Who's Excited about Synergy's Trulance This November?
Who's Excited about Synergy's Trulance This November? PART 1 OF 4
Inside Synergy Pharmaceuticals: Your Investor Overview
By Kenneth Smith | Nov 21, 2017 2:01 pm EST
Overview
Synergy Pharmaceuticals (SGYP) is a biopharmaceutical company focused on developing drugs for GI (gastrointestinal) diseases like CIC (chronic idiopathic constipation), IBS-C (irritable bowel syndrome with constipation), and opioid-induced constipation and ulcerative colitis. According to Synergy, it’s estimated that ~33 million people suffer from CIC and 12 million people suffer from IBS-C in the US.
Synergy’s only commercial product is plecanatide, which is sold under the brand name Trulance and was approved by the FDA (US Food and Drug Administration) for the treatment of CIC in January 2017.
Inside Synergy Pharmaceuticals: Your Investor Overview
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Synergy is also aiming for the label expansion of Trulance for IBS-C and opioid-induced constipation, with a PDUFA (Prescription Drug User Fee Act) for IBS-C set for January 24, 2018.
The company’s second lead product candidate is Dolcanatide for IBD (inflammatory bowel disease).
Analyst recommendations for Synergy
Of the six analysts covering Synergy in November 2017, five recommend a “buy” or higher, while one recommends a “strong sell.” The mean rating for the stock is 2.0, with a target price of $7.75.
Notably, Synergy Pharmaceuticals makes up about 0.45% of the SPDR S&P Biotech ETF’s (XBI) total portfolio holdings.
Peer ratings
By comparison, of the 11 analysts covering Ironwood Pharma (IRWD) in November 2017, five recommend a “buy” or higher, while five recommend a “neutral.” For Allergan (AGN), of the 21 analysts covering the stock, 13 recommend a “buy” or higher. Of the 34 analysts covering AstraZeneca (AZN) in November 2017, 21 recommend a “buy” or higher.
In the next part of the series, we’ll take a deeper look at Trulance, Synergy’s first and only commercialized drug.
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Part 2
Who's Excited about Synergy's Trulance This November? PART 2 OF 4
An Overview of Trulance: Synergy Pharmaceuticals’ First Commercialized Drug
By Kenneth Smith | Nov 21, 2017 2:01 pm EST
Performance since launch
Since its launch, Synergy Pharmaceuticals’ (SGYP) Trulance sales have been steadily rising. According to Synergy, in 3Q17, more than 25,000 prescriptions were filled for the drug, representing a 105% rise over prescription fills in 2Q17. A total of nearly 38,000 prescriptions have been filled since the launch of Trulance in March 2017.
An Overview of Trulance: Synergy Pharmaceuticals’ First Commercialized Drug
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Synergy’s sales force is targeting prescribers to increase sales. The success of this strategy is evident from the fact that ~7,000 healthcare professionals had prescribed Trulance by the end of 3Q17, representing a QoQ (quarter-over-quarter) rise of 87%.
According to synergy, ~20% of prescribers account for over 70% of the branded constipation prescription market in the US. With this in mind, Synergy’s sales force is targeting high volumes, prescribing gastroenterologists to drive Trulance’s numbers higher.
Focus on increasing coverage
For the commercial success of a drug, it’s crucial to be included on formulary lists. Synergy has thus been continuously trying to increase coverage for Trulance through discussions and meetings with payers. The efforts are bearing fruit, and according to the company, ~84% of people covered by the largest commercial plans in the US had Trulance coverage, with up to 67% having unrestricted access.
Over 40% of lives covered by the largest Medicare Part D and Managed Medicaid plans in the US had Trulance on formulary lists. The company expects Trulance to gain more favorable access across commercial, Medicare Part D, and Managed Medicaid plans in 2018.
In the CIC market, Trulance competes with Linzess, which is commercialized by Ironwood Pharma (IRWD), and Allergan (AGN) in 2012 in the US. It competes with Astellas Pharma (ALPMY) in Japan. In 3Q17, Linzess generated sales of ~$73 million in the US.
Strong intellectual property
By the end of December 2016, the company had 21 issued patents in the US, eight foreign patents, and 17 pending patent applications in the US, and 82 foreign pending patent applications.
Notably, Synergy Pharmaceuticals makes up about 0.02% of the iShares Russell 2000 ETF’s (IWM) total portfolio holdings.
In the next part, we’ll take a deeper look at Synergy’s financials.
