Synergy Pharmaceuticals Inc. (NASDAQ:SGYP): Did Investors Overreact?

Synergy Pharmaceuticals Inc. (NASDAQ:SGYP)

Synergy Pharmaceuticals Inc. (NASDAQ:SGYP)

Shares of Synergy Pharmaceuticals Inc (NASDAQ:SGYP) shed 3.65% in market value after the company announced a new $300 million debt financing. The biopharmaceutical company secured the new financing from CRG LP, a healthcare focused investment firm.

Synergy Pharmaceutical Sell Off

Tuesday’s sell-off continued a trend that has plagued the stock for the better part of the year. Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) is currently trading at the lower end of its $2.89 – $3.25 trading range, and appears to be closing on its 52-week low of $2.85 a share.

Synergy Pharmaceuticals Inc. (NASDAQ:SGYP)
One month SGYP stock price chart

Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) has underperformed the overall industry even though it has released positive news. Early this year the company won an FDA approval for the use of its drug, Trulance for the treatment of idiopathic constipation. The condition affects about 35 million people in the U.S.

Investors were confident that Trulance would reinvigorate Synergy Pharmaceutical prospects given that a rival drug marketed by Allergan (NYSE:AGN) and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) generated sales of $625 million last year. That has not been the case, as the stock has continued to hit lower lows in the market.

Trulance is still seen by analysts as a major catalyst that could make or break Synergy Pharmaceuticals Inc. (NASDAQ:SGYP). The drug boasts clinical advantages that could make it as popular than Linzess, its primary competitor. In clinical trials, the drug reported lower diarrhea, abdominal pain, and flatulence when compared to Linzess.

Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) is currently working on expanding the labeling of the drug, a move that it hopes will make it popular thus attract more sales. The company has also made a submission to the FDA to have the drug approved for the treatment of irritable bowel syndrome. A decision on the same is expected early next year.

$300 Million Debt Financing

In addition to positive news on the drug development front, the $300 million debt financing could have a significant impact on the company’s prospects going forward.

“This non-dilutive financing enhances our cash position and provides us with financial flexibility to continue to execute on the launch of TRULANCE and achieve our business objectives, which we are confident will ultimately maximize long-term shareholder value,” said Gary Gemignani, Chief Financial Officer

CRG agreeing to lend Synergy Pharmaceuticals Inc (NASDAQ:SGYP) $300 million underscores its confidence in the company’s long term prospects.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Monica has an undergraduate degree in Accounting and an MBA she earned – with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

Author: Monica Gray

Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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