Synergy Pharmaceuticals Inc (NASDAQ: SGYP) is climbing in the pre-market this morning after announcing a management update. The company said that it has brought one of its independent directors on as Chairman of the Board. With the headaches that the company has been facing as of late, the announcement excited investors who are now pushing the stock toward the top. Today, we’ll talk about:
- The chairman announcement;
- the issues SGYP has been facing and what needs to happen to turn things around;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
SGYP Announces Melvin K. Spigelman Will Assume The Chairman Role
As mentioned above, Synergy Pharmaceuticals is having a great start to the trading session this morning after the company announced that it has a new Chairman of the Board. In a press release, the company said that Melvin K. Spigelman, M.D., will assume the role as Chairman, effective immediately. The company said that Executive Chairman, Gary S. Jacob, Ph.D., will be leaving the company in pursuit of other opportunities. In a statement, Troy Hamilton CEO at SGYP, had the following to offer:
As a co-inventor of plecanatide, Gary played a critical role in the discovery, development and FDA approval of Synergy’s first product, TRULANCE®, which is now available to help benefit patients suffering from chronic GI conditions… We thank Gary for more than a decade of service to Synergy and wish him well in his future endeavors.
Issues The Company Is Facing
In recent news, everything hasn’t been too peacy for SGYP. In fact, the company recently released a business update that led to dramatic declines. In the update, the company announced that TRULANCE sales just weren’t where they needed to be. To make matters worse, the company has debt with CRG that comes with a covenant surrounding TRULANCE sales. If the company doesn’t reach $61 million in sales in 2018, it will have to pay back between $31 million and $51 million by March 31, 2019. Unfortunately, $61 million is a far stretch from the $42 million in sales that’s at the top of the company’s guidance.
Ultimately, for Synergy, this is raising insolvency concerns. In order to avoid insolvency, the company has three options:
- Renegotiate the deal with CRG;
- get sales up to par, which is highly unlikely; or
- raise funds to cover the debt that the company simply can’t afford.
Obviously, the best option is going to be to renegoatiate. Unfortunately, in the same press release announcing the issue, the company said that it is working to renegotiate the terms, but the negotiation isn’t going well. Nonetheless, something may change between now and the end of the year. If it does, the stock could fly. If not, we could see further declines.
What We’re Seeing From The Stock
As investors, we know that the news moves the market. In terms of Synergy Pharmaceuticals, the news proved to be positive. After all, investors are excited to see what the new Chairman of the Board will do to improve the company’s current situation. So, it’s not surprising to see that excited investors are pushing the stock upward. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (7:48), SGYP is trading at $0.53 per share after a gain of $0.11 per share or 27.19% so 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 keep a close eye on SGYP. In particular, we’re interested in seeing the moves that Mr. Spigelman makes to bring the company out of the tough spot that it has found itself in. 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!