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Synergy Pharma: Will There Be A Buyout In 2018?
Jan. 3, 2018 7:41 AM ET|
38 comments|
About: Synergy Pharmaceuticals, Inc. (SGYP)
Avisol Capital Partners
Long/short equity, newsletter provider, healthcare, biotech
Marketplace
The Total Pharma Tracker
(4,823 followers)
Summary
Synergy has a good product and poor cash situation.
This makes it an ideal buyout cadidate.
We discuss a realistic buyout price, and some potential buyers.
This idea was discussed in more depth with members of my private investing community, The Total Pharma Tracker.
Synergy Pharma (SGYP) has a good product with high future potential but a current cash flow problem. As we were doing our valuation of the company, we noticed these two things quite clearly - that its product has a long shelf life of another 10+ years, its uptake is good and looks very promising, its competition is not at par as far as Trulance product profile is concerned. Contrastingly, we noticed that since Synergy management has tried to market the drug without a partner, it is facing terrible cash crunch coupled with significant burn rate.
SGYP Logo These two elements together - good product and poor finance - make for a strong buyout scenario. The trick here will be to survive long enough; every extra quarter of survival increases the company’s value, and that’s additional millions of dollars the company can command in a buyout scenario.
So, who is going to buy Synergy, and for how much?
First, the how much. SGYP recently saw some strong movement and is currently trading at around $2.4 and has a market cap of about $600mn. By our admittedly conservative valuation model, the stock should be worth $7.5 in the midterm. In the next 14 years, while Trulance’s patent still lasts, the drug, per our model, will make around $11bn in sales. Per our valuation, the drug will have an EBT (Earnings Before Tax) of $7bn. To be very, very conservative, we will adjust for tax at a very high rate, and adjust for all sorts of eventualities. We still don’t get anywhere below $4bn for the value of the drug while its patent lasts.
SGYP Trulance blister pack
Image source: company website
Lets say nobody will pay a 7x premium on the company’s current market cap, and we drastically reduce the current value to $2bn, right? This is the price I would be willing to accept right now, if I was selling. Even then, we have a 3x premium to current prices. So, per my very rough estimate (see the valuation for the numbers), this company could sell for at least $2bn - possibly more - if it is bought out within the next couple quarters. As I said, though, every quarter that goes by and shows stellar uptake for Trulance increases the value of the company. By how much? I don’t know, but a good few hundred million dollars is not a bad working estimate.
So, who is going to buy Synergy for $2-$3bn in 2018?
Allergan (AGN) immediately comes to mind. This is a $54bn behemoth that is sitting on a cash pile of above $10bn - and it owns the only serious competing drug whose dominance is being challenged by Trulance. To pick up Trulance would be good business sense. Or would it? Won’t the company be competing with itself if it bought out Trulance?
The other potential buyer is the owner of Amitiza. Now, Amitiza is owned by Sucampo (SCMP), licensed to Takeda (OTCPK:TKPYY), but Sucampo itself is being acquired by Mallinckrodt (MNK) for about $1.2bn. This is about 50% premium to what SCMP was trading at last month - and Sucampo is not a huge money maker either. So, any of these players - Takeda especially, and even Mallickrodt if it has cash remaining - can find Trulance interesting.
There is also quite a lot of big pharma interest in conspitation related diseases. For example, at least two had drugs that were withdrawn from the market due to safety issues - Novartis’ (NVS) Zelnorm (tegaserod/5-HT4 agonist) in 2007 and Johnson & Johnson’s (JNJ) Propulsid (cisapride/5-HT4 agonist) in 2000 – withdrawn due to adverse cardiovascular effects. Novartis does not retain much interest in the disease area. Neither does JNJ, apparently; although it has some interest in related diseases and earlier had developed Prucalopride, another related drug. Shire, which acquired rights to this drug, has a decent focus in related disease areas - and has $7bn in cash and has a problem requiring some self-rediscovery. Shire could be a good contender for Trulance as well. As you can see from here, those are more or less the major players (recent and recent past) in the disease area. Ferring, which looks interesting, is privately held. Movetis is/was a subsidiary of JNJ.
The bottom line of the discussion is that, there are not a lot of players in the broad field of constipation (chronic, idiopathic, others). However, even without a buyout, a proper partnership can also work wonders for SGYP’s cash problem.
Disclosure: I am/we are long SGYP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
2018 Is a Critical Year for These 3 Small Commercial-Stage Biotech Stocks
Todd Campbell, The Motley Fool
Motley FoolDecember 10, 2017
Making the leap from clinical-stage to the commercial-stage drug isn't easy. It requires an entirely different set of experience to navigate the world of private and public payers and a big investment in sales and marketing to convince doctors to prescribe drugs. In 2018, we'll find out if Keryx Pharmaceuticals (NASDAQ: KERX), Synergy Pharmaceuticals (NASDAQ: SGYP), and Flexion Therapeutics (NASDAQ: FLXN) have what it takes to succeed.
Expanding or not?
Keryx Pharmaceuticals didn't have a smooth time of it after it won FDA approval of Auryxia in 2014. Despite advantages over existing phosphorous binders that lower phosphorous levels in the body to increase calcium levels in chronic disease patients, sales have been slow to grow. Auryxia recorded only $27.2 million in revenue in 2016.
The drug's launch was hampered by manufacturing problems and breaking into a well-established market for binders that are delivered in dialysis centers, but it appears those problems are behind the company. In 2018, Keryx hopes Auryxia's newly approved indication as an anemia drug for non-dialysis patients will catapult revenue higher. Unquestionably, a lot is at stake because this is Keryx Pharmaceuticals' only drug.
There's some reason for optimism, given that the non-dialysis market opportunity is much bigger than the dialysis opportunity. Keryx Pharmaceuticals ability to spark sales growth this year (Auryxia's sales totaled $38.2 million through the first nine months) suggests that new insurance reimbursement is helping support prescription volume and physicians experience with Auryxia already could make it easier to convince them to prescribe Auryxia in its new indication.
Only time will tell if that's the case, but investors will be rooting for the company because a smooth launch in non-dialysis patients gives the company its best shot yet at achieving profitability. It's already posted a loss of $71 million so far this year.
Cutting in on the competition
Synergy Pharmaceuticals' Trulance is already sold in the U.S. for patients with chronic idiopathic constipation (CIC), but a pending FDA approval on Jan. 24 could clear its use in irritable bowel syndrome with constipation (IBS-C), too, and that could provide a big revenue tailwind in 2018.
Trulance won FDA approval in January 2017, but sales rang in at only $2.3 million in the second quarter. Prescription volume is growing, but the company faces stiff competition from Ironwood (NASDAQ: IRWD) and Allergan (NYSE: AGN) Linzess, which is already approved in both CIC and IBS-C. Last year, Linzess sales were $626 million, up 38% from 2015.
Synergy Pharmaceuticals estimates that only 5% of the 33 million Americans who suffer from CIC are being treated with a prescription drug and that 45 million Americans have either CIC or IBS-C. Those numbers are big enough to suggest that there may be enough room for more than one player.
Investors sure hope so, because Synergy Pharmaceuticals' has issued a lot of stock and taken on a lot of debt in hopes that Trulance will become a winner. If an approval in IBS-C doesn't result in a spike in sales in 2018, it could put the company and its investors under pressure.
Synergy Pharmaceuticals accumulated $96 million in long-term debt and it spent more than $50 million on operating costs in Q3 alone. That spending isn't slowing either, so a disappointing launch could force the company to tap its senior secured loan for more money or it may have to dilute investors even more by issuing more shares. It had $118 million in cash exiting September and it raised about $56 million more, gross of fees, in November, but that's not likely to be enough if the FDA doesn't cooperate or sales don't materialize.
With FDA Approvals in Sight, Will Synergy Pharmaceuticals and Agile Therapeutics Skyrocket as H.C Wainwright Predicts?
support@smarteranalyst.com (Ben Mahaney)
SmarterAnalystDecember 8, 2017
If H.C. Wainwright analysts are right, a great deal of upside potential hangs in the balance for two biotech players: Synergy Pharmaceuticals Inc (NASDAQ:SGYP) and Agile Therapeutics Inc (NASDAQ:AGRX).
With both companies approaching PDUFA dates with destiny, H.C. Wainwright is upbeat on chances for FDA approval, as Synergy eyes a green light in IBS-C and Agile is raring to hit the contraceptive patch market.
Will Label Extension Be a Rapid-Fire "Turning Point" for Synergy Sales?
Synergy is on track for a meaningful uptick in sales gains as far as H.C. Wainwright analyst Ram Selvaraju is concerned; especially if this drug maker secures a label extension for use in constipation-predominant irritable bowel syndrome (IBS-C).
In reaction, the analyst maintains a Buy rating on Synergy stock while trimming the price target from $8 to $7 to reflect the latest financing move. The new target implies a 280% upside from where the shares last closed.
Yet, despite the price target reduction, make no mistake; Selvaraju is a steadfast bull on Synergy's opportunity ahead, anticipating that should label extension be within reach, "Synergy is likely to experience a significant acceleration in sales growth."
Selvaraju highlights, "Since the new product blocks restricting formulary access for the first six months after Trulance market entry have now expired, we continue to believe that sales should be meaningfully increased in the final quarter of the year. However, we also anticipate that the bulk of acceleration in prescription growth should only occur after the IBS-C label extension occurs in January."
Looking ahead to next year, the analyst angles for around $85 million in sales for Trulance.
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.
Healthcare Performance
1m3m6mYTD1yClick Ticker Above to Show/Hide on GraphSGYPXBIIRWDAGNAZNXLV (Health Care SPDR (ETF))Jan '17May '17Sep '17Jan '18-100%-50%0% + 50%
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.
Healthcare Performance
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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.
Healthcare Performance
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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.
This $12 Billion Hedge Fund Is Switching to Synergy Pharmaceuticals, Away from ACADIA
By Tipranks | November 21, 2017 — 8:47 AM EST
Read more: This $12 Billion Hedge Fund Is Switching to Synergy Pharmaceuticals, Away from ACADIA | Investopedia https://www.investopedia.com/investing/12-billion-hedge-fund-switching-synergy-pharmaceuticals-away-acadia/#ixzz4z4xPedQ0
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Hedge fund titan Dmitry Balyasny is founder of the eponymous $12.6 billion Balyasny Asset Management (BAM) fund, which has now revealed its trades for the third quarter. We can see that in the quarter the fund displayed a bullish sentiment towards Synergy Pharmaceuticals Inc (NASDAQ:SGYP) while turning bearish on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
"We think the challenges, consolidation, and changes in the industry are due to one main factor: There isn't enough alpha to make everyone happy," Balyasny told investors recently. He says the best way to get round Hedge fund titan Dmitry Balyasny is founder of the eponymous $12.6 billion Balyasny Asset this is to use a combination of technical data analysis while also ensuring the stock in question has “some fundamental inflection in a business that has not been picked up yet in the data.” Indeed, BAM is famous for its multi-strategy approach which involves using uncorrelated approaches developed by its proprietary trading tools and technology.
Let’s now take a closer look at how this approach played out in the last quarter with two key pharmaceutical stocks:
Synergy Pharmaceuticals
Balyasny initiated a brand-new position in the promising, gastrointestinal medicine-focused Synergy in the third quarter. He snapped up 1,383,400 shares with a value of just over $4 million.
On November 13, Synergy offered 21,705,426 common shares at $2.58 per share together with 21,705,426 warrants to purchase common shares at $2.86 per share, exercisable until November 15, 2019. This will generate about $56 million for Synergy. Investors didn't like the news, sending shares down from $2.72 to the current share price of $1.93.
The financing will give Synergy the cash required to fund the advancement of its key drug Trulance. The drug is already approved for the treatment of chronic idiopathic constipation (CIC) and is also currently being reviewed for the treatment of irritable bowel syndrome with constipation (IBS-C). The crunch date for the application is set for January 2018. This is when the FDA will either approve or reject the application.
The stock still has many supporters who point out that sales of Trulance are steadily growing and that the stock’s fundamentally positive picture remains intact. One of these supporters is Canaccord Genuity analyst John Newman. He has a buy rating on the stock and a price target of $13 (about 360% upside from the current share price). Newman points out that: “SGYP is expecting most remaining new-to-market (NTM) blocks to be lifted in 1H18, which would give Trulance more favorable access across commercial, Medicare Part D and Managed Medicaid plans.” He is also bullish on increased DTC (direct to consumer) advertising, recent formulary wins and the large percentage of prescriptions for patients who were new to the branded treatment.
Synergy Pharmaceutical (SGYP) on Sale Ahead of Upcoming PDUFA Date
November 15, 2017, 12:26 PM EDT
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Shares in gastrointestinal biopharma Synergy Pharmaceuticals Inc (NASDAQ:SGYP) are plunging by 30% this week, following the announcement of an equity offering to raise money. The move will certainly improve Synergy’s balance sheet, but it will also dilute current shareholdings. From a financial perspective, the decision seems to make sense. Without a big pharma’s backing, Synergy needs cash to finance the commercialization of its key product Trulance. This drug has already been approved for the treatment of chronic idiopathic constipation (CIC) and is now being reviewed by the FDA for the treatment of irritable bowel syndrome with constipation (IBS-C).
