Synergy (SGYP) is a biopharmaceutical company focused on the development of new drugs to treat gastrointestinal disorders and diseases. The company has a major catalyst coming up by the end of the year as it is expected to release clinical trial results for its lead drug candidate. Analysts are very bullish on the stock, setting it up for potentially volatile trading as we move closer and closer to the release of the data.
The story has become more interesting over the past year with the stock receiving significant exposure on multiple fronts as it graduated to a Nasdaq listing, became a member of Russell Indexes, and has received significant interest from the Street. Synergy has also received a boost from the FDA's approval of a competitor's drug.
The events started to unfold about a year ago when the company initiated the dosing of patients in the all-important Phase II/III clinical trial of plecanatide to treat chronic idiopathic constipation (CIC). The study is being conducted at 110 sites in the United States and is designed to enroll 880 patients with CIC who will be treated with one of three doses of plecanatide (0.3, 1.0 or 3.0 mg) or placebo taken once daily over a period of 12 weeks. The study has its primary objective the measure of complete spontaneous bowel movements using a responder analysis. The trial will also evaluate spontaneous bowel movements and daily constipation symptoms, as well as the impact of plecanatide on disease-specific quality of life measures.
On August 14, the company announced that its Phase IIb/III plecanatide study in chronic idiopathic constipation (CIC) achieved its enrollment target of 880 patients. Synergy said that it anticipates topline data being released by year end, which set the catalyst firmly in place.
The Phase IIa results for plecanatide to treat chronic constipation were positive. Oral plecanatide given once daily, over 14 consecutive days, at doses of 0.3, 1.0, 3.0 and 9.0 mg gave improved bowel function in patients with chronic constipation. Benefits were observed in increased frequency of bowel movements, decreased straining and abdominal discomfort, and improvement in other associated clinical measures. Plecanatide treatment exhibited an excellent safety profile. No severe adverse events were observed, and notably no patients receiving plecanatide reported diarrhea. Additionally, no systemic absorption of plecanatide was detected in patients at any of the dose levels studied.
The market opportunity for plecanatide is estimated to be $2 billion, according to a recent presentation, with over 100 million people worldwide that suffer from IBS/chronic constipation. The growth rate for the US laxative market is expected to be healthy through 2015 with the analysts expecting an 18% CAGR.
The Street is very bullish on the stock. There are five analysts that cover the stock with the median target being $12, suggesting upside of over 200%. The low target for the stock is $7. If the stock is just able to achieve the lowest price target on the street, investors will be sitting on a cool 75% gain. Recent commentary from Street analysts has been positive, suggesting that plecanatide is a compound with similar efficacy but less side effects the than Ironwood's (IRWD), which was just approved by the FDA. Cantor Fitzgerald also noted that the "economics appear more favorable for Synergy, which owns 100% of plecanatide commercial rights, while Ironwood has partnered linaclotide with three companies and keeps only a portion of the profits." One other key point from the broker was that it believes that management plans to sell the asset rather than build out a large organization, suggesting that SGYP could be an M&A target for potential acquirers. Side note, IRWD is partnered with Forest Laboratories (FRX) on the drug.
With Synergy being a constant presence at major conferences all throughout the year, additional coverage and positive commentary into the results may be forthcoming. Conferences the company has presented at so far in 2012 include: Cowen, Roth, Maxim, AACR, BIO, and Canaccord Genuity.
The focus of most of this article so far has been on the event itself but you can also play trade the stock into the event. Small biotech stocks, in general, experience a lot of volatility into important events. One way it sometimes plays out is the stock's run up into the event. However, instead of holding the stock through the event, traders can lock in their gains before the release of the news. This phenomenon happens for a variety of reasons but has been well documented.