currently carries a non-fully diluted market cap of $2.4B, still manages to carry a -$0.98 EPS with a blockbuster drug that has already cleared the $600m revenue hurdle in just four full years of sales. One has to wonder when Wall Street will recognize the fact that Synergy is slated to achieve in a shorter span of time what Ironwood to this day has not: profit from its IP. For reference, SGYP currently sports a non-full diluted market cap of just $731m.
My lone point of intrigue which remains is as to why Gary Jacob has not arranged for partnering internationally in any capacity to date.
Ironwood, by the time Linzess launched in the US, had multiple partners for several regions around the world: in Europe, there was Almirall S.A., for Japan Astellas (OTCPK:ALPMY), and for China, AstraZeneca (OTCPK:AZNCF). Licensing agreements, along with milestone payments from partners with established sales teams, relations with foreign drug administrations, and experience abroad, would accelerate adoption of the Plecanatide compound. This infusion of non-dilutive, non-interest carrying capital could be used for not only funding a much larger US sales force, further sample pack production, or advertising; but also to further develop its second compound Dolcanatide for Ulcerative Colitis (UC) and Opioid Induced Constipation (OIC). These alternatives would either help capture more market share, more quickly and/or increase company value.
The only logical reason I can surmise for as to why Synergy is holding all of its rights to Plecanatide is to drive up its inherent value in an acquisition negotiation. In several instances, management has described its retaining of full worldwide rights as a “strategy”. Other than the reason suggested, I cannot think as to what strategic purpose a company would not take money in the now; versus the later.
The coming weeks feature many key events for the nascent commercial entrant that is Synergy Pharmaceuticals. While many risks have been mitigated in the several months prior to today, others linger for the prospects of this company not so much succeeding but rather excelling in its market space. Medicare Part D coverage, specifically gaining preferred status like both of its current competitors, will be crucial for a sentiment change to occur before the year is over. In addition, the IBS-C indication must be approved in order to have some semblance of an equal footing in this competitive field.
In terms of total value, I continue to be bullish based on what has transpired with acceptance of the drug by both doctor and patient in these early stages. Considering the lean sales force (5x smaller than Ironwood’s) and lack of a global sized partner (Allergan (NYSE:AGN) or Takeda (OTCPK:TKPHF)), Trulance’s ability to capture over 10% of new to brand prescriptions is nothing short of encouraging.
Our projection of sales through 2019 is a base case, the potential for more is there for the taking should the various variables line up in Synergy's favor. With peak sales currently aligning in the $600m+ range, using a conservative 3x multiple would result in a $1.8B value for Trulance in the US alone. International rights could yield another third of that figure, and Dolcanatide holds promise for a market that is valued at around $6B for 2022.
Safe to say, SGYP is undervalued by Mr. Market at the moment.