So for investors looking for high-potential stocks does this dip make a neat buying opportunity? Let’s take a closer look at this healthcare stock and see what analysts are forecasting.
At the moment, SYGP is battling to steal market share from Allergan and Ironwood Pharmaceuticals’ rival drug Linzess. If we take a look back at the third quarter, we can see that Trulance is nonetheless making a firm start with sales doubling quarter over quarter. At the same time, Allergen is a fierce rival that can afford to invest in its drug Linzess and keep Trulance in the shadows. Something that should help Synergy push Trulance further is if it succeeds in its application for Trulance to treat IBS-C as well as the current offering for CIC.
Indeed, approval from the FDA would represent a key catalyst for the stock. Moving into IBS-C would open up a whole new- and very sizeable- market with around 17 million potential new patients. It could also increase the positive perception and knowledge of the drug from physicians. The key crunch date to look out for is in this respect is January 24 2018. On this date, the FDA will approve or reject the application- potentially causing considerable share price volatility for investors. The initial signs appear promising. The application was based on Phase 3 clinical trials for Trualance for IBS-C where both the 3mg and 6mg dosages met the primary endpoint showing statistical significance which includes an over 30% reduction in worst abdominal pain.
Furthermore, two analysts have recently issued very encouraging reports on the stock. Oppenheimer’s Derek Archila assigned a buy rating with a $6 price target (195% upside from current share price). Archila says: “We continue to be encouraged by Trulance’s launch progress, particularly around SGYP’s recent coverage wins which should bode well for Trulance in 2018.” He expects Trulance to begin to accelerate in early-to-mid 2018 post the IBS-C PDUFA in January. Ultimately Trulance could reach peak sales of $695 million by 2029 says Archila, after which time generic competition would begin to impact sales potential.
Crucially he is bullish on how Trulance shapes up against other players in the market: “We remain convinced of Trulance’s differentiation relative to existing branded agents for constipation, based on our positive physician checks and continue to see value in shares.” However, management’s 2019 breakeven timing seems aggressive says Archila- listing 2021 as a more realistic date. Interestingly the analyst also adds that “While takeout is not core to our thesis, we believe SGYP does represent an attractive potential acquisition target.”
Similarly, Cantor’s William Tanner has a buy rating on the stock with an even higher price target of $10- this is down from $11 but still represents a whopping 392% upside from the current share price. He says it is likely that the FDA will approve Trulance for IBS-C, and is also confident about Trulance’s prospects for CIC: “We continue to believe that Trulance will become an important therapy for treating chronic idiopathic constipation (CIC).” Two attractive elements to the Trulance-uptake story are the number of IBS-C patients untreated and the dissatisfaction of those who are being treated with the available therapies says Tanner.
Overall, TipRanks shows that the stock has a relatively optimistic analyst consensus rating of Moderate Buy. This breaks down into 5 buy ratings and just 1 lone sell rating. Meanwhile the stock’s average analyst price target of $7.75 translates into huge upside of 220% from the current share price.
I doubled my holdings early this morning by buying at $1.75. Sure hope I made the right decision.
Synergy Pharma: A Call To Action
Nov. 15, 2017 2:18 PM ET|
76 comments|
About: Synergy Pharmaceuticals, Inc. (SGYP)
Avisol Capital Partners
Avisol Capital Partners
Long/short equity, newsletter provider, healthcare, biotech
Marketplace
The Total Pharma Tracker
(3,536 followers)
Summary
Synergy went down 30% on a sudden dilutive offering.
Shareholders are unhappy, and rightly so.
However, we must set emotions aside and do the smart thing - bring average costs down.
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If we take out all the dross surrounding Synergy Pharma (SGYP), notably...
Its poor stock market performance post the previous approval,
Its poor stock market performance prior to the next approval,
Its market-inexperienced management,
Its blundering secondary offerings
Its lack of marketing prowess vis-a-vis the competition
Its insistence on, but inability to, go to market alone, etc.
... we see why we originally invested in this company. That original thesis was Trulance, a drug that is better than its competition in safety, and at least as good as the competition in efficacy. This is a killer thesis for investing in an early-stage company. However, everything went wrong along the way, and the late-lamented dilution was the final straw. This stock is now breaking apart.
What went wrong? For investors, the ideal scenario would have been an approval, followed by a buyout or at least a collaboration - but management decided to go it alone. By doing so, SGYP’s management took over the prospects of a huge debt burden. A lot of funds are required upfront to launch a drug, and it may be years before they break even. However, a buyout/collaboration is based on prospects, not just current situation, so that would have enabled shareholders to reap lesser rewards, but quicker. Naturally, shareholders are angry.
But if I stand in management’s shoes, I see they have been cornered by the need for cash. Cash burn is very high, as Stone Fox Capital so clearly explains in this article, and the $300mn debt financing came not only with a $9.5mn interest for the next year after the initial $100mn tranche, but it came with the condition that SGYP had to independently have a certain amount of money before the next tranche could be released. The company had no other means of getting that money besides a dilution. Besides, if you plan to make a secondary offering, then, from management’s perspective, there’s hardly any reason to tell that to shareholders early on. So that is the story behind the sudden dilution here. It really is nothing new. It is a continuation of the go-it-alone story - they need cash because they are un-partnered, and this is how they get it.
My basic point is: if you got into SGYP knowing they would a) not take a partner or sell out, and b) their cash burn, while high, is not unrealistic, then you can’t really blame management for what happened, even if you blame them for how it happened. You can especially blame them for those warrants, but when it comes to Jefferies, perhaps a strong deal sweetener was the only way to get them on board. We will never know. However, we do know that 18% of all biotech deals in 2015 came with warrants, while that was 25% in 2016. These are simply not good times for biotechs that need cash.
Another interesting little titbit from our daily scoop today is this major share offloading - “10% shareholder Paulson & Co. Inc. disposed 36% of their holding of SGYP, 8,750,000 shares, for $24,678,500.” That tells you another angle of what happened yesterday.
Investors can take two approaches here. One, which doesn’t have a high probability of success, is to work toward making management sell out the company once IBS-C is approved. That way, many of us can recover our investments and probably also make some profits. The stock is down 65% y-o-y, and a 50% premium from current prices isn’t unrealistic given Trulance’s potential. In fact, I'm probably being too pessimistic. But this is probably never going to happen.
The other approach is what we have been doing - doubling down, bringing our costs down. When you do that with a biotech that doesn’t have a product, you end up with the gambler’s risk of doubling down to zero. However, this is a small company with a major product - so there’s huge value here. The bottom line value of the drug - if you set aside all sorts of company issues - probably runs into a few billion dollars. I mean, I'm valuing it at Ironwood’s (IRWD) market cap. That, to me, is the bottom line - because Trulance is better than Linzess, and IRWD has very little else but a market cap north of $2bn. So, I strongly believe that despite the main cause of worry for SGYP - cash - the market will begin valuing it properly at some point. This may not happen today, but by doubling down, I'm reducing my risks, not increasing it, because I'm 100% certain this company with a great marketed product does not belong in the penny stock zone.
Disclosure: I am/we are long SGYP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Synergy Pharmaceuticals: A Misjudged Secondary Offering
Nov. 14, 2017 10:46 AM ET|
About: Synergy Pharmaceuticals, Inc. (SGYP)
John Engle
Value, special situations, Deep Value, Growth
(1,083 followers)
Summary
Synergy announced Monday that it would raise $56 million in a secondary offering; the market reacted poorly to news.
The move was unexpected given the company’s cash position and access to non-dilutive capital; it has clearly shaken confidence.
Synergy’s long-term prospects remain positive, but they are colored by reduced confidence in management and fears about further unexpected dilution.
Well, that was a fairly inauspicious start to the week. On the morning of Monday, November 13th Synergy Pharmaceuticals (SGYP) announced a secondary offering of its shares, blindsiding many investors and sending the stock into a tailspin.
The move was doubly strange, not having been telegraphed at all during the earnings call at the start of the month, and seemingly unnecessary given current cash reserves and access to non-dilutive debt financing.
Let’s take a look at the latest development for Synergy and what it means for the company in the short-term and long-term.
Well That was Unexpected
The decision to issue a secondary offering is surprising, and far from heartening. It is personally frustrating as well given the bullish case I have made to date (including a positive article published here on Friday). Synergy still has value, but this move is definitely unsettling.
During Q3 2017, Synergy successfully secured a debt facility worth $300 million and has drawn $100 million of it so far. A 9.5% interest rate is quite dear, but reasonable given the nature and risk profile of the company. What Synergy did not disclose during conference calls, nor bother to highlight except on a 10-Q report, was that this loan was subject to the company having a certain amount of cash at the end of January 31st to obtain the next tranche. I am struck in particular by a statement from CFO Gary Gemignani during the last earnings call:
Under the terms of the agreement, we have access to an additional $100 million on or before February 28, 2018 and up to two additional tranches of up to $50 million on or before March 29, 2019 subject to certain conditions. While I cannot comment on specific conditions required to access the additional tranches beyond what’s publicly disclosed, I can tell you that we are confident in our ability to meet the conditions that will allow us to access to the additional capital if and when we need it.
That looks a lot like obfuscation in hindsight, bordering on deliberate misdirection. Perhaps we should have been paying more attention to the fine print, but that sort of comment is beneath an executive of a serious public company (I have been kicking myself today, and I am sure many other analysts are as well. I suppose my only consolation is that they missed it too. Misery loves company!).
With the supposed ability to draw on $200 million in non-dilutive capital and $117.8 million in cash and equivalents, the frustratingly high burn rate of about $50 million per quarter looked manageable. Synergy’s aim has always had to be to boost revenues, and it has been doing so at a geometric rate since Trulance, its treatment for chronic idiopathic constipation, hit the market this year. The cost of going it alone was always expected to be high, but it appeared manageable in light of the company’s resources.
Thus a secondary offering of 21,705,426 new shares, each with a warrant to purchase a further share, is extremely galling. The offering is priced at $2.58 per share to raise $56 million before expenses. The new capital will be enough to finance operations for another quarter.
How Not to Do a Secondary
The most bizarre part of the offering is the inclusion of the warrant, which gives the ability to purchase a further share within two years with an exercise price of $2.86 per share. A warrant does nothing to raise funds in the short-term, and is a rather perverse tool to employ in an offering, especially when the ostensible aim would be for significantly greater share price appreciation between now and November 2019.
Even without the warrants being exercised, the share float will be expanded by nearly 10%. That increase is doubled, if the warrants are all exercised. That is far from encouraging.
The warrant represents an egregious error on the part of Synergy’s finance team. Clearly they were convinced they needed to offer a sweetener as inducement to subscribers, which is standard in these cases. But this was too sweet by a long shot.
The Dangers of Losing Confidence
All of this builds up to a question: Can we trust Synergy management? They failed to telegraph this secondary offering at all, and have given a sweet deal to new subscribers at the expense of current shareholders. The question is especially pertinent given the company’s claims after its last secondary offering, in January, that it would not do it again. For those of us holding for a longer-term capital appreciation, the specter of dilution will be omnipresent.
That makes capital appreciation even harder over the next while, as investors will be skeptical of buying in when there is a threat that their stake might be diluted without notice or clear reason. That is deeply unfortunate because the company growth story has really been starting to take shape.
The expensive and challenging effort of bringing a new drug to market without a licensing partner has always been a risk overhanging Synergy, but it has been working well to carve out the beginnings of a market share for Trulance. With this new secondary, the share price will likely struggle to pick up as much vigor, even as prescriptions and revenues grow.
Investor’s-Eye View
After this shellacking, it is understandable that lots of investors would shy away. Falling below $2.50, it may take some time before enough market confidence is restored to lift it all that much higher. I previously called $2.50 a floor – and it probably was before the secondary. Shares are already down close to 10%, reflecting fairly accurate (in a day-on-day sense) the increase in the float.
Given all that, there is probably not too much further it can fall barring more terrible news. There could be a bit of downward pressure from tax selling, but any impact from that will be temporary. With a PDUFA date set for January 24th 2018 for Trulance’s indication expansion for irritable bowel syndrome with constipation, there is more good news than bad on the horizon.
The case for Trulance remains strong, and thus so does the case for Synergy. But it may take the market a while to see that. Especially with the loss of confidence in management’s statements.
Disclosure: I am/we are long SGYP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Synergy Pharmaceuticals Announces Pricing of Offering of Common Stock and Warrants
[Business Wire]
Business WireNovember 13, 2017
NEW YORK--(BUSINESS WIRE)--
Synergy Pharmaceuticals Inc. (SGYP), a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal therapies, today announced the pricing of its underwritten offering of 21,705,426 shares of its common stock together with accompanying warrants to purchase an aggregate of 21,705,426 shares of common stock at a combined price to the public of $2.58 per share and accompanying warrant. The aggregate offering price, before deducting underwriting discounts and commissions and other offering expenses, is expected to be approximately $56 million. The offering is expected to close on or about November 15, 2017, subject to customary closing conditions.
