The biotech sector did well last year despite the volatility that took away the 52-week highs in the speculative plays. One biotech stock I followed closely last year is still on watch: Synergy Pharