Synergy Pharmaceuticals Inc (NASDAQ: SGYP) is troubled at the moment. That fact became clear on Friday when the company issued a business update that sent the stock tumbling down more than 60%. The question now is whether or not the company will be able to bounce back from the blues that it is experiencing. Today, we’ll talk about:
- What SGYP needs to do in order to bounce back;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
What SGYP Needs To Do In Order To Bounce Back
Synergy Pharmaceuticals fell hard on Friday, giving up more than half its value in a single trading session. At the end of the day, the company released a series of bad news that led to fear among investors. Now, the big question is whether or not the company will be able to bounce back. If it plays its cards right, I believe that there’s a good possibility here.
First and foremost, for SGYP to bounce back, the company will have to successfully renegotiate the terms of the agreement that it has with CRG Servicing. The agreement at the moment has a covenant on sales and liqudity that is proving to be a big problem for the company. Should sales not increase, improving liquidity and satisfying the terms of the agreement, insolvency may become a very real issue. On the other hand, while the company has struggled to renegotiate the agreement, if a successful renegotiation were to take place, the stock could fly.
Another major issue that SGYP is facing at the moment has to do with Trulance sales. At the end of the day, irritable bowel syndrome is a highly competitive indication with several options over the counter. This can make prescription drug sales difficult, and the company is dealing with that difficulty now. In fact, sales this year are only expected to come in the range between $42 million and $47 million. According to the CRG Servicing agreement, if sales come in below $61 million, the company will have to repay a large chunk of debt by March 31, 2019, something that it may not be able to do.
So here’s the deal: Either Synergy Pharmaceuticals will have to increase sales, which looks highly unlikely by the end of this year, or the company will have to renegotiate the deal with CRG. The problem is that as of yet, CRG and SGYP have yet to see eye to eye and negotiations aren’t going well. However, that could change, and if it does, SGYP will likely fly as a result.
What We’re Seeing From The Stock
After a dramatic fall from the top on Friday, Synergy Pharmaceuticals seems to be trying to work its way back upward, albeit slowly. As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:33), SGYP is trading at $0.44 per share after a gain of a penny or 2.33% thus far today.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on SGYP. In particular, we’re interested in following the story surrounding the company’s negotiations with CRG. The truth of the matter is that if this negotiation goes well, Synergy may get a new breath of life. However, if it goes poorly, the next topic of conversation may be insolvency and bankruptcy. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!