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Synergy Pharmaceuticals: Things Are Looking Better


  • Shares of Synergy were trading in the low $2s in early January as I looked at the prospects for the business.
  • I was really cautious at the time, as positive developments have been seen ever since.
  • This includes reasonable Q4 sales growth, wider FDA approval, a licence deal in Canada and a much more discipline management team in terms of its finances.
  • While the outlook looks much better than it did just two months ago, Synergy continues to have financial challenges as I anxiously wait more clues about the pace of the sales ramp-up.

Synergy Pharmaceuticals (NASDAQ:SGYP-OLD) continues to see continued struggles. Early in January I looked at the prospects for the business in an article titled "Synergy Pharmaceuticals - Continued Challenges After Difficult 2017."

Despite approval of TRULANCE last year, last year has been a very disappointing year, as the pick-up in sales was very modest, while high costs continued to result in steep losses and, thereby, dilution for investors.

Even as shares kept falling, I was not appealed to the shares, as dilution still results in a sizeable valuation amidst continued cash burn. Key in changing my stance would be a great pick-up in fourth-quarter sales or approval of TRULANCE for a second indication. As the company announced its fourth-quarter results, it is time to revisit my thesis.

Troubles Despite TRULANCE

Following the IPO of the company back in 2011, shares have been trading in a $2-10 range ever since, currently trading towards the lower end of the range. For all of the time, Synergy had no working product, until it received FDA approval for TRULANCE in early 2017.

TRULANCE is a medication which helps adults who have chronic idiopathic constipation (CIC). The drug replicates the function of so-called "uroguanylin," a gastrointestinal peptide which stimulates fluid secretion, resulting in stool consistency. More than 30 million people in the US are set to be impacted by CIC.

2017 Revisited

Following approval in January 2017, shares jumped to $6 per share as Synergy took the opportunity to raise $120 million by issuing 20 million shares at the time. First-quarter results revealed that product sales came in at just $98,000, prompting shares to fall towards the $4 mark.

Second-quarter sales rose to $2.3 million, as the pick-up in sales was not comforting to investors, with shares having fallen back to $3. The modest revenue number came despite the fact that

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This article was written by

The Value Investor profile picture
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

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Comments (28)

This aged well
Bnuts Alpha profile picture
well, they couldn't string together even 3 weeks of Rx growth :-/
No, you are not missing anything. There are currently no head to head studies comparing any of the 3 CIC drugs. Not sure what billboard attorney is trying to accomplish other than making his firm some slip and fall money. If he is comparing product PI’s, you can’t. Each study is powered in a different way using the most current criteria dictated by the FDA. Still amazed at the total lack of knowledge of the pharma business by so many investors and now I include starving lawyers.
HVAC52 profile picture
A potentially very good drug, bastardized by an inept, and greedy management team. This is IMHO only, of course.
corbitt profile picture
It really does boil down to the $$$ being spent mostly on the new sales department and how good they are in convincing doctors to either have patients switch or get new patients to try it. As a side note, I have emailed a couple of the attorneys involved with the ‘expanded’ lawsuit indicating that I have seen clinical trial data from both the trulance and Linzess trials and trulance did show better results, especially with diarrhea than the Linzess. So I’m trying to understand the ‘expanded’ piece of the lawsuit that claims that Synergy failed to disclose that Trulance does not have a side-effect profile superior to its competitors. I haven’t heard back from either. Am I missing something?
Things are looking better for Sgyp but I need to liquidate my trading shares so I can swap into vtvt ahead of Alzheimer’s readout and get my 4 bagger
Shire's CIC ANDA was accepted. PDUFA is December 2018.They were try to chase SGYP. SGYP must get the partnerships for ex-US as soon as they can. Shire's TEAEs are bad as compared to Trulance. If Shire couldnt get FDA approval. They may buy SGYP.
2017/1/05~2018/3/1resi... line > broken
MACD > buy sign
ichimoku cloud > buy sign soon

and pivot point has arrived. So I bought 130000 at 2.04(average).