Jefferies is acting as sole book-running manager for the offering.
Each warrant sold in the offering will be cash exercisable for one share of common stock at an exercise price of $2.86 per whole share, and will be exercisable from issuance until November 15, 2019. The shares of common stock and warrants sold in the offering are immediately separable and will be issued separately.
Synergy intends to use the net proceeds from the offering to fund its commercialization activities related to TRULANCE® and for working capital and other general corporate purposes. Synergy may also use the net proceeds from this offering to fund possible acquisitions of other companies, products or technologies, though no such acquisitions are currently contemplated.
A shelf registration statement relating to this offering was filed with the Securities and Exchange Commission (SEC) on November 13, 2017 and has become effective. The securities may be offered only by means of a written prospectus, including a prospectus supplement, forming a part of the effective registration statement. A final prospectus supplement and accompanying prospectus will be filed with the SEC. When available, copies of the prospectus supplement and the accompanying prospectus may also be obtained by contacting Jefferies LLC, Attention: Equity Syndicate Prospectus Department, 520 Madison Avenue, 2nd Floor, New York, NY 10022, or by telephone at (877) 821-7388, or by email at Prospectus_Department@Jefferies.com.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities being offered, nor shall there be any sale of the securities being offered in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.
About Synergy Pharmaceuticals Inc.:
Synergy is a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal (GI) therapies. Synergy has pioneered discovery, research and development efforts around analogs of uroguanylin, a naturally occurring human GI peptide, for the treatment of GI diseases and disorders. Synergy proprietary GI platform includes one commercial product TRULANCE (plecanatide) and a second lead product candidate - dolcanatide.
Forward-looking Statements
Certain statements in this press release are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about Synergy’s anticipated public offering, anticipated use of proceeds and other statements containing the words "anticipate," "planned," "believe," "forecast," "estimated," "expected," and "intend," among others. These forward-looking statements are based on Synergy's current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the uncertainties related to market conditions and the completion of the public offering on the anticipated terms or at all; the development, launch, introduction and commercial potential of TRULANCE; growth and opportunity, including peak sales and the potential demand for TRULANCE, as well as its potential impact on applicable markets; market size; substantial competition; our ability to continue as a going concern; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payer reimbursement; dependence upon third parties; our financial performance and results, including the risk that we are unable to manage our operating expenses or cash use for operations, or are unable to commercialize our products, within the guided ranges or otherwise as expected; and risks related to failure to obtain FDA clearances or approvals and noncompliance with FDA regulations. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. There are no guarantees that future clinical trials discussed in this press release will be completed or successful or that any product will receive regulatory approval for any indication or prove to be commercially successful. Investors should read the risk factors set forth in Synergy's most recent periodic reports filed with the Securities and Exchange Commission, including Synergy’s Form 10-K for the year ended December 31, 2016. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and Synergy does not undertake any obligation to update publicly such statements to reflect subsequent events or circumstances.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171113005760/en/
5 Small Biotechs Receive Shots in the Arm
By
Bret Jensen
Follow
| Nov 12, 2017 | 12:00 PM EST
Stock quotes in this article:
sgyp
,
After the bell on Thursday we got a handful of earnings reports and a couple U.S Food and Drug Administration (FDA) approvals among the small-cap biotech names I often cover in these posts, so let's look at some of the highlights.
Synergy Pharmaceuticals Inc. (SGYP) posted very solid third-quarter results that beat both top- and bottom-line consensus. Its key drug Trulance continues to ramp up impressively since it first hit the market this March. Scripts more than doubled from the second quarter.
The drug should be approved for irritable bowel syndrome with constipation (IBS-C) in January, expanding its potential market by a third. Greater access to insurer programs and Medicare formularies to begin 2018 should boost Trulance's sale trajectory further.
A buyout in 2018 is certainly on potential end game for this name.
https://realmoney.thestreet.com/articles/11/12/2017/5-small-biotechs-receive-shots-arm?puc=yahoo&cm_ven=YAHOO&yptr=yahoo
No just the opposite. Go look at a dozen quarterly earning. When a company has a good quarter the stock usually goes down, when they have a bad quarter the stock usually goes up.
I think the reason for this is that a good report has people questioning if it will continue with better numbers the next quarter.
With a bad report people think they can improve in the next quarter hence they bid the stock up.
There are also shorts at work here. They can cut a stock down very quickly but they can also pay in the long run.
I look for better results this coming week, taking us over $3.00 a share, maybe never to look back at under $3.00. All in my own opinion of course
SGYP has made tremendous progress in just 7 months. Come January 24, 2018 it could be even better for the company and for us.
SGYP has the best product, that has been proven. They have not licensed it anywhere in the world and there is still the possibility of a strategic partner or a buyout.
The people that analyze these types of stocks all seem to be behind the future success of this company.
Let's talk 6 months from and see if it was worth waiting for.
Hey iandy, you say your are frustrated and impatient. You have expressed this many times on this tread. Maybe you would sleep better being out of this stock.
I know I have felt this way about other stocks and I felt a 1000 pounds being lifted off of me after I sold out.
We only live once. Enjoy life.
Synergy Pharmaceuticals Inc (SGYP): Analyst Makes Bullish Case for Robust Value in Trulance Asset
Canaccord forecasts DTC marketing could be big for SGYP's Trulance next year, in footsteps of rival Linzess.
Julie Lamb, Senior Editor-November 10, 2017, 1:19 PM EDT
SHARE ON:
Synergy Pharmaceuticals Inc (NASDAQ:SGYP) shares are falling 6% after yesterday’s third quarter update, but Canaccord analyst John Newman simply sees victory.
“Recent formulary wins [are] notable,” the analyst argues, eyeing exciting value for chronic idiopathic constipation (CIC) drug Trulance, whose wins will only serve to sustain more gains down the line.
As such, the analyst reiterates a Buy rating on SGYP stock with a $13 price target, which represents a just under 363% increase from current levels. (To watch Newman’s track record, click here)
Selvaraju highlights, “SGYP is expecting most remaining new-to-market (NTM) blocks to be lifted in 1H18, which would give Trulance more favorable access across commercial, Medicare Part D and Managed Medicaid plans. In 3Q17, more than 25K Rx were filled (+105% over 2Q17), totaling ~38K Rx since launch in March. The Rx volume is driven by over 7000 physicians (+87% over 2Q17), and 50% of the volume came from patients who were new to branded treatment and 42% was from conversions, consistent with what we have seen in previous quarter. Overall, the Rx volume growth is within our expectation and the pattern continues to suggest strong value proposition for Trulance given the high portion of therapeutic conversions in the Rx volume. In addition, the formulary wins should help continue to support Trulance’s growth trajectory.”
Moving forward, direct-to-consumer advertising could yield a “meaningful positive impact” next year in bolstering awareness of Trulance, which could help the biotech player “level the competition field to some extent.” With a PDUFA date with destiny set for the 24th of January for an IBS-C sNDA, the analyst has soaring “confidence” that Synergy will get the nod, then leading to a more advantageous Trulance adoption curve.
Most on Wall Street are backing this biotech stock, with TipRanks analytics exhibiting SGYP as a Buy. Out of 5 analysts polled by TipRanks in the last 3 months, 4 are bullish on Synergy stock while 1 is less. With a return potential of 178%, the stock’s consensus target price stands at $7.90.
This is good for EMES in my opinion. Snackman
Crude Oil Heads For A New High In 2017
Nov. 3, 2017 11:41 AM ET|
Andrew Hecht
Andrew Hecht
Commodities, long/short equity, medium-term horizon, long-term horizon
Marketplace
Hecht Commodity Report
(11,707 followers)
Summary
Higher lows and higher highs since June 21.
Brent breaks above $60 per barrel, and the market tightens.
Oil products and inventories continue to provide support.
OPEC meeting could cause volatility.
How high can nearby NYMEX futures rise?
I rarely share my top ideas for free. Members of Hecht Commodity Report receive exclusive access to all of my top ideas. Become a member today >>
On Wednesday, November 1 the price of NYMEX nearby crude oil futures traded to a high of $55.22 per barrel and then closed the session at $54.30 disappointing those who were looking for a breakout in the energy commodity. Critical resistance for NYMEX crude was at the 2017 highs established back in January at the start of the year at just two cents above the November 1 highs. The first attempt at conquering technical resistance and putting in a new peak for the year failed.
Crude oil is one of the most closely-watched commodities that trade on futures exchanges around the world. While two-thirds of the world’s crude oil use the Brent price as a pricing mechanism for physical transactions, the most liquid futures market for the energy commodity is listed on the New York Mercantile Exchange (NYMEX) division of the Chicago Mercantile Exchange (CME). The NYMEX contract calls for delivery of West Texas Intermediate crude oil that is a North American product. WTI crude is sweeter oil; meaning it has lower sulfur content than Brent. Meanwhile, the WTI crude tends to be cheaper and easier to refine into gasoline while the Brent oil is more suitable for processing into distillate products. Gasoline is the most ubiquitous oil product and WTI traded on the NYMEX tends to attract the most speculative activity as market participants depend on liquidity when it comes to high levels of volume and open interest. Open interest is the total number of open long and short positions in a futures market, and the NYMEX contract has a history of the highest level of open interest of all commodities futures. Therefore, while WTI oil only accounts for one-third of the world’s pricing, it takes the gold medal when it comes to a trading instrument.
The price of crude oil is a barometer for the health of the global economy, inflationary pressures, and the supply and demand for the world’s energy market. Since June 21, the price of NYMEX crude oil has been moving higher, and market structure in the oil market continues to support strength in the price of crude oil, even at the current highs.
Higher lows and higher highs since June 21
On June 21, the price of NYMEX crude oil violated technical support at the November 2016 lows at $42.20 per barrel. As the price of the energy commodity approached that low, many analysts pointed to an oversupply of the energy commodity and called for the price to fall to $40 per barrel or below. However, while nearby NYMEX futures made a lower low, it quickly turned around and commenced a rally that has lasted for the past four and one-half months.
Source: CQG
As the weekly chart highlights, NYMEX futures fell just 15 cents below the November 2016 low on June 21 and has been making a series of higher lows and higher highs since. On November 1, the nearby contract traded above the $55 per barrel for the first time since the first week of 2017 but it reached just two ticks shy of the high for the year when it traded to $55.22 per barrel.
Technical indicators for the crude oil market, now that it is close to breaking a technical resistance level on the upside, present conflicting data. The trend, as exemplified by the slow stochastic is rising, but it is in overbought territory which means it could run out of bullish steam and a correction to the downside could be ahead. Open interest had increased to 2.528 million contracts as of November 1 which is the highest level in history. While rising price and increasing open interest tend to validate a bullish trend in futures markets, it is likely that there are lots of trend-following speculative longs in the crude oil market given the price action over recent months. Speculators buy a commodity like crude oil to sell it at a higher price, and like in a game of musical chairs when the trend turns many run for exits which poses a danger for the price of the energy commodity. At the same time, while the trend in the oil market appears bullish it looks about as good as it looked bad back on June 21. Crude oil looked like it was about to fall into the abyss back in June, but the price could only manage a move that was 15 cents below support and a new low for 2017. On November 1, the energy commodity only rose to a level that was two cents below resistance and has yet to put in a new high for this year.
On a technical basis, one could make a strong case for a price correction, and perhaps crude oil will decline and spend some time consolidating and building cause for another run at the highs for the year. When it comes to the fundamentals of the energy commodity, its market structure and supply and demand equation continue to provide support for the price.
Brent breaks above $60 per barrel, and the market tightens
While WTI crude has not made a new high for this year on its move on November 1, Brent crude oil has broken out to the upside from a technical perspective.
Source: ICE
As the weekly chart of Brent futures that trade on the Intercontinental Exchange illustrates, the highs for 2017 dating back to early January stood at $58.37 per barrel, and that price gave way back in late September when the price rose to $59.49. However, this past week the price of Brent surged to highs of $61.70 and was trading around the $60.50 level at the close of business on November 1. Brent has strengthened compared to WTI over recent months for several reasons. First, higher oil prices have depressed the price of WTI compared to Brent as selling from U.S. shale producers has weighed on the price of the NYMEX futures contracts. Second, production cuts from OPEC announced late last year have decreased output which has provided support for Brent compared to WTI crude. Third, the geopolitical landscape in the Middle East which uses Brent as its pricing benchmark has caused supply fears. The ongoing conflict between the Saudis and Iranians has resulted in a proxy war in Yemen. The current blockade of Qatar by Saudi Arabia and many of their Gulf State allies has increased the prospects for violent flare-ups in the region. Any increase in tension could impact production or logistical routes for the energy commodity. Finally, China has been on a tear when it comes to buying industrial commodities, and it is likely that the world’s leading commodities consumer has been stocking up on crude oil to increase the level of their strategic petroleum reserves. Chinese buying, from a logistical perspective, is likely to be tied to Brent pricing contracts thus increasing the premium of Brent compared to WTI.
