Personal Finance
AGN

Why Synergy Pharmaceuticals Rallied 12% Today

A businessperson points at a chart showing a rising stock price.

What happened

Synergy Pharmaceuticals (NASDAQ: SGYP) updated investors on the performance of its chronic idiopathic constipation (CIC) drug, Trulance, at the Ladenburg Thalmann Healthcare Conference on Sept. 26 and the Cantor Fitzgerald global healthcare conference on Sept. 27. Its message appears to have resonated with investors, since shares in Synergy Pharmaceuticals finished 12% higher on Friday.

So what

Industry watchers have previously said they expect Trulance revenue of around $21 million this year. Based on Synergy Pharmaceuticals' investor presentations this week, Trulance's fast-growing prescription volume could have it on track to hit that target.

A businessperson points at a chart showing a rising stock price.

IMAGE SOURCE: GETTY IMAGES.

Trulance's sales totaled only $2.3 million in the second quarter. However, total prescription volume increased 22% between July and August to 8,774 prescriptions, and the August figure alone is substantially greater than the 6,386 prescriptions written in all of the second quarter. Management told investors this week that 43% of patients taking Trulance have switched to it from other medicines, suggesting it's gaining market share.

A ramp-up in scripts that translates into revenue growth would be good news for investors, because Synergy Pharmaceuticals has been spending heavily on marketing and on R&D (research and development) in support of Trulance. Through the first six months of 2017 alone, the company's R&D and SG&A (sales, general, and administrative) expenses totaled $41.4 million and $92.6 million, respectively.

Now what

Trulance competes withAllergan (NYSE: AGN) and Ironwood Pharmaceuticals ' (NASDAQ: IRWD) drug Linzess, and Linzess sales of $626 million in 2016 (up 38% from 2015) indicate there's a valuable commercial opportunity here. That's especially true if marketing by these companies increases awareness and the overall pool of patients. According to Synergy Pharmaceuticals data, only 5% of the 33 million Americans who suffer from CIC are being treated with a prescription drug like Linzess or Trulance.

Synergy Pharmaceuticals' sales could increase even more quickly next year if the U.S. Food and Drug Administration agrees to expand Trulance's label to include patients who have irritable bowel syndrome with constipation (IBS-C); the company estimates there are 45 million Americans who have either CIC or IBS-C. An FDA decision on the expanded label is expected on Jan. 24, 2018.

Overall, it's undeniably good news that more prescriptions for Trulance are being written, but this company's got a long way to go before it turns a profit, so investors might want to temper their optimism a little bit.

10 stocks we like better than Synergy Pharmaceuticals

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Synergy Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of September 5, 2017

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AGN IRWD

Other Topics

Stocks

Latest Personal Finance Videos

How Student Loan Refinancing Works

Though it may be a great way to lower monthly payments, not everyone understands the student loan refinancing process. NerdWallet explains it. For more, try our refinance calculator: http://bit.ly/nerdwallet-student-loan-refinancing-calculator

Nov 25, 2019

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More