I wish for good luck.
Joel2040 profile picture
Been with SGYP since 2013 and I have averaged down a lot since then. I am in this to win and things are looking a lot better now. Like the new CEO, have BEST in Class drug for CIC and IBS-C, Have better Insurance Coverage with the addition of Medicare this year and other insurance coverages. Sales are stronger and will continue to grow while expenses continue to decrease. The future looks bright and that will eventually be reflected in the share price as increased sales are proven. GLTA.
Do not get why the bears continue to drive this stock back towards 2.
Joel2040 profile picture
In the past it was because they could as there was just early news on Trulance (or Plecanatide as it was called) also the former CEO made it easy for them with using the shares of the company like free money and not taking a closer look at expenses until it was too late. The new CEO seems to have righted the ship and has us heading in the right direction on all fronts. In another 12 months we shall finally start to see some share price gains from his latest efforts.
Without a deal for O-US rights this company is toast. The new CEO made remarks that indicated he is looking at everything so…..hope springs eternal. But hope is not a business strategy so we are stuck with whatever he brings forth
SGYP is improving in three areas: management, sales, and expenses. Be patient and you will be rewarded. Long SGYP.
" Cipher Pharmaceuticals is paying the company $5 million upfront as well as unspecified royalties and milestone payments on sales of the drug in Canada. This brings in some much-needed cash (although royalty payments will be very limited in the near term) without Synergy having to incur costs." Why are royalties and milestone payments unspecified??? Tired of this companies penchant for not revealing the whole story!!! What is stopping them up from revealing details? Wish I had never invested in this stock.
Maybe the class action lawsuit against SGYP and some of its officers is what is holding the stock price down. Check it out on Yahoo Finance.
The Value Investor profile picture
I doubt it, but could be the case.
As a “bag holder” of this stock for well over a year and was very disappointed and disgusted by the ex-CEO’s incompetent conduct, I was ready to throwing the towel pending the performance of the new CEO for a couple quarters, I am very glad the co has finally proven it is now in the hand of a new and competent CEO who has indicated to move the co ahead. The most heartening data for me related to to the fact that 50% of the new prescriptions came from naive patients. This means a substantial GI physicians have realized the drug’s superior efficacy and better side effects over the dominant drug on the market, despite latter’s deep pocketed partner and tremendous amount of commercials. The recent partnership with this Canadian pharma is further signaling its intent to make more deals internationally and domestically. While it may take time to achieve profitability, the course is set toward that. I believe SGYP is on the right course under the right leadership. Will keep my share for another year to realize its success. With such large short positions, the recent strength caught these shorts by surprise, so don’t be surprised to see a slew of bash postings appearing. The more shorts post, the more indication they are scared.
yes the shorts are really quaking in their boots.
The hired salesforce is expensive ANd could be cut QuickType ome zelf sustaining momentum is achieved. Cash flow positieve could be earlier.
I believe the outsourced salesforce has now been insourced.
GreenPirate profile picture
Thanks for the laugh.
They have poor management that screws shareholders..
Old narrative that seems not to apply. Although I state that with trepidation.
This is so far a one trick pony.. other medicines in devepment are quite early stage.. buy some other company instead of this junk..
One trick for 2 indications (CIC/IBS-C) in multi-billion dollar market, it has a long history as a preventative cancer agent although clinically very difficult to prove. As you mentioned Dolcanatide (for OIC / UC) in in Phase 1/2 depending upon the indication. Great results but has to come off the shelf and see further development.
Saku you got that right. After reading this story on sales projections for 45 to 48 million potential customers, the script numbers after a year, I am holding my breath to expiry on puts I sold with 2 buck strike. The news is good enough to keep this dog just around 2 but waiting for someone to find the slipper and save this witch of a stock is toooo much to ask. Six feet under by year end most likely outcome with all that debt.
What is the total addressable market?

I see that they are accelerating income per prescription and are accelerating top - line growth.
If we assume this acceleration to be 1 $MM / Q Synergy will achieve positive cash flow by Q2'19 for a total 30$MM positive Op.CF.
If we assume no acceleration at all they are -70 $MM for 2019 year.

I still expect them to be taken out @4-5 $. A large Pharma can integrate them fast and achieve massive synergies, pun intended.
Main Street Origin Investments profile picture
So will you be taking a position? I just created limit order a little above the low price in last few days, technically set up double bottom, moves caught eye, stock has made watch list in past, is now the time?
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