uploads/2017/11/Synergy-Pharma-RD-Expenses-Trend-1.png

Behind Synergy Pharmaceuticals’ Financials Today

By

Updated

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.

Article continues below advertisement

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.

Advertisement

More From Market Realist