Source: CQG
As the weekly chart of WTI minus Brent nearby crude oil futures shows, the Brent premium stood at around the $2 level at the beginning of 2017 and was trading close to that differential on June 21 when oil hit its low for the year. However, over recent months, the premium for Brent has increased for the stated reasons, and reached a high of $7.15 per barrel in late September and was trading at the $5.83 level on November 2. The increase in the premium caused Brent crude oil to rise to a new high for 2017 while WTI remains below the elusive level, for now.
When it comes to the forward curve for the two crude oils, the term structure has tightened which is often a bullish short-term signal for the oil market.
Source: CQG
The price of December 2018 minus December 2017 NYMEX crude oil futures shows that the spread has moved from a $2.31 contango on June 21 to a $1.60 backwardation on November 1. Forward premiums for NYMEX crude oil have turned to discounts as the price of nearby futures rose. The move in term structure is likely the result of an increase in shale producer hedging activity which serves to depress deferred prices as producers lock-in prices for future output. However, it is also a sign of short-term supply concerns and the action in the Brent forward spreads has been a sign that the market has indeed tightened over recent months. The January 2018 versus January 2019 Brent spread was trading at a $2.93 backwardation as of the close of business on November 2 while the same NYMEX spread was at a $2.07 backwardation. Term structure is just one piece of the market structure puzzle for the energy commodity, but others are also providing bullish signs for the price of crude oil.
Oil products and inventories continue to provide support
Crude oil inventory data has been supportive for the price of the energy commodity in the United States. The move to highs of $55.22 on November 1 was likely the result of weekly inventory numbers from the American Petroleum Institute ((API)) on Tuesday, October which received some degree of validation from the Energy Information Administration ((EIA)) in their release on November 1. The API told markets that crude oil inventories declined by a whopping 5.09 million barrels for the week ending on October 27 and the EIA said the decline in stocks was 2.4 million barrels. Both numbers exceeded market expectations for a withdrawal from inventories. At the same time, there were also withdrawals in the product markets. The API said gasoline inventories fell by 7.7 million barrels and the EIA reported a 4 million barrel decline. When it comes to the distillates, the API said they dropped by 3.11 million barrels while the EIA reported only a 320,000 barrel decline. This was not the first week that inventory reports supported the price of crude oil and triggered buying and economic growth in the United States and around the world continue to be supportive of increasing demand for crude oil and products. While the price of crude oil has been rallying for over four months, products have outperformed the raw energy commodity which is supportive for more gains in the commodity that is the input in their production.
Source: CQG
The trajectory of the December NYMEX gasoline crack spread shows that it has appreciated steadily since May. Even though we have been in the offseason for gasoline demand in the US since September, the oil product continues to outperform crude oil adding support for the energy commodity. The latest price spike on Thursday, November 02 came on the back of an outage at the Wales refinery which has caused Valero to pull gasoline from other regions of the United States to satisfy requirements.
Source: CQG
The trend in the December NYMEX heating oil crack spread which is a proxy for other distillates like jet and diesel fuels shows a similar trajectory over recent months as oil products could be signaling that we have yet to see a high in the price of crude oil. Both oil products have outperformed crude oil at a time when the oil price experienced a significant rally. From the lows on June 21 to the highs on November 1, the price of crude oil has appreciated by over 31%. Over that period, demand for oil products has continued to rise, and the prices have done even better than the commodity that is the input in their production. The bottom line is that oil products continue to support the price of the energy commodity and a new high for 2017.
OPEC meeting could cause volatility
The oil ministers of OPEC will attempt to put aside their individual issues with one and other when they gather in Vienna, Austria on November 30 to decide on production policy for the coming six months. At their last meeting in late spring, the cartel extended production cuts until the end of the first quarter of 2018. It is likely that OPEC will now continue the quotas until the end of 2018 at their upcoming meeting. In a pow-wow in Moscow last month, the King of Saudi Arabia and Vladimir Putin likely agreed to a deal that would extend production cuts. The two biggest oil producing countries are unlikely allies considering Russia’s close relationship with the theocracy in Iran. While not a member of OPEC, Russia had served as an unofficial mediator since last year when they successfully arranged for the cartel to abandon their strategy to flood the market with petroleum and negotiated production quotas for member nations. A higher and stable oil price is a necessity for all parties involved. Russia, Iran, the Gulf States, Qatar, and all other members of the cartel depend on oil revenues. When it comes to Saudi Arabia, the valuation of the coming IPO of Aramco that will capitalize the Kingdom’s sovereign wealth fund depends on the price of crude oil. The IPO is likely to be the biggest in history with a market cap of over $1 trillion, and the Saudis are relying on a successful sale of shares to diversify away from petroleum in the future.
There is likely to be lots of horse trading, threats, and moments of concern leading up to the OPEC meeting at the end of this month. After all, getting the membership to agree on anything is like trying to herd wild cats. During periods of doubt, we could see some violent corrections in the price of oil. However, vested interest is likely to prevail, and a continuation of quotas until the end of 2018 will prove supportive for the current price of crude oil.
How high can nearby NYMEX futures rise?
Crude oil has already reached my target which was the highs of 2017. I consider falling two cents short a victory considering it came from the $42.05 level. When it comes to the future, I could easily see the price rise to the $60 per barrel level given the current state of term structure, inventories, and product prices. At the same time, I have a nagging feeling that the price action when oil made a new low on June 21 could repeat when the price finally rises above the $55.24 per barrel level on nearby NYMEX futures. After all, long crude oil has become a crowded trade and nothing fuels a correction like stale longs heading for exits. It would be ironic if the energy commodity were to rise to just 15 cents above that critical resistance level and then fall back to the sweet spot for WTI light sweet crude oil at $50 per barrel in a mirror image of the price action from June. The bottom line is that anything is possible when it comes to commodities market and the geopolitical landscape is anything but stable these days. I am flat crude oil at this time, but if I had a gun to my head, I would have to remain long even though I would be one of many. I am waiting for the analysts who called for prices in the $30s in June to call for oil in the $60s or higher. When the bulls come out of the woodwork, it will be time to sell and even go short the energy commodity. I still believe that $50 is the pivot point for crude oil. A price that is double the February 2016 low and half the June 2014 high is a number that producers and consumers alike can agree satisfies their desire for stability. However, right now the bulls have the reigns of the market and producers tend to be pigs when it comes to price appreciation. Someone should remind them that in the volatile commodities markets where trends can turn on a dime, hogs are not pets and they go to slaughter. As I write this piece on Thursday evening November, 2 December NYMEX crude oil futures are trading at the $54.80 per barrel level and Brent January futures are at $60.87 per barrel.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.
Synergy Pharmaceuticals Inc (SGYP): A 2018 Story Shapes Up
[SmarterAnalyst]
support@smarteranalyst.com (Ben Mahaney)
SmarterAnalystOctober 26, 2017
Synergy Pharmaceuticals Inc (SGYP): A 2018 Story Shapes Up
By Bret Jensen
Small biotech stocks especially 'Tier 3' concerns like Omeros and Flexion Therapeutics have been taking it on the shin for most of October as investor sentiment has shifted suddenly and violently into a negative stance. It is times like these I start to deploy some 'dry powder' to incrementally add shares to core positions in several promising names in this high beta part of the market.
Today I would like to highlight a very undervalued small biopharma concern called Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) which has taken its lumps in this latest downdraft. However, I think the stock will be a great story and big winner in 2018. I see a big sales ramp up for its recently approved GI drug Trulance in the quarters and years ahead.
The company’s primary drug candidate Trulance was approved for Chronic Idiopathic Constipation in January of this year and stock moved up to around $7.00 a share on the approval. However, the shares have slowly declined since then and currently trade for just under $2.75 a share. There a few key reasons for the poor performance of the equity since the approval of Trulance.
No buyout has materialized as some had speculated upon approval of the drug
The usual concerns about the challenges of rolling out a new compound in the market
The company also had worries about funding that was a huge headwind for the stock.
The company recently addressed its funding overhang by entering into a debt deal that will provide up $300 million in tranches over the next year or so that should take care of all worries about funding issues.
Sales of Trulance have ramped up slowly and consistently in 2017. At yearend, the drug should be delivering at a $50 million annual run rate. Approximately half of Trulance prescriptions are coming from individuals new to the branded GI market and half from competitors.
Trulance has two important advantages over the market leader Linzess which does around $160 million in quarterly sales. First, it can be taken at any time of the day where Linzess has to be taken before the first meal of the day. In addition, diarrhea occurs in approximately one in six individuals that take Linzess. The rate for Trulance is approximately a third of that. Given Trulance has price parity with Linzess, I expect it to steal considerable market share in a growing part of the market.
Tepananor from Ardelyx recently posted solid late stage trial results for the treatment of IBS-C. However, it had the same diarrhea side effect ratio as Linzess. It also will be at least two quarters after Trulance is approved for IBS-C before that compound hits the market. I don't expect it to be a notable competitor in this space.
Outlook:
2018 should be a big year for growth in Trulance sales. The drug should be approved for IBS-C in late January of next year which will expand its potential customer base by a third. As 2018 opens, the compound will also be available in more formularies and covered by more insurance networks as new contracts kick in. I see the drug doing $80 million to $100 million in revenues in 2018 and similar sales growth in 2019. As that growth materializes I expect SGYP to trade back to the mid to high single digits, making for a big rise from current levels.
Disclosure: I have added some shares of SGYP on the recent decline. I have also increased my exposure with some bull market call spreads using the Jan 2019 $4/$7 call option spreads for a net debit of 50 cents.
Analysis of top Seeking Alpha coverage: Synergy
Today, we will discuss an article on Synergy Pharma (SGYP) by John Engle, titled Synergy Pharmaceuticals: Opportunity In Irritable Markets. The author began with a quote that I found very appropriate for the Synergy situation - "What's the best way to make God laugh? Tell him your plans for the future." This is a company with a best-in-class drug approved in a very important market, with another critical approval 3 months ahead - and yet the stock is being held back forever.
The company competes with Ironwood (IRWD), a debt-laden company that has never seen a dollar of profit; but actually, it competes against big pharma Allergan (AGN). I wonder, though, whether these gods are laughing at Allergan or at Synergy right now.
There has been little recent news from Synergy except for a presentation it made at a medical conference. The presentation concerns findings from a survey of patients and healthcare providers about current treatment for irritable bowel syndrome with constipation. It shows how the market is largely dissatisfied with existing treatment options and how Trulance can benefit from this large unmet need. The presentation, to me, was largely irrelevant and confused me even further - if Trulance is so good, why isn't the stock moving?
Synergy also reported more data for Trulance. Testing two dosage levels against placebo, both showed significant Overall Response (Placebo, 16.0%; Low Dose, 25.7%; High Dose 26.6%). Results were also positive for abdominal pain response and stool frequency. Furthermore, patients reported improvements in stool consistency and reduced straining severity. The principal negative side-effect, diarrhea, was limited (Placebo, 1.0%; Low Dose, 4.3%; High Dose, 4.0%). Barely more than 1% of treated patients had to discontinue treatment due to the effects of diarrhea. If you recall, Linzess has shown 5 times more probability of patients having diarrhoea than Trulance. And yet, the poor show from SGYP.
In response to a Total Pharma Tracker member's question, I wrote yesterday that there is not a single apparent reason for SGYP to go down. There is no negative news, analysts are bullish, funds are holding, insiders are not selling, IBS-C has every chance of being approved, competitor IRWD is heavily debt laden, Trulance has strong uptake, Linzess has poor safety profile... I could probably add 5 more points like these.
However, the stock is going down, with probably a bottom of sorts at $2.5. All sorts of investment logic tell me this is the time to double down. Street analysts are also strongly bullish the stock, and while that by itself is hardly a convincing argument, the consensus is hard to ignore. "Out of 6 analysts polled by TipRanks in the last 3 months, 5 are bullish on Synergy stock while 1 is bearish. With a return potential of nearly 195%, the stock's consensus target price stands at $8.59."
I note that the author Mr. Engle also has same bottom out price for SGYP - $2.5. As he says,
"While I am wary of trying to identify a bottom, it seems highly unlikely that it will fall below $2.50."
Meanwhile, Allergan is hard at work wooing the consuming public with TV ads like the one that was selected as the only DTC pharma advertising to win an Effie Award this year and ranked in the Sweet 16 of FiercePharma's DTC March Madness contest. The ad doesn't mention Trulance because there's no way the words "Trulance" and "Linzess" can be used in the same sentence without making that sentence sound detrimental to Linzess, or be a falsehood.
Here, try it out: Linzess is... better than... cheaper than... easier to use than.. Trulance. All those statements are false.