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Part 3
Who's Excited about Synergy's Trulance This November? PART 3 OF 4
Behind Synergy Pharmaceuticals’ Financials Today
By Kenneth Smith | Nov 21, 2017 2:01 pm EST
R&D expenses
Synergy Pharmaceuticals (SGYP) incurred R&D (research and development) expenses of ~$90 million, $78 million, and $ 83 million in fiscal 2016, 2015, and 2014, respectively. The increase in expenses was due to studies for IBS-C, expenses for the filing of an NDA (new drug application), and manufacturing costs for batches of Trulance.
Behind Synergy Pharmaceuticals’ Financials Today
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For 3Q17, Synergy’s R&D expenses were $6.6 million, which represents a YoY (year-over-year) decline of 73%, but the company expects these expenses to gradually decline.
SG&A expenses
Synergy’s SG&A (selling, general, and administrative) expenses totaled $55.7 million for 2016, reflecting a YoY rise of ~156%, due to preparations for the commercial launch of Trulance. For 3Q17, its SG&A expenses were $44 million, representing a YoY rise of ~217%, due to marketing and promotional efforts for Trulance.
Inventory levels and cash position
Synergy’s inventory level rose from $5.6 million at the end of December 2016 to $13 million at the end of September 2017 due to commercialization efforts for Trulance.
At the end of December 2016, Synergy had ~$82 million in cash and cash equivalents, compared with ~$112 million in 2015. At the end of September 2017, its cash position was $117.8 million.
In September, Synergy entered into a term loan agreement with CRG Servicing for $300 million. It has borrowed $100 million of this amount and can borrow an additional $100 million by February 28, 2018, and two tranches of up to $50 million before March 29, 2019. The term loan matures in June 2025 and bears an interest rate equal to 9.5%.
With this recent round of financing, Synergy now has a total-debt-to-enterprise-value ratio of 0.24. Peers Ironwood Pharma (IRWD), AstraZeneca (AZN), and Allergan (AGN) have ratios of 0.16, 0.18, and 0.34, respectively.
Notably, Synergy Pharmaceuticals makes up about 0.06% of the iShares Nasdaq Biotechnology ETF’s (IBB) total portfolio holdings.
In the next part and final part of this series, we’ll discuss the key risks facing Synergy.
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Part 4
Who's Excited about Synergy's Trulance This November? PART 4 OF 4
Synergy Pharmaceuticals Is Facing These Risks This November
By Kenneth Smith | Nov 21, 2017 2:01 pm EST
Synergy’s risks
Synergy Pharmaceuticals (SGYP) faces some key company-specific risks. An effective navigation through these will help us determine the continued sustainability of the company.
Synergy Pharmaceuticals Is Facing These Risks This November
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Largely dependent on the success of Trulance
Synergy only started earning revenues after the launch of Trulance in March 2017. Prior to that, Synergy hadn’t earned any revenues. In 3Q17, the company generated sales of $5 million, and it saw total revenues of $7.4 million for the first three quarters of fiscal 2017. Its net loss for 3Q17 came in at $48.9 million, while its net loss was 187.4 million in the first three quarters of fiscal 2017.
Analysts expect Synergy’s revenues to rise substantially and forecast revenues of ~$14 million, ~$80 million, and ~$217 million for 2017, 2018, and 2019, respectively. They expect the company to become cash flow positive in 2020.
Peers Ironwood Pharma (IRWD), Allergan (AGN), and AstraZeneca (AZN) are expected to earn total revenues of ~$290 million, ~$15.8 billion, and ~$21.7 billion in fiscal 2017, respectively.
Limited capital
Due to limited capital, Synergy has resorted to periodic financing rounds to raise funds. In the CIC market, Trulance faces competition from Amitiza, which is manufactured by Sucampo Pharma (SCMP), Linzess, which is manufactured by Ironwood Pharma (IRWD), and Allergan (AGN). These companies have substantially more resources than Synergy Pharma and well-established drugs on the market.
R&D failure risk
Synergy is now aiming to extend the Trulance label for additional indications of IBS-C (irritable bowel syndrome) and opioid-induced constipation by January 24, 2018. Dolcanatide for ulcerative colitis is the only other product candidate in Synergy’s pipeline.
With such a small pipeline, the stakes for the successful commercialization of drugs are a lot higher, and with significant expenses incurred on these candidates, a refusal from the FDA (US Food and Drug Administration) could take a significant toll on the company’s financial health.
Notably, Synergy Pharmaceuticals makes up about 0.68% of the iShares US Pharmaceuticals ETF’s (IHE) total portfolio holdings.
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