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Synergy Pharmaceuticals' Cash Flow And Prescription Trends

Joe Apuzzo profile picture
Joe Apuzzo


  • Synergy Pharmaceuticals achieved the cash balance necessary to access Tranche 2 of its debt agreement. Liquidity is now sufficient to fund operations into 2019.
  • Synergy sells Canadian rights to TRULANCE for $5 million; no plans to commercialize outside the US.
  • Prescription data through February 23, 2018 indicates Q1 prescriptions are trending lower than Q4.
  • To move the needle on the stock price, prescriptions will have to grow at an exponential rate, somewhere between 20-50% compounded quarterly.

Synergy Pharmaceuticals (NASDAQ:SGYP-OLD) has had an eventful few months. New CEO, achieving the milestone to access an additional $100 million in debt, sale of Canadian rights for $5 million.

In November 2017, SGYP entered into a debt agreement with CRG. Provisions of that agreement required SGYP to have a cash balance of $128 million at January 30, 2018 to access the second tranche of $100 million. They made it. How?

At December 31, 2017, SGYP had $137 million in cash, an increase from $117 million at the end of Q3. This was the result of a secondary offering netting $53 million, offset by Q4 cash used in operations of $33 million. Q3 cash useage was almost $60 million. (In an article dated November 18, 2017, I had estimated Q4 cash use of about $32 million).

We don't have numbers for January, but with $137 million in cash at 12/31/2017, SGYP could have burned $9 million in cash in January and still made the milestone. Given Q4 cash burn of $33 million ($11 million per month) it was probably a close thing. But they made it.

Let's analyze how they reduced cash used from ops by $27 million dollars in one quarter.

Income Statement

Three months ended 12/31/2017 9/30/2017 Change
Net sales $ 9,400 $ 5,008 $ 4,392
Cost of goods sold 3,820 1,722 2,098
Gross profit 5,580 3,286 2,294
Costs and Expenses:
Research and development 1,990 5,876 3,886
Selling, general and administrative 41,779 45,110 3,331
Loss from Operations - 38,189 -47,700 9,511
Other Income/(Loss)
Interest expense, net - 2,909 - 1,226 - 1,683
Change in fair value of derivative instruments-warrants 4,124 55 $ 4,069
Net loss $ (36,974) $(48,871) $11,897

So the loss from ops was reduced by almost $12 million. Of that, $2.2 million was from increased sales (not

This article was written by

Joe Apuzzo profile picture
Private equity advisor, former Fortune 500 CFO.

Analyst’s 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.

I am not an investment advisor, and this article is not meant as investment advice. Readers are encouraged to do their own due diligence before making any investment decisions.

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