Synergy Pharmaceuticals Is Facing These Risks This November



Synergy’s risks

Synergy Pharmaceuticals (SGYP) faces some key company-specific risks. An effective navigation through these will help us determine the continued sustainability of the company.

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Largely dependent on the success of Trulance

Synergy only started earning revenues after the launch of Trulance in March 2017. Prior to that, Synergy hadn’t earned any revenues. In 3Q17, the company generated sales of $5 million, and it saw total revenues of $7.4 million for the first three quarters of fiscal 2017. Its net loss for 3Q17 came in at $48.9 million, while its net loss was 187.4 million in the first three quarters of fiscal 2017.

Analysts expect Synergy’s revenues to rise substantially and forecast revenues of ~$14 million, ~$80 million, and ~$217 million for 2017, 2018, and 2019, respectively. They expect the company to become cash flow positive in 2020.

Peers Ironwood Pharma (IRWD), Allergan (AGN), and AstraZeneca (AZN) are expected to earn total revenues of ~$290 million, ~$15.8 billion, and ~$21.7 billion in fiscal 2017, respectively.

Limited capital

Due to limited capital, Synergy has resorted to periodic financing rounds to raise funds. In the CIC market, Trulance faces competition from Amitiza, which is manufactured by Sucampo Pharma (SCMP), Linzess, which is manufactured by Ironwood Pharma (IRWD), and Allergan (AGN). These companies have substantially more resources than Synergy Pharma and well-established drugs on the market.

R&D failure risk

Synergy is now aiming to extend the Trulance label for additional indications of IBS-C (irritable bowel syndrome) and opioid-induced constipation by January 24, 2018. Dolcanatide for ulcerative colitis is the only other product candidate in Synergy’s pipeline.

With such a small pipeline, the stakes for the successful commercialization of drugs are a lot higher, and with significant expenses incurred on these candidates, a refusal from the FDA (US Food and Drug Administration) could take a significant toll on the company’s financial health.

Notably, Synergy Pharmaceuticals makes up about 0.68% of the iShares US Pharmaceuticals ETF’s (IHE) total portfolio holdings.


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