Also, another Trulance negative is that Express Scripts (NASDAQ:ESRX) did not take it up for the national preferred formulary in 2018, instead opting for the older meds Linzess and Amitiza. As the referenced article says, this is probably because Trulance, the new kid on the block, dared to price its BETTER drug at par with big boy Linzess, while the PBM must have been looking for a discount. One Cowen analyst who seemed biased against SGYP noted earlier this year, "We believe Trulance's uptake will be primarily determined based on Synergy's resources and ability to establish payor relationships and not on the diarrhea and efficacy differences with Linzess." Sadly, this may be true and hurt the stock in the short to midterm as the company establishes payor relationships. CVS (NYSE:CVS) is on board, but Express Scripts is the largest of them, and Trulance needs to find itself on that list of approved meds.
The problem here is just pricing, and I am not sure why SGYP didn't budge. But eventually, this will be sorted out if its marketing people can do a good job and IBS-C gets through. That means, if you have a little patience, this could be a huge winner in about a year's time or less, when next year's formulary inclusions are declared sometime in July. That, coupled with IBS-C, and potentially a buyout, could change the game in favor of SGYP, the David in this David and Goliath story.
3 Biotech Stocks to Consider Ahead of FDA Decisions
By Tipranks | October 25, 2017 — 11:36 AM EDT
The key date to seal Trulance’s fate is January 24, 2018. This is the PDUFA date – the deadline for the FDA to announce if Trulance’s supplemental new drug application (sNDA) for IBS-C is approved.
“We believe the likelihood of approval is high” writes Cantor analyst William Tanner. “Approval for that indication should expand the commercial opportunity, in our opinion, and place the drug on more equal footing, indication-wise, with Linzess and Amitiza.” This top analyst, who is ranked #866 out of over 4,700 tracked analysts on TipRanks, has a buy rating and $11 price target (311% upside potential) on SGYP stock.
Similarly, Cowen analyst John Newman has “high confidence of a positive response from the FDA, which should help expand Trulance’s commercial potential.” Newman’s bullish take on the stock is reflected in his $13 price target for SGYP – its highest price target yet and 386% above the current share price of just $2.67. He adds that “SGYP is planning to transfer Publicis Touchpoint contract sales representatives over to the company to support the Trulance indication expansion into IBS-C.”
In fact, Trulance is already approved but for chronic idiopathic constipation (CIC). And Newman is confident that Trulance can take rival market share for CIC as “less diarrhea and the ability to dose with or without food make Trulance a simpler and easier choice for doctors and patients with CIC.” Meanwhile, Tanner contemplates the potential of Trulance to expand further afield with, for example, the treatment of opioid-induced constipation (OIC) or ulcerative colitis (UC). He concludes: “Entering relatively crowded markets populated with established products, a perception that Trulance compares favorably with alternative options should bias success, in our opinion.”
Read more: 3 Biotech Stocks to Consider Ahead of FDA Decisions | Investopedia http://www.investopedia.com/investing/3-biotech-stocks-consider-ahead-fda-decisions/#ixzz4waieBC1X
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H.C. Wainwright Pounds the Table on Synergy Pharmaceuticals Inc (SGYP)
support@smarteranalyst.com (Ben Mahaney)
SmarterAnalystOctober 18, 2017
H.C. Wainwright analyst Ram Selvaraju was out pounding the table on shares of Synergy Pharmaceuticals Inc (NASDAQ:SGYP) Wednesday, reiterating a Buy rating and price target of $8, which implies an upside of 173% from current levels. (To watch Selvaraju's track record, click here)
Yesterday, Synergy indicated that new findings from an online questionnaire highlighting the frustration of patients suffering from constipation-predominant irritable bowel syndrome (IBS-C) and the perceptions of healthcare providers (HCPs) who treat these patients had been presented at the World Congress of Gastroenterology Meeting in Orlando, FL.
Selvaraju commented, "We believe that these results emphasize the degree to which IBS-C is a highly impactful health issue among sufferers and could point to the potential importance of a drug like Synergy's Trulance™ in this condition. We remind investors that the approval decision date for the Trulance supplemental New Drug Application (sNDA) in treatment of IBS-C is January 24, 2018."
Last week, Ardelyx (NASDAQ:ARDX) reported results from T3MPO-2, its second Phase 3 study of tenapanor for IBS-C. However, the data didn’t measure up so well against Synergy's Trulance.
Selvaraju noted, "As we have previously indicated, the sodium-proton exchanger NHE3 inhibitor tenapanor—being developed by Ardelyx—does not appear to have a competitive safety profile vs. guanylyl cyclase C (GC-C) receptor agonists like Trulance or Linzess® (linaclotide). The Phase 3 trial of tenapanor in IBS-C revealed 14.6% of treated patients had diarrhea vs. only 1.7% of placebo subjects, while 5.9% discontinued due to diarrhea in the treatment arm vs. only 0.6% in the placebo group. We also note that the most recent pivotal trial data reported for tenapanor were in the end-stage renal disease (ESRD)-related hyperphosphatemia setting; accordingly, we view these data as having less relevance for tenapanor's potential utility in IBS-C."
Where does the rest of the Street side on this biotech player? It appears mostly bullish, as TipRanks analytics demonstrate SGYP as a Buy. Out of 6 analysts polled by TipRanks in the last 3 months, 5 are bullish on Synergy stock while 1 is bearish. With a return potential of nearly 195%, the stock’s consensus target price stands at $8.59.
Synergy Pharmaceuticals Presents Results from Study Examining Patient and Physician Perceptions and Experiences with Irritable Bowel Syndrome with Constipation (IBS-C)
[Business Wire]
Business WireOctober 17, 2017
NEW YORK--(BUSINESS WIRE)--
Synergy Pharmaceuticals Inc. (SGYP) announced today new findings highlighting the frustration of patients suffering from irritable bowel syndrome with constipation (IBS-C) and the perceptions of healthcare providers (HCPs) who treat these patients. The online questionnaire, designed to develop a better understanding of the experiences and attitudes associated with IBS-C, revealed many patients experienced stress and lost productivity when managing this condition. Patients and HCPs also noted a lack of satisfaction in currently available prescription treatments for IBS-C.
Detailed results from the BURDEN IBS-C Study (Better Understanding and Recognition of the Disconnects, Experiences, and Needs of Patients with Irritable Bowel Syndrome with Constipation) were presented today at World Congress of Gastroenterology (WCOG) at American College of Gastroenterology (ACG), in Orlando, Fla. Findings are based on results from the online questionnaire of more than 1,300 patients and 325 HCPs.
IBS-C has a negative impact on a patient’s day-to-day life, including productivity.
Nearly two out of three patients (60%) described IBS-C symptoms as somewhat to extremely bothersome.
43 percent of patients said they had been “frustrated” with IBS-C, with more than a quarter of respondents (28%) noting their condition was “stressful.”
Patients reported that their productivity at work or school is impacted four out of every 30 days each month by IBS-C, with respondents also missing approximately 1.5 work or school days per month due to the condition.
HCPs recognized patients’ frustration with IBS-C symptoms, yet underestimate how many patients have “accepted” their condition.
The majority of HCPs acknowledged that their patients were frustrated (76%) and stressed (65%) by symptoms of IBS-C.
HCPs were less likely to recognize that patients were “accepting” of the impact of their condition, compared to the 39 percent of patients who said they had accepted their IBS-C.
Many HCPs and patients feel current treatments do not sufficiently address IBS-C symptoms.
Among the patients that were currently using a prescription IBS-C treatment, 78 percent were not completely satisfied. More than half (51%) of these patients cited efficacy as a reason for not being completely satisfied with current prescription IBS-C treatments.
21 percent of HCPs were satisfied or completely satisfied with current prescription treatments, with more than half (55%) of those who were not satisfied or completely satisfied citing inadequate efficacy and 41 percent citing diarrhea as challenges most frequently experienced in treating IBS-C.
“Results from the BURDEN IBS-C Study highlight the frustration patients’ have about the condition, suggesting patients and HCPs alike face real challenges with the current management of IBS-C,” said Eamonn M.M. Quigley, M.D., Director, Lynda K. and David M. Underwood Center for Digestive Disorders, Houston Methodist Hospital. “These data provide further evidence of the substantial burden IBS-C can have on a person’s quality of life and point to the need for both HCPs and patients living with IBS-C to maintain an open, productive dialogue about a patient’s health and treatment options.”
About the BURDEN IBS-C Study
The BURDEN IBS-C (Better Understanding and Recognition of the Disconnects, Experiences, and Needs of Patients with Irritable Bowel Syndrome with Constipation) study consisted of more than 1,300 patients who met IBS-C criteria (mean age 46 years; 73 percent of respondents were female) and completed the author-developed, IRB-approved online questionnaire. The study also evaluated, through an approximate 45-minute questionnaire, more than 325 healthcare providers who treat patients with IBS-C.
About Irritable Bowel Syndrome with Constipation (IBS-C)
Irritable bowel syndrome (IBS) is a chronic gastrointestinal disorder characterized by recurrent abdominal pain and associated with two or more of the following: related to defecation, associated with a change in the frequency of stool, or associated with a change in the form (appearance) of the stool. IBS can be subtyped by the predominant stool form: constipation (IBS-C), diarrhea (IBS-D) or mixed (IBS-M). Those within the IBS-C subtype experience hard or lumpy stools more than 25 percent of the time they defecate, and loose or watery stools less than 25 percent of the time. It is estimated that the prevalence of IBS-C in the U.S. adult population is approximately 4 to 5 percent.
About Synergy Pharmaceuticals Inc.
Synergy is a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal (GI) therapies. The company has pioneered discovery, research and development efforts on analogs of uroguanylin, a naturally occurring and endogenous human GI peptide, for treatment of GI diseases and disorders. For more information, please visit www.synergypharma.com.
Forward-Looking Statement
Certain statements in this press release are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words such as "anticipate," "planned," "believe," "forecast," "estimated," "expected," and "intend," among others. These forward-looking statements are based on Synergy's current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, substantial competition; our ability to continue as a going concern; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payer reimbursement; limited sales and marketing efforts and dependence upon third parties; and risks related to failure to obtain FDA clearances or approvals and noncompliance with FDA regulations. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. There are no guarantees that future clinical trials discussed in this press release will be completed or successful or that any product will receive regulatory approval for any indication or prove to be commercially successful. Investors should read the risk factors set forth in Synergy's Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic reports filed with the Securities and Exchange Commission. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and Synergy does not undertake any obligation to update publicly such statements to reflect subsequent events or circumstances.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171017005355/en/
Synergy Pharmaceuticals to Highlight New Data for TRULANCE® (Plecanatide) at the World Congress of Gastroenterology (WCOG) at American College of Gastroenterology (ACG)
[Business Wire]
Business WireOctober 12, 2017
NEW YORK--(BUSINESS WIRE)--
Synergy Pharmaceuticals Inc. (SGYP) today announced that the company will present two abstracts, including Phase 3 studies evaluating TRULANCE® (plecanatide) for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) at the World Congress of Gastroenterology (WCOG) at American College of Gastroenterology (ACG), Oct. 13-18, 2017, in Orlando, Fla.
TRULANCE is a once-daily tablet approved by the Food and Drug Administration (FDA) for the treatment of adults with chronic idiopathic constipation (CIC) and is currently being evaluated for the treatment of adults with IBS-C. The recommended dosage of TRULANCE for CIC is 3 mg taken orally, once daily, with or without food at any time of the day.
Synergy will also present findings from the new BURDEN IBS-C (Better Understanding and Recognition of the Disconnects, Experiences, and Needs of Patients with Irritable Bowel Syndrome with Constipation) study, which evaluated the experiences and perceptions of people living with IBS-C and healthcare providers who regularly treat this condition. Synergy previously presented results from a companion study, BURDEN-CIC, at Digestive Diseases Week in May 2017.
The data will be presented via poster presentations as follows:
Tuesday, Oct. 17 – 1:15 – 2:30 p.m. ET
P2019: BURDEN IBS-C Study
Presenter: Eamonn M.M. Quigley, M.D., Director, Lynda K. and David M. Underwood Center for Digestive Disorders, Houston Methodist Hospital
P2023: Efficacy and Safety of Plecanatide in Patients with Irritable Bowel Syndrome with Constipation (2017 Presidential Poster Award)
Presenter: Patrick Griffin, M.D., Synergy Pharmaceuticals Inc.
Indications and Usage
TRULANCE is a guanylate cyclase-C (GC-C) agonist indicated in adults for the treatment of chronic idiopathic constipation (CIC).
IMPORTANT SAFETY INFORMATION
WARNING: RISK OF SERIOUS DEHYDRATION IN PEDIATRIC PATIENTS
Trulance® is contraindicated in patients less than 6 years of age; in nonclinical studies in young juvenile mice administration of a single oral dose of plecanatide caused deaths due to dehydration. Use of Trulance should be avoided in patients 6 years to less than 18 years of age. The safety and efficacy of Trulance have not been established in pediatric patients less than 18 years of age.
Contraindications
Trulance is contraindicated in patients less than 6 years of age due to the risk of serious dehydration.
Trulance is contraindicated in patients with known or suspected mechanical gastrointestinal obstruction.
