First: Happy Birthday to Home Sweet Home, the US of A!
I thought it would be fun to take a look at Synergy Pharmaceuticals ($SGYP) to see how they could represent the intent of its namesake. By definition, synergy is the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects. Any company adopting synergy as its name must have lofty aspirations – we all know that biotech is filled more with disappointment than with success.
$SGYP is a bulletin board company that was spun-out from, yes, you may have guessed it, another bulletin board company, $CLSP (Callisto Pharmaceuticals), which still owns close to 50% of $SGYP (48.1% from 10K, 3-12-11). I must say, this was not a great way to start the session. Tread lightly in this name, unless you love to play bulletin board stocks. Company presentation from 1-10-11 is here.
What first caught my attention was the crazy valuation achieved back in June 2010, when the stock reached $11/share, and a corresponding $973M valuation (88.4M shares, 5-6-10)!!! Yes, it is a thinly traded stock and has a low float, but wow, a billion dollar market cap…with just Phase I data at the time…come on! The company traded back down to reality during the 3rd quarter 2010 and is currently trading in the $4s ($4.19/share, July 1 for a $390M market cap). So, one year after hitting their high, they are a bit further along the development path having generated promising 14-day P2a data from 78 evaluable chronic constipation patients to create additional value. The bizarre movement in the stock is a nice case for not investing and holding long-term bulletin board stocks.
On the flip side, I guess, the question is, what is a company like $SGYP supposed to do? The company believes that they have the potential to be “Best in Class” vs “First in Class”, which goes to $IRWD’s linaclotide; both are guanylate cyclase C receptor agonists. Linoclatide has completed 2 x P3 trials each for both in chronic constipation, and in c-IBS, is partnered with $FRX and should file an NDA this quarter.
What could some “Best in Class” claims include? From my quick read through, the bet would be on a potential lower incidence of diarrhea (15-20% with linaclotide) with comparable efficacy claims in chronic constipation (they still need to run trials in c-IBS). Maybe – the P2a data suggests side effects comparable to placebo, with respect to diarrhea, but one should also keep an eye out for nausea and bloating, down the line.
If they reach the market, not only would they compete against linaclotide, but also $SCMP’s lubiprostone (Amitiza; US commercialization rights with Takeda), possibly $MOVE’s (now part of $SHPGY) prucalopride (Resolor), which has been approved in Europe, as well as molecules targeting other MoAs, such as ghrelin agonists ($TYZM), that are in the pipeline.
The company estimated that they would burn $31M in 2011, presumably most of that would go towards running the P2b/3 trials. Unfortunately, they have yet to raise these funds and it looks like it could be a long slog for them.
What a mess – I didn’t find any synergies here, just lots of distractions. From the outside, and admittedly, after a very superficial look into the company, I wouldn’t be betting on a big pharma partner, or even a spec pharma to save the day, at present. Maybe the best thing to do is find a shell with some cash, and negotiate attractive merger terms, or perhaps, work out an back-ended deal with a GI-focused entity, such as $SLXP, to help get the ball rolling.
No positions.
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