Behind Synergy Pharmaceuticals’ Financials Today



R&D expenses

Synergy Pharmaceuticals (SGYP) incurred R&D (research and development) expenses of ~$90 million, $78 million, and $ 83 million in fiscal 2016, 2015, and 2014, respectively. The increase in expenses was due to studies for IBS-C, expenses for the filing of an NDA (new drug application), and manufacturing costs for batches of Trulance.

For 3Q17, Synergy’s R&D expenses were $6.6 million, which represents a YoY (year-over-year) decline of 73%, but the company expects these expenses to gradually decline.

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SG&A expenses

Synergy’s SG&A (selling, general, and administrative) expenses totaled $55.7 million for 2016, reflecting a YoY rise of ~156%, due to preparations for the commercial launch of Trulance. For 3Q17, its SG&A expenses were $44 million, representing a YoY rise of ~217%, due to marketing and promotional efforts for Trulance.

Inventory levels and cash position

Synergy’s inventory level rose from $5.6 million at the end of December 2016 to $13 million at the end of September 2017 due to commercialization efforts for Trulance.

At the end of December 2016, Synergy had ~$82 million in cash and cash equivalents, compared with ~$112 million in 2015. At the end of September 2017, its cash position was $117.8 million.

In September, Synergy entered into a term loan agreement with CRG Servicing for $300 million. It has borrowed $100 million of this amount and can borrow an additional $100 million by February 28, 2018, and two tranches of up to $50 million before March 29, 2019. The term loan matures in June 2025 and bears an interest rate equal to 9.5%.

With this recent round of financing, Synergy now has a total-debt-to-enterprise-value ratio of 0.24. Peers Ironwood Pharma (IRWD), AstraZeneca (AZN), and Allergan (AGN) have ratios of 0.16, 0.18, and 0.34, respectively.

Notably, Synergy Pharmaceuticals makes up about 0.06% of the iShares Nasdaq Biotechnology ETF’s (IBB) total portfolio holdings.

In the next part and final part of this series, we’ll discuss the key risks facing Synergy.


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