Warnings and Precautions
Risk of Serious Dehydration in Pediatric Patients
Trulance is contraindicated in patients less than 6 years of age. The safety and effectiveness of Trulance in patients less than 18 years of age have not been established. In young juvenile mice (human age equivalent of approximately 1 month to less than 2 years), plecanatide increased fluid secretion as a consequence of stimulation of guanylate cyclase-C (GC-C), resulting in mortality in some mice within the first 24 hours, apparently due to dehydration. Due to increased intestinal expression of GC-C, patients less than 6 years of age may be more likely than older patients to develop severe diarrhea and its potentially serious consequences.
Use of Trulance should be avoided in patients 6 years to less than 18 years of age. Although there were no deaths in older juvenile mice, given the deaths in young mice and the lack of clinical safety and efficacy data in pediatric patients, use of Trulance should be avoided in patients 6 years to less than 18 years of age.
Diarrhea
Diarrhea was the most common adverse reaction in the two placebo-controlled clinical trials. Severe diarrhea was reported in 0.6% of patients.
If severe diarrhea occurs, the health care provider should suspend dosing and rehydrate the patient.
Adverse Reactions
In the two combined CIC clinical trials, the most common adverse reaction in Trulance-treated patients (incidence ≥2% and greater than in the placebo group) was diarrhea (5% vs 1% placebo).
Please click here for Full Prescribing Information.
About Chronic Idiopathic Constipation (CIC)
CIC affects approximately 14 percent of the global population, disproportionately affecting women and older adults. People with CIC have persistent symptoms of difficult-to-pass and infrequent bowel movements. In addition to physical symptoms including abdominal bloating and discomfort, CIC can adversely affect an individual’s quality of life, including increasing stress levels and anxiety.
About Irritable Bowel Syndrome with Constipation (IBS-C)
Irritable bowel syndrome (IBS) is a chronic gastrointestinal disorder characterized by recurrent abdominal pain and associated with two or more of the following: related to defecation, associated with a change in the frequency of stool, or associated with a change in the form (appearance) of the stool. IBS can be subtyped by the predominant stool form: constipation (IBS-C), diarrhea (IBS-D) or mixed (IBS-M). Those within the IBS-C subtype experience hard or lumpy stools more than 25 percent of the time they defecate, and loose or watery stools less than 25 percent of the time. It is estimated that the prevalence of IBS-C in the U.S. adult population is approximately 4 to 5 percent.
About TRULANCE®
TRULANCE® (plecanatide) is a once-daily tablet approved for adults with CIC and is being evaluated for IBS-C. With the exception of a single amino acid substitution for greater binding affinity, TRULANCE is structurally identical to uroguanylin, a naturally occurring and endogenous human GI peptide. Uroguanylin activates GC-C receptors in a pH-sensitive manner primarily in the small intestine, stimulating fluid secretion and maintaining stool consistency necessary for regular bowel function.
About Synergy Pharmaceuticals
Synergy is a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal (GI) therapies. The company has pioneered discovery, research and development efforts on analogs of uroguanylin, a naturally occurring and endogenous human GI peptide, for the treatment of GI diseases and disorders. Synergy’s proprietary GI platform includes one commercial product TRULANCE® (plecanatide) and a second lead product candidate, dolcanatide. For more information, please visit www.synergypharma.com.
Forward-Looking Statement
This press release and any statements made for and during any presentation or meeting contain forward-looking statements related to Synergy Pharmaceuticals Inc. under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These statements may be identified by the use of forward-looking words such as "anticipate," "planned," "believe," "forecast," "estimated," "expected," and "intend," among others. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the development, launch, introduction and commercial potential of TRULANCE; growth and opportunity, including peak sales and the potential demand for TRULANCE, as well as its potential impact on applicable markets; market size; substantial competition; our ability to continue as a going concern; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payer reimbursement; dependence upon third parties; our financial performance and results, including the risk that we are unable to manage our operating expenses or cash use for operations, or are unable to commercialize our products, within the guided ranges or otherwise as expected; and risks related to failure to obtain FDA clearances or approvals and noncompliance with FDA regulations. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. There are no guarantees that future clinical trials discussed in this press release will be completed or successful or that any product will receive regulatory approval for any indication or prove to be commercially successful. Investors should read the risk factors set forth in Synergy's most recent periodic reports filed with the Securities and Exchange Commission, including Synergy’s Form 10-K for the year ended December 31, 2016. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and Synergy does not undertake any obligation to update publicly such statements to reflect subsequent events or circumstances except as required by law.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171012005771/en/
It’s a problem for Ardelyx….their drug has three-times the incidence of diarrhea as a side-effect than does SGYP’s drug
Synergy Pharma (SGYP) - the biotech pulls back after the quick rally to $3.50. Look for a buying opportunity to end the week as the stock likely doesn't trade below $3 again.
Synergy Pharmaceuticals to Highlight New Data for TRULANCE® (Plecanatide) at the World Congress of Gastroenterology (WCOG) a...
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Synergy to also present new insights from the BURDEN IBS-C study, which evaluated patient and physician perceptions on irritable bowel syndrome with constipation (IBS-C)
Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) today announced that the company will present two abstracts, including Phase 3 studies evaluating TRULANCE® (plecanatide) for the treatment of adults with irritable bowel syndrome with constipation (IBS-C) at the World Congress of Gastroenterology (WCOG) at American College of Gastroenterology (ACG), Oct. 13-18, 2017, in Orlando, Fla.
TRULANCE is a once-daily tablet approved by the Food and Drug Administration (FDA) for the treatment of adults with chronic idiopathic constipation (CIC) and is currently being evaluated for the treatment of adults with IBS-C. The recommended dosage of TRULANCE for CIC is 3 mg taken orally, once daily, with or without food at any time of the day.
Synergy will also present findings from the new BURDEN IBS-C (Better Understanding and Recognition of the Disconnects, Experiences, and Needs of Patients with Irritable Bowel Syndrome with Constipation) study, which evaluated the experiences and perceptions of people living with IBS-C and healthcare providers who regularly treat this condition. Synergy previously presented results from a companion study, BURDEN-CIC, at Digestive Diseases Week in May 2017.
The data will be presented via poster presentations as follows:
Tuesday, Oct. 17 – 1:15 – 2:30 p.m. ET
P2019: BURDEN IBS-C Study
Presenter: Eamonn M.M. Quigley, M.D., Director, Lynda K. and David M. Underwood Center for Digestive Disorders, Houston Methodist Hospital
P2023: Efficacy and Safety of Plecanatide in Patients with Irritable Bowel Syndrome with Constipation (2017 Presidential Poster Award)
Presenter: Patrick Griffin, M.D., Synergy Pharmaceuticals Inc.
Indications and Usage
TRULANCE is a guanylate cyclase-C (GC-C) agonist indicated in adults for the treatment of chronic idiopathic constipation (CIC).
IMPORTANT SAFETY INFORMATION
WARNING: RISK OF SERIOUS DEHYDRATION IN PEDIATRIC PATIENTS
Trulance® is contraindicated in patients less than 6 years of age; in nonclinical studies in young juvenile mice administration of a single oral dose of plecanatide caused deaths due to dehydration. Use of Trulance should be avoided in patients 6 years to less than 18 years of age. The safety and efficacy of Trulance have not been established in pediatric patients less than 18 years of age.
Contraindications
Trulance is contraindicated in patients less than 6 years of age due to the risk of serious dehydration.
Trulance is contraindicated in patients with known or suspected mechanical gastrointestinal obstruction.
Warnings and Precautions
Risk of Serious Dehydration in Pediatric Patients
Trulance is contraindicated in patients less than 6 years of age. The safety and effectiveness of Trulance in patients less than 18 years of age have not been established. In young juvenile mice (human age equivalent of approximately 1 month to less than 2 years), plecanatide increased fluid secretion as a consequence of stimulation of guanylate cyclase-C (GC-C), resulting in mortality in some mice within the first 24 hours, apparently due to dehydration. Due to increased intestinal expression of GC-C, patients less than 6 years of age may be more likely than older patients to develop severe diarrhea and its potentially serious consequences.
Use of Trulance should be avoided in patients 6 years to less than 18 years of age. Although there were no deaths in older juvenile mice, given the deaths in young mice and the lack of clinical safety and efficacy data in pediatric patients, use of Trulance should be avoided in patients 6 years to less than 18 years of age.
Diarrhea
Diarrhea was the most common adverse reaction in the two placebo-controlled clinical trials. Severe diarrhea was reported in 0.6% of patients.
If severe diarrhea occurs, the health care provider should suspend dosing and rehydrate the patient.
Adverse Reactions
In the two combined CIC clinical trials, the most common adverse reaction in Trulance-treated patients (incidence ≥2% and greater than in the placebo group) was diarrhea (5% vs 1% placebo).
Please click here for Full Prescribing Information.
About Chronic Idiopathic Constipation (CIC)
CIC affects approximately 14 percent of the global population, disproportionately affecting women and older adults. People with CIC have persistent symptoms of difficult-to-pass and infrequent bowel movements. In addition to physical symptoms including abdominal bloating and discomfort, CIC can adversely affect an individual’s quality of life, including increasing stress levels and anxiety.
About Irritable Bowel Syndrome with Constipation (IBS-C)
Irritable bowel syndrome (IBS) is a chronic gastrointestinal disorder characterized by recurrent abdominal pain and associated with two or more of the following: related to defecation, associated with a change in the frequency of stool, or associated with a change in the form (appearance) of the stool. IBS can be subtyped by the predominant stool form: constipation (IBS-C), diarrhea (IBS-D) or mixed (IBS-M). Those within the IBS-C subtype experience hard or lumpy stools more than 25 percent of the time they defecate, and loose or watery stools less than 25 percent of the time. It is estimated that the prevalence of IBS-C in the U.S. adult population is approximately 4 to 5 percent.
About TRULANCE®
TRULANCE® (plecanatide) is a once-daily tablet approved for adults with CIC and is being evaluated for IBS-C. With the exception of a single amino acid substitution for greater binding affinity, TRULANCE is structurally identical to uroguanylin, a naturally occurring and endogenous human GI peptide. Uroguanylin activates GC-C receptors in a pH-sensitive manner primarily in the small intestine, stimulating fluid secretion and maintaining stool consistency necessary for regular bowel function.
About Synergy Pharmaceuticals
Synergy is a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal (GI) therapies. The company has pioneered discovery, research and development efforts on analogs of uroguanylin, a naturally occurring and endogenous human GI peptide, for the treatment of GI diseases and disorders. Synergy’s proprietary GI platform includes one commercial product TRULANCE® (plecanatide) and a second lead product candidate, dolcanatide. For more information, please visit www.synergypharma.com.
Forward-Looking Statement
This press release and any statements made for and during any presentation or meeting contain forward-looking statements related to Synergy Pharmaceuticals Inc. under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These statements may be identified by the use of forward-looking words such as "anticipate," "planned," "believe," "forecast," "estimated," "expected," and "intend," among others. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the development, launch, introduction and commercial potential of TRULANCE; growth and opportunity, including peak sales and the potential demand for TRULANCE, as well as its potential impact on applicable markets; market size; substantial competition; our ability to continue as a going concern; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payer reimbursement; dependence upon third parties; our financial performance and results, including the risk that we are unable to manage our operating expenses or cash use for operations, or are unable to commercialize our products, within the guided ranges or otherwise as expected; and risks related to failure to obtain FDA clearances or approvals and noncompliance with FDA regulations. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. There are no guarantees that future clinical trials discussed in this press release will be completed or successful or that any product will receive regulatory approval for any indication or prove to be commercially successful. Investors should read the risk factors set forth in Synergy's most recent periodic reports filed with the Securities and Exchange Commission, including Synergy’s Form 10-K for the year ended December 31, 2016. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and Synergy does not undertake any obligation to update publicly such statements to reflect subsequent events or circumstances except as required by law.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171012005771/en/
Company:
Synergy Pharmaceuticals Inc.
Gem Hopkins, 212-584-7610
VP, Investor Relations and Corporate Communications
ghopkins@synergypharma.com
To see the charts in this article go to the bottom of the page and click on the link.
Synergy Pharmaceuticals: Sales Of Trulance Trending Well
Oct. 9, 2017 4:17 PM ET|
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About: Synergy Pharmaceuticals, Inc. (SGYP)
Steven Goldman
Special situations, long/short equity, Event driven investments, biotech
www.goldmanhine.com
(1,496 followers)
Summary
As of Sept. 29, 2017, weekly sales of Synergy's Trulance for the treatment of chronic ideopathic constipation are trending well after its March 20, 2017, commercial launch in the U.S.
Synergy's share price appears to have turned the corner after bottoming a few weeks ago.
An upcoming PDUFA date for expanded use of Trulance for the treatment of irritable bowel syndrome and constipation appears likely to be approved, which should further increase Trulance sales.
Synergy's shares appear to have bottomed.
Synergy Pharmaceuticals is a buy.
