Sizing Up Synlogic
Summary
- Today, we take an in-depth look at Synlogic, a small-cap developmental firm taking a unique approach in developing potential compounds.
- The company has several 'shots on goal' and has trial readouts scheduled on the near-term horizon.
- A full analysis follows in the paragraphs below.
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No one gossips about other people’s secret virtues.”― Bertrand Russell
Every now and again, I get a question on a small-cap concern named Synlogic (NASDAQ:SYBX). To my knowledge, we never have done a deep dive on this name, so it seemed a good time to do some research on this company. A full analysis follows in the paragraphs below.
Company Overview
Synlogic is a 'Tier 4' developmental concern based just outside of Boston in Cambridge, MA. The company is focused on developing synthetic biotic medicines to treat metabolic, inflammatory, and cancer. In May of 2017, Synlogic (a private company at the time) announced it would merge with publicly held Mirna Therapeutics (MIRN) and keep the Synlogic name. From its website, the company states 'Synlogic is working at the intersection of biology and engineering, pioneering the application of synthetic biology to design living therapeutics programmed to treat disease in new ways'.
Source: Company Presentation
The stock currently trades just over $3.00 a share and sports and approximate market capitalization of $120 million.
Source: Company Presentation
The company has quite a few early stage efforts in its pipeline. One of more promising is the Synlogic's efforts with a compound called SYNB1618 to treat Phenylketonuria and SYNB8802 targeting Enteric hyperoxaluria. Both compounds are currently in proof of concept studies where data should be out mid-2021. Kuvan or Palynziq are two treatments for PKU, both of which have limitations, and Synlogic believes SYNB1618 has the potential to be a superior treatment.
Source: Company Presentation
Phenylketonuria is also known as PKU and is a rare condition caused by a defect in the gene that helps create the enzyme needed to break down phenylalanine. Without this enzyme, a dangerous buildup can develop when a person with PKU eats foods that contain protein or eats aspartame. A special diet must be strictly followed to avoid serious health conditions.
Source: Company Presentation
Enteric hyperoxaluria is caused by increased absorption of oxalate as a result of certain intestinal diseases, including Crohn’s disease and short bowel syndrome or as a result of surgical procedures such as bariatric weight-loss surgery. Some 250,000 individuals are impacted by this affliction. SYNB8802 is designed to consume oxalate in the gastrointestinal tract to potentially lower oxalate levels and the risk of kidney damage.
Source: Company Presentation
The company also has another compound SYNB1891 that currently is in Phase 1 clinical testing evaluating it as a potential treatment for patients with advanced solid tumors and lymphoma.
Analyst Commentary & Balance Sheet
The company gets relatively sparse coverage on Wall Street. Only three analyst firms have chimed in on the stock since mid-November. H.C. Wainwright ($13 price target) and Chardan Capital ($10 price target) have reiterated Buy ratings on SYBX while Oppenheimer assigned a Hold rating on the stock on December 15th.
After posting a quarterly net loss of $13.2 million, the company ended the third quarter of 2020 with just over $100 million in cash and marketable securities on its balance sheet. Managed stated at the time it expected with current funding to have a projected cash runway into 2022.
Verdict
Synlogic definitely has multiple 'shots on goal' and is targeting some potentially lucrative niches. That said, it is years and probably several capital raises from any potential commercialization. Despite being public for quite some time, the company still has an early stage pipeline.
In addition, the stock has destroyed significant shareholder value over the years. Synlogic has seen its share of setbacks in development in recent years as well. In May of last year, a collaboration deal with drug giant AbbVie (ABBV) around developing Synthetic Biotic medicines for the potential treatment of inflammatory bowel disease was terminated. The company also discontinued development of a compound SYNB1020 for the treatment of hyperammonemia in August of 2019 after disappointing trial results.
Given all this, I can see no reason to own SYBX until the company shows significant progress on the developmental front and, therefore, am passing on my making any investment recommendation around Synlogic at this time.
Men are more easily governed through their vices than through their virtues.”― Napoleon Bonaparte
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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