Near Term Catalysts Should Propel Synergy’s Share Price Print E-mail
By Scott Matusow   
Thursday, 20 February 2014 08:34

Synergy Pharmaceuticals (SGYP) focuses on the development of drugs to treat gastrointestinal disorders and diseases. The company is developing two proprietary compounds for treating IBS-S gastrointestinal diseases: Synergy's proprietary drug Plecantide is being studied in patients who suffer from chronic idiopathic constipation (CIC) as well as irritable bowel syndrome with constipation (IBS-C).

2. SP-333 is being evaluated in patients who suffer from OIC and ulcerative colitis (UC).

  • Catalysts

Two major catalysts nearing that should propel Synergy's share price in the short term.

Phase II Data IBS-C Trial: Topline phase II data is expected to be released in the earlier part of Q2 2014. Based on excellent data from its Phase IIb CIC trial, topline data here should be good here as well.

Phase II Data SP-333 for OIC: A 4 week phase II study which was initiated in November should be completed in the first quarter with topline data expected to be announced in the 2Q.

Additionally, the Phase III program for Plecanatide might very well be one of the most risk-mitigated clinical development initiatives in the biotech sector since the drug is designed to mimic an endogenous human hormone and as mentioned prior, it has proven its efficacy in a large, Phase II /III trial comprising 951 patients. Plecanatide could end up becoming the best-in-class therapy for both CIC and IBS-C of the constipation-predominant subtype. Data from these trials should driving Synergy stock in 2014.

We believe Plecanatide will receive FDA approval in early 2015, and could very well be the drug of choice over Ironwood Pharmaceutical's (IRWD) FDA approved drug, LINZESS. Ironwood owns half if LINZESS with its partner, Forest Laboratories (FRX). Both drugs use a similar mechanism of action, but Plecanatide to this point, shows better tolerance and efficacy in clinical trials in our opinion after reviewing the current available data.

Synergy has a current market cap of around $485M, and owns 100% of Plecanatide. Ironwood's current market cap is around $1.8B.

Balance Sheet

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Synergy burns around $10M a quarter, but this rate has been decreasing as the  current clinical trials have finished and are awaiting the data releases starting in early Q2. The current burn rate keeps Synergy well financed, so a cash raise is not likely here anytime soon in our opinion.

We think Synergy because of its good management and market size for these indications, if data shows to be positive, can reach double a digit stock price provided the overall market remains stable. At the very least, we believe the stock will attract biotech "catalyst run-up traders" soon as these data releases draw closer. Under decent overall market conditions, we think Synergy's stock price can appreciate significantly, perhaps touching the $7 range.

Also on our Catalyst Watch List:

Synthetic Biologics Inc. (SYN), which has a significant data release in April, and is a Randall Kirk investment. This one could see a run like Prana (PRAN) just recently experienced.

Halozyme (HALO) recently engaged a secondary public offering has multiple catalysts upcoming through out 2014 and is also a Randall Kirk investment.


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