Synergy logo
Synergy Pharmaceuticals (SGYP) is a New York, N.Y.-based biopharmaceutical company focused on the development and commercialization of novel gastrointestinal therapies. Synergy discovered, is developing, and controls 100% worldwide rights to its proprietary uroguanylin based GI platform.
Having commercially launched its first FDA approved drug in the U.S. market on March 20, 2017, weekly sales of Synergy's proprietary drug TRULANCE up to and including Sept. 29, 2017, are trending well. Despite Synergy's share price losing substantial value since TRULANCE was approved by the FDA in January of this year, Synergy's share price appears to be undervalued. Based on its current share price there appears to be substantial upside for Synergy for the reasons discussed in this article.
Capital Summary
Current share price: $3.46 (close of Oct. 6, 2017)
52-week share price. trading range: $2.56 to $7.15
Outstanding shares: 224,948,622
Market cap: $778 million
Outstanding options as of June 30, 2017: 28,882,068 options with an exercise price ranging from $0.44 to $9.12; weighted average strike price of $3.90; 6.8 years remaining
Outstanding warrants as of June 30: 869,688
Senior Convertible Notes as of June 30: 5,981,672, convertible at $3.11
Debt facility: $300 million debt facility (as set out in Form 8-K filed with the SEC on Sept. 6, 2017); $100 million drawn on Sept. 1, 2017; $100 million second tranche available on or before Feb. 28, 2018 (subject to conditions); up to two additional $50 million tranches available to be drawn on or before March 29, 2019 (subject to conditions). The debt's maturity date is June 30, 2025.
TRULANCE
Synergy's only commercial product, TRULANCE (uroguanylin based), was approved by the FDA on January 19, 2017 and commercially launched two months later on March 20, 2017 in the U.S. under the trademark name TRULANCE, as a once-daily treatment for adults with chronic idiopathic constipation, or CIC.
In clinical trials, TRULANCE helped improve stool consistency and provide more regular bowel movements. TRULANCE is the only prescription medication for CIC that can be taken once daily, with or without food, at any time of the day. In addition, TRULANCE is the only prescription medication for CIC available in a unique calendar pack that is patient preferred vs. a traditional pill bottle.
Synergy plans to expand the use of TRULANCE to include the treatment of adults with irritable bowel syndrome with constipation (IBS-C). The FDA has accepted Synergy's new drug application (sNDA) for IBS-C for review with a Prescription Drug User Fee Act (PDUFA) date of Jan. 24, 2018.
Synergy estimates available on Synergy's website) that in the U.S. alone an estimated 33 million adults suffer from CIC and 12 million adults suffer from IBS-C.
Size of US Market
People with CIC have persistent symptoms of difficult-to-pass and infrequent bowel movements, which can adversely affect an individual's quality of life, including increased stress levels and anxiety. Many patients attempt to manage CIC symptoms with improved diet, fiber, and over-the-counter laxatives; however, these options can be ineffective or may not provide long-term relief. For those patients with persistent symptoms, prescription therapy is recommended. Many patients taking prescription medications fail to respond to therapy, or suffer from treatment-related adverse events, such as nausea and diarrhea.
Synergy's 250 person sales team was hired to promote TRULANCE to more than 27,000 gastroenterologists, primary care physicians, nurse practitioners and physician assistants in the U.S. The company believes that these 27,000 health practitioners represent approximately 70% of the branded prescription business.
In its recent Cantor presentation, Synergy estimates that currently only about 5% of the U.S. market for CIC or IBS-C is being treated with prescription drugs which represent an enormous untapped U.S. market opportunity. Synergy believes that not only is the entire market growing but that with the right marketing strategy it believes there is an opportunity to increase that 5% market to 10% or even 20%.
Untapped Market
Consistent with its view of penetrating that untapped market, Synergy has found that it has not just taken away market share from its competitors, but more than half (51%) of new TRULANCE prescriptions filled since its March 20th launch are coming from new patients not previously on a branded prescription treatment. Approximately 45% were patients that converted from other branded prescription treatments.
Majority new to branded prescriptions
Additionally, Synergy states in its 10-Q that approximately 95% of people with commercial insurance had access to TRULANCE for a co-pay of $25 or less through the TRULANCE Savings-to-Go-Program.
Synergy estimates that the combined US market for the treatment of chronic idiopathic constipation or CIC and IBS-C or Irritable Bowel Syndrome with Constipation is worth approximately $1.8B today. The market is not only growing but it appears that there a large portion of potential patients that might be persuaded to take Trulance through patient and medical promotion, awareness and ongoing education. The company estimates that the market is growing and should be worth over $3B by 2025 in the U.S. alone.
Currently, the market for CIC and IBS-C in the US is dominated by . Linzess, was originally approved by the FDA in 2012 for CIC and then IBS-C, was also recently approved at a lower dose of 72 mcg. Linzess is owned by Ironwood Pharmaceuticals (IRWD). Last year Linzess generated approximately of $600 million in annual sales in the US, with an approximately 20% year over year growth rate. Sucampo's (SCMP) Amitiza, a lubiprostone drug first approved in 2006, also has a market share in CIC in adults and IBS-C in adult women, and generated approximately $400 million in sales last year in the U.S.
Trulance has a comparable or slightly better efficacy profile than its leading competitor, Linzess. More importantly, Trulance has a much better safety profile. Linzess has many side effects including weight gain and diarrhoea and is required to be taken 30 minutes before food. In contrast, Trulance can be taken anytime, with or without food, and has far fewer side effects.
After Synergy obtaining FDA approval by the FDA of Trulance in January 2017 and continuing after commercially launching Trulance in the U.S. on March 20, 2017, Synergy's share price has fallen significantly until a few weeks ago.
See the SGYP 2017 YTD chart below:
Chart SGYP data by YCharts
SGYP Shares Appear to Have Bottomed, Now Recovering
However, SGYP shares appear to have bottomed a few weeks ago and have now begun to recover.
See the SGYP one-month chart below:
Chart SGYP data by YCharts
Synergy's recent share price action has not gone unnoticed. There have been a number of recent articles published on Seeking Alpha about Synergy which are worthwhile reading such as the Oct. 3 article by Novum Insights and the Oct. 6 article by John Engle.
Trulance Weekly Sales from March 20, 2017, to Sept. 29, 2017
While the Trulance sales data presented by Synergy at its recent Cantor Healthcare Conference presentation included sales data up to the end of August 2017, I have provided six different charts below that show the sales data and trend for TRULANCE from the date of its commercial launch up to and including Friday, Sept. 29, 2017. The charts also including the following (using Symphony Health Solutions as the source of data):
1. TRX Count: The number of total prescriptions.
2. NRX Count: The number of new prescriptions.
3. TRX Quantity: The number of pills actually prescribed, taking into account that while the majority of prescriptions are for 30 days, a certain percentage are 90-day prescriptions. For example, for the week ending Sept. 29, the total prescription count (TRX Count) was 2,123 scripts written, with a total quantity of pills prescribed (TRX Quantity) of 79,829 pills. That averages out to 37.6 pills per TRULANCE prescription.
4. NRX Quantity: The number of pills actually prescribed, also taking into account that certain prescriptions are for 90 days. For the week ending Sept. 29, 2017, the total number of new TRULANcE prescriptions written was 1,230 scripts with 49,526 TRULANCE pills (TRX Quantity). That averages out to 40.26 pills per new TRULANCE script.
5. TRX MBS: A dollar amount equal to the Manufacturer's Benchmark Sales Dollars multiplied by the number of pills sold (new prescriptions only). For the week ending Sept. 29, 2017, the TRX MBS figure was $940,600.00. This represents a gross number before deducting the various discounts that the company has not disclosed. I expect that the discount will be in the 30% to 40% range but that is my guestimate only. That represents an annualized run rate in the $30 million range and that's only six months after the U.S. launch began.
6. NRX MBS: A dollar amount equal to the manufacturer's benchmark sales (MBS) dollars multiplied by the number of pills sold (new prescriptions only). For the week ending Sept. 29, 2017, the figure was $583,550.00. This represents a gross number before deducting the various discounts that the company has not disclosed. I expect that the discount will be in the 30% to 40% range but that is my guestimate only.
In some ways, reviewing the NRX Quantity, NRX MBS and TRX Quantity and TRX MBS charts and weekly sales data provides a better understanding of Trulance's sales trajectory compared to simply looking at the TRX or NRX Count figures.
TRX Count Sept 29
NRX Count Sept 29 2017
TRX Quantity
NRX Quantity September 29 2017
TRX MBS Quantity
NRX MBS sept 29
Summary
Synergy's sales of TRULANCE are continuing on a nice upward trend with increasing weekly sales in a growing market. As of the week ending Sept. 29, annualized TRULANCE sales run rate are already in the $30 million range in the U.S. alone. Given the advantages of TRULANCE over its competition and its aggressive marketing strategy, I expect that TRULANCE will continue taking market share from its competitors and increase the overall size of the prescription market at the same time.
With an upcoming Jan. 24, 2018, PDUFA date for its expanded indication for TRULANCE to include ICB-C (which will likely be approved), that will simply help increase sales further. With its recent $300 million debt facility being arranged, Synergy now has sufficient capital (or the ability to access the necessary capital) to continue executing on its launch strategy in the U.S. without the need to raise further funds in the foreseeable future.
While some authors have estimated TRULANCE peak U.S. sales to be somewhere in the $600 million range, the company has not yet sold or partnered its rights to TRULANCE to any market outside of the U.S. which represents a substantial upside potential. I would expect to see some partnering deal later this year or next year for all markets outside of the U.S. as the company demonstrates the potential value of TRULANCE in the U.S. market. I don't expect that Synergy would invest in developing its own sales force internationally so a partnership or licensing deal with an upfront payment, milestone payments and an ongoing licensing royalty is the most likely option.
With its 250 sales force focusing on the GI market (which is an expensive sales force to develop), it would certainly be prudent for Synergy to consider adding additional GI related products for its sales force to market in addition to TRULANCE. So I wouldn't be surprised to see some M&A for additional GI drugs or companies focused in the GI market within the next 12 to 24 months. Alternatively, Synergy would make an attractive target for a larger pharmaceutical company trying to expand its existing GI product lines.
At its current share price and market cap, there appears to be a great deal of upside for Synergy shareholders over the next few years.
Analyst Share Price Targets for Synergy Pharmaceuticals
Cantor Fitzgerald has an $11.00 price target for SGYP (as of Oct. 5, 2017)
H.C. Wainwright has a $8.00 price target (as of Sept. 25, 2017)
Canaccord Genuity has a $13.00 price target (as of Sept. 8, 2017)
Oppenheimer has a $6.00 price target (as of Sept. 8, 2017)
BTIG LLC has an $11.00 price target (as of Sept. 8, 2017)
Risks
Investing in a company like Synergy has various risks, many of which were set out in detail in the company's 10-Q filed with the SEC on March 1, 2017. The company's success is currently dependent on the commercial success of TRULANCE in the U.S. for the foreseeable future, and the company cannot guarantee when, or if, it will attain profitability or positive cash flow. Commercial success depends on many factors including the effectiveness of TRULANCE, the size of the patient population, the effectiveness of the sales team, adoption by physicians, and the occurrence of any side effects, adverse reactions or unfavorable publicity.
There are also risks of changes in government regulations, class actions, future capital requirements and general downturns in the pharmaceutical markets or general market. There is also a risk that the FDA won't approve TRULANCE for its expanded IBS-C indication on or before its upcoming Jan. 24, 2018, PDUFA date. In addition, the company faces competition, unforeseen material adverse reactions, and various other risks.
Future Weekly TRULANCE Sales
I hope to post weekly sales of TRULANCE in the comments section below every few weeks (as long as the data continues to be available). I look forward to hearing comments and suggestions from readers.
Disclosure: I am/we are long SGYP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/article/4112540-synergy-pharmaceuticals-sales-trulance-trending-well
Synergy has suffered due to slower than anticipated uptake of chronic idiopathic constipation drug, Trulance.
Going to market without a larger partner has exacerbated difficulties and raised costs, but progress is clearly being made.
Trulance represents a best-in-class product and will eventually secure significant market share.
While Synergy has seen some upward movement since itpresented at a recent conference, it is still significantly undervalued.
Where you stumble and fall, there you will find gold.
– Joseph Campbell
Investors in Synergy Pharmaceuticals (SGYP) started the year in good spirits, but quickly soured. From a high of $7.15 a share in early February, Synergy fell to a low of $2.56 in September – a 64% drop. Yet, after months down in the dumps, this past week has seen something of a recovery. Shares now trade around $3.40-3.50.
The recovery has been thanks to new clarity around the sales growth prospects for Synergy’s sole FDA-approved drug, Trulance, which treats chronic idiopathic constipation, or CIC. With Trulance’s rocky rollout a chief driver of share price slide, the drug’s star once again ascending should mean good things for Synergy.
This article addresses the current state of Trulance and Synergy’s financials to make the case that Synergy’s recent upswing is the start of a more general recovery.
Post-Approval Blues
Synergy is not the first drug company to get hit with the post-approval blues. For investors holding through an approval catalyst, the wave of relief and excitement from an FDA green light can sometimes carry stocks away. Add to that expectations surrounding peak sales and sometimes overly exuberant projections for market penetration, and you have a recipe for disappointment.
In the case of Synergy, the pain was probably compounded further by two factors: A hoped-for buyout never materialized, and the company opted to pursue commercialization on its own. Synergy presents an excellent example to companies such as Dynavax Technologies (DVAX), which is currently contemplating a similar go-it-alone strategy for its leading drug candidate. While being able to keep all the profits from a drug has its allure, launching a marketing and sales operation can prove an unexpected challenge.
At the time of approval, in January 2017, peak sales for Trulance were projected to be $350 million by 2021 and, while the constipation drug has been making inroads to the market, it hasn’t been gaining traction as swiftly as expected. I have lamented before about how so many investors seem to flip a switch in their minds as soon as a drug is approved: Before approval they are willing to think in the long-term with an eye toward peak sales; after approval, it’s suddenly all about quarterly revenues and sales growth. Fortunately for investors interested in the longer view, such irrational attitudes can create buying opportunities.
Trulance on the Rise
No one can deny that the rollout of Trulance has been less than perfect. The cost of marketing has been especially high. In Q2 2017, despite beating revenue estimates by $0.34 million, Synergy missed on earnings by $0.08 per share (more than 30% above estimates).
While that higher than expected cost was not particularly heartening, the money was put to good use expanding the sales pipeline, including securing a contract with CVS Caremark. The hard work of building out a sales force and securing contracts appears now to be bearing fruit.
On September 27, Synergy presented at the Cantor Fitzgerald Global Healthcare Conference and, unlike most conference attendees, actually delivered some significant new information. The company reported that Trulance’s monthly total prescription volume had been expanding by 116% month-over-month, on average, and that total prescriptions in August had been 8,774 (for a cumulative total of 28,608 since March).
Furthermore, Trulance has been muscling in on market share, reaching 13.5%. Trulance has made some progress chipping away at the market share of Linzess, the market leader produced by Ironwood Pharmaceuticals (IRWD) in partnership with Allergan (AGN). Linzess is down to 64.5% market share, down from 66.9% in March.
Linzess continues to be the big dog of CIC treatment, and investors have clearly been worried about Synergy’s ability to compete directly with with sales power of Allergan, but Trulance is building up a strong position as the best-in-class treatment.
While their clinical benefits are similar, Trulance stands apart from its main competitor in that it does not need to be taken before the first meal of the day. More importantly, the rates of diarrhea, a common side-effect of CIC treatments, are radically lower in Trulance than Linzess. Add to that Trulance’s lack of other unpleasant gastrointenstinal side-effects – which Linzess can cause – and the case for Synergy’s product winning significant market share over time is very strong indeed.
Solid Financials Going Forward
At the end of Q2, there was a bit of uncertainty surrounding Synergy’s near-term financial health. The company reported a net loss of $73.9 million and a cash balance of $82 million.
The uncertainty was dispelled quite resoundingly in early September when Synergy announced it had secured $300 million in debt financing. While the market through a slight tantrum at the time, the decision was sound. It prevented dilution and brought in enough cash to continue operations for four quarters at the current burn rate.
Given expectations for Trulance’s sales growth over the next year, Synergy should have no need to go out in search of cash injections for the foreseeable future.
Investor’s-Eye View
Looking at Synergy’s financial position and Trulance’s growth prospects in the CIC market, a market capitalization of less than $775 million looks far too low – not much more than twice projected peak sales.
While the struggle to gain market share will be unglamorous, and may come in fits and starts, Trulance clearly has an upward trajectory. Investors looking for a de-risked and undervalued biotech play need look no further than Synergy.
Disclosure: I am/we are long SGYP, DVAX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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.
I am noticing all the ads for Lizeness (sp) on TV lately.
If we are taking business from the others in the same field, their advertising will be helping us whether they know it or not.
WE HAVE THE BEST PRODUCT ON THE MARKET.
Why Synergy Pharmaceuticals Rallied 12% Today
Investor presentations at conferences this week boosted optimism that Trulance is gaining market share.
Todd Campbell
(TMFEBCapital)
Sep 29, 2017 at 5:15PM
What happened
Synergy Pharmaceuticals (NASDAQ:SGYP) updated investors on the performance of its chronic idiopathic constipation (CIC) drug, Trulance, at the Ladenburg Thalmann Healthcare Conference on Sept. 26 and the Cantor Fitzgerald global healthcare conference on Sept. 27. Its message appears to have resonated with investors, since shares in Synergy Pharmaceuticals finished 12% higher on Friday.
So what
Industry watchers have previously said they expect Trulance revenue of around $21 million this year. Based on Synergy Pharmaceuticals' investor presentations this week, Trulance's fast-growing prescription volume could have it on track to hit that target.
A businessperson points at a chart showing a rising stock price.
IMAGE SOURCE: GETTY IMAGES.
Trulance's sales totaled only $2.3 million in the second quarter. However, total prescription volume increased 22% between July and August to 8,774 prescriptions, and the August figure alone is substantially greater than the 6,386 prescriptions written in all of the second quarter. Management told investors this week that 43% of patients taking Trulance have switched to it from other medicines, suggesting it's gaining market share.
A ramp-up in scripts that translates into revenue growth would be good news for investors, because Synergy Pharmaceuticals has been spending heavily on marketing and on R&D (research and development) in support of Trulance. Through the first six months of 2017 alone, the company's R&D and SG&A (sales, general, and administrative) expenses totaled $41.4 million and $92.6 million, respectively.
Now what
Trulance competes with Allergan (NYSE:AGN) and Ironwood Pharmaceuticals' (NASDAQ:IRWD) drug Linzess, and Linzess sales of $626 million in 2016 (up 38% from 2015) indicate there's a valuable commercial opportunity here. That's especially true if marketing by these companies increases awareness and the overall pool of patients. According to Synergy Pharmaceuticals data, only 5% of the 33 million Americans who suffer from CIC are being treated with a prescription drug like Linzess or Trulance.
Synergy Pharmaceuticals' sales could increase even more quickly next year if the U.S. Food and Drug Administration agrees to expand Trulance's label to include patients who have irritable bowel syndrome with constipation (IBS-C); the company estimates there are 45 million Americans who have either CIC or IBS-C. An FDA decision on the expanded label is expected on Jan. 24, 2018.
Overall, it's undeniably good news that more prescriptions for Trulance are being written, but this company's got a long way to go before it turns a profit, so investors might want to temper their optimism a little bit.
Here is a link to the slide presentation SGYP made today at the Ladenburg Thalmann 2017 Healthcare Conference.
https://seekingalpha.com/article/4109910?source=ansh $SGYP
Management has to go huh?
Who got the FDA approval last January?
Who just basically got a line of credit for 300 MILLION dollars.
Who is going to get more FDA approval come January?
Yes, I will cry all the way to the bank with this management team.
A little patience might pay off for you if you have any. (Patience that is)
We have the best product on the market. We have made GREAT strides in a very short time. A little patience will pay off in my opinion.
From a Dr. friend of mine this is a legit website.
Analyzing Frac Sand Volume Growth for HCLP and EMES
Ruth King
Market RealistSeptember 14, 2017
HCLP, EMES: Are Frac Sand MLPs Currently Attractive? PART 3 OF 9 HCLP’s recent performance Emerge Energy Services (EMES) and Hi-Crush Partners (HCLP) both reported strong 2Q17 results. Hi-Crush Partners sold 2.1 million tons of sand in the quarter, representing a 53.0% rise over the previous quarter. It expects strong results in 3Q17 with a 14.0%–24.0% sequential growth in volumes. The above graph shows Hi-Crush Partners’ volumes sold over the last three years. “Growth in sand demand, combined with increasing prices throughout the quarter, resulted in $23 million of distributable cash flow. Frac sand fundamentals continue to be positive, particularly for fine mesh sand, and execution continues
EMES expects high volume growth
Emerge Energy Services’ frac sand volumes rose 11.3% from 1.3 million tons in 1Q17 to 1.4 million tons in 2Q17. As the above graph shows, EMES projects total volume growth of 93.0% CAGR (compound annual growth rate) over two years.
Strong volume growth contributed to positive DCF (distributable cash flow) for the two MLPs after several quarters of negative flows. Let’s analyze the DCF and capital expenditure trend for Emerge Energy Services and Hi-Crush Partners in the next part of this series.
Earlier this week, Synergy Pharmaceuticals (SGYP) addressed the biggest overhang on its stock; a funding overhang. We discuss the impacts of this transaction in today's Spotlight feature.
This small biopharma secured a debt deal with CRG LP to provide some $300 million in debt financing on Tuesday. The first tranche of $100 million was funded on closing, the second $100 million installment will be provided on or before the end of February 2018 and two $50 million tranches on or before the end of March 2019.
The loans matured at the end of the first half of 2025. Payments under the loan will be interest only and paid quarterly for the initial five-year period. This will followed by a dozen quarterly installments of principal and interest during the final three years of the term. This could convert to an eight-year interest only period if certain milestones are achieved.
The interest on the debt was 9.5%. This compares favorably to other similar deals I have seen on some of the biotech companies I have held in similar situations. Relypsa (RLYP) obtain half the financing and at 11.5% before it was bought out several months later. Merrimack (MACK) paid 12% last year.
The debt deal does a couple of important things for Synergy Pharmaceuticals. It obviously removes the funding overhang that has cut the stock more than in half since Trulance was approved in January. It gets the company to 2019 where its CFO has stated the firm will be cash flow positive. Most importantly, it keeps the company in play as an acquisition target. Synergy did not have to issue convertible debt or sell any global rights to Trulance in this deal. Therefore, in no way did it diminish its appeal as an acquisition or hinder its ability to negotiate a purchase on favorable terms.
I don't see a buyout as a likely possibility over the next six months. I believe the company would like to get into early 2018 before considering any serious offers. Trulance should be approved for IBS-C expanding the potential market for the compound by roughly a third. New insurance coverage contracts should also kick in on January first. Both should help Trulance sales nicely enhancing Synergy's negotiating position.
Oppenheimer and Canaccord Genuity both reiterated Buy ratings on the stock after the announcement of the debt deal with the latter also posting a $13 price target on the stock. Canaccord's analyst adding this take on the financing deal:
Based on cash flow analysis, we expect the debt financing to sustain the company through 2019, which is highly encouraging. We believe the non-dilutive method of financing is a prudent measure to sustain company financial health without causing pressure on the share price
My own view is the company is bought out for $8.00 to $11.00 a share over the next 18 months, providing serious upside potential from current trading levels.
I have a full position in Synergy already but am adding exposure using a Buy-Write strategy to mitigate some risk and pick up some premium income as well. Buying the stock for ~$3.00 a share and looking to get 50 cents for the April $4 calls might be a nice risk/reward play at current levels, and one I plan to pursue. I offer it up for others that might be in a similar situation on Synergy.
http://www.bing.com/news/apiclick.aspx?ref=BDIGeneric&aid=5021FF6D1971DEF2E613F5DAD265192472D38E86&tid=EA302F2C290A45EC925112286DA10305&url=https%3a%2f%2fseekingalpha.com%2farticle%2f4105291-biotech-forum-daily-digest-synergys-financing-deal-focus&c=8430884679496585735&mkt=en-us
Synergy Pharmaceuticals to Present at Upcoming September Investor Conferences
[Business Wire]
Business WireSeptember 6, 2017
NEW YORK--(BUSINESS WIRE)--
Synergy Pharmaceuticals Inc. (SGYP) today announced that the company will present corporate updates at three upcoming investor conferences in New York City during September:
Rodman & Renshaw 19th Annual Global Investment Conference on Monday, September 11, 2017 at 9:35 a.m. Eastern Time.
Cantor Fitzgerald Global Healthcare Conference on Monday, September 25, 2017 at 10:20 a.m. Eastern Time.
Ladenburg Thalmann 2017 Healthcare Conference on Tuesday, September 26, 2017 at 10:30 a.m. Eastern Time.
A live webcast of the presentations will be accessible through the Investor Relations section of the company’s website at www.synergypharma.com. A replay of the webcast will be available on Synergy’s website for 90 days following each conference.
About Synergy Pharmaceuticals Inc.
Synergy is a biopharmaceutical company focused on the development and commercialization of novel gastrointestinal (GI) therapies. The company has pioneered discovery, research and development efforts on analogs of uroguanylin, a naturally occurring and endogenous human GI peptide, for the treatment of GI diseases and disorders. Synergy’s proprietary GI platform includes one commercial product TRULANCE™ (plecanatide) and a second lead product candidate, dolcanatide. For more information, please visit www.synergypharma.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170906005517/en/
I agree with you that the terns are good. Also, they can pay off the loans earlier if revenues warrant it.
That should have been 300 MILLION not 300 Thousand
The interest may be on the high side but this company is putting up $300,000.00. They are risk. You pay for risk