Synergy Pharmaceuticals Inc (NASDAQ: SGYP) had a rough day in the market yesterday, falling more than 10% throughout the day and closing down more than 6%. However, today the stock seems to be making a recovery in the pre-market hours. Today, we’ll talk about what we’re seeing from SGYP, the story surrounding the stock, and what we’ll be watching for ahead.
What We’re Seeing From SGYP
As mentioned above, Synergy Pharmaceuticals has been a bit of a roller coaster ride over the past few trading sessions. While the stock closed the day down more than 6% yesterday, it’s trading up in a strong way in the pre-market hours this morning. Of course, our partners at Trade Ideas were the first to alert us to the gains. At the moment (9:04), SGYP is trading at $1.95 per share after a gain of $0.06 per share or 3.17% thus far today.
The Synergy Pharmaceuticals Story
Synergy Pharmaceuticals is a company that’s focused on addressing gastrointestinal conditions. In particular, the company has a flagship product, known as Trulance (Plecanatide), that is indicated for the treatment of chronic idiopathic constipation (CIC) as well as irritable bowel syndrome with constipation (IBS-C). At the moment, the company has achieved approval from the FDA for the CIC constipation and has a New Drug Application in with the FDA surrounding the IBS-C indication.
However, investors have found themselves stuck in the middle on this one. While SGYP has achieved FDA approval for one indication and is likely to expand its label to include IBS-C in January, the financial picture isn’t a pretty one. With a cash burn rate of around $60 million a quarter and revenue around $5 million, SGYP is blowing through money and could burn through its cash on hand within a couple of quarters. While there is a $300 million credit facility the company can take advantage of, pulling money from this facility comes at a high cost with a 9.5% interest rate. So, the financial picture is a pretty dim one at the moment.
The Silver Lining
There is a silver lining here. Sure the financial picture for Synergy Pharmaceuticals isn’t the greatest one at the moment. However, sales are climbing at an incredible rate. In fact, most recent numbers showed that Trulance sales grew by more than 100%, and the company is expecting for this growth to continue.
One of the keys here has been a rapid increase in payer coverage. In fact, SGYP has coverage with both private and public insurance companies, and continues with their efforts to expand this coverage. As coverage continues to expand, sales are likely to continue to grow at an astounding rate. Then, when we add in the likely FDA approval of the label change to add IBS-C as an indication on the Trulance label, the opportunity becomes more clear. While it will take some time, SGYP rapid sales growth could push the company to a profit in the future.
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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 watching two big stories. First and foremost, the sales growth story is a great one, and we’re hoping that it continues on this path. Also, we have the PDUFA date for the IBS-C indication coming in January, which is just around the corner. Considering the positive data produced through clinical trials, this approval is likely.
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