Synergy Pharmaceuticals Inc (NASDAQ: SGYP) is tumbling this morning after providing a business update. In the update, the company announced some concerning news associated with the FDA approved treatment TRULANCE, its liquidity, and debt repayment requirements. With the concerns in mind, the stock is tumbling, giving up more than half of its value. Today, we’ll talk about:
- The business update;
- what we’re seeing from SGYP stock as a result; and
- what we’ll be watching for ahead.
SGYP Provides A Business Update
As mentioned above, today isn’t off to the best of starts for Synergy Pharmaceuticals after the company provided a business update. Throughout the update, the company explained the steps that it has been taking in order to properly commercialize TRULANCE, a treatment that has been approved by the FDA for the treatment of irritable bowel syndrome.
As you got toward the end of the press release, the real issue started to emerge. Currently, SGYP is in debt with CGR. The terms of the agreement with CGR include a minimum revenue covenant, under which, the company must generate $61 million in revenue for the year 2018 to avoid penalties.
In the update, it became clear that SGYP is not going to be able to do so. In fact, the company guided for 2018 net sales of TRULANCE to come in between $42 million and $47 million, well below the $61 million revenue covenant requirement.
What This Means
Ultimately, this is very bad news for Synergy Pharmaceuticals and its shareholders. If the company can’t get revenue up in the couple of months that we have in the year, the company will be required to repay principal and make prepayment penalties. The amount owed by SGYP if it can’t get its revenue up to par will be between $38 million and $51 million. These payments will be due no later than March 31, 2019. Unfortunately, the company’s liquidity position shows that it will be unable to do so. Now, SGYP seems to have only two options. Either the company will need to successfully renegotiate the agreement with CRG or find another lender that’s willing to pick up the slack. If not, the company will either have to raise funds to cover the debt or face insolvency.
What We’re Seeing From The Stock
With the revenue and potential insolvency issues in mind, Synergy Pharmaceuticals isn’t having a good day in the market today. In fact, the stock is tanking. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. At the moment (8:04), SGYP is trading at $0.51 per share after a loss of $0.89 per share or 63.49% thus far today.
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What We’ll Be Watching For
SGYP is a stock that will remain at the top of our watch list. When watching, we’ll be looking for any news associated with potential partnerships that can boost the sales of TRULANCE, news associated with the renegotiation of the agreement with CRG and potential news of further funding from outside sources to take away the insolvency issues. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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