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Stocks to Sell: Synergy Pharmaceuticals (SGYP)
Stocks to Sell: Synergy Pharmaceuticals (SGYP)
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All-Time Low: $1.53 (opening price on OTCBB), November 19, 2008
Synergy Pharmaceuticals Inc (NASDAQ:SGYP) first started trading on the pink sheets back in 2008 at $1.53-per-share. The stock would clear $20 within two years — and since then, SGYP has been nothing but trouble.
Short-sellers are circling the stock: over 30% of the float now is sold short. Oppenheimer downgraded SGYP earlier this month, citing the likely need for another dilutive share offering to raise cash. Five days later, Chris Lau on this site detailed the many challenges facing SGYP.
To be fair, Lau argued SGYP might be due for a bounce. Its main drug, Truvance, is used to treat CIC (chronic idiopathic constipation) and it is seeing sharp growth in prescriptions. Synergy continues to burn cash — the key reason Oppenheimer is worried about further dilution — but could stabilize that burn and turn the corner if Truvance gains traction. And with the stock still roughly 50% above its initial price, it would take a roughly one-third decline to reach a new low.
That low still seems possible, if not outright likely, in 2018. Short-sellers in the pharmaceutical space tend to be attuned to prescription growth and market movements, and they clearly see little risk in betting against SGYP even after a long decline. The cash burn is going to drive another offering at some point, even if it doesn’t come as quick as Oppenheimer forecasts, and that offering likely will drive SGYP lower.
It increasingly looks like SGYP’s only way out is to sell itself to a larger company with a larger, better sales force. But acquirers hardly are motivated to buy Synergy at the moment, with bankruptcy risk reasonably significant. To avoid breaking $2 and hitting all-time lows, Synergy needs a turnaround. But there just isn’t enough to see that turnaround coming any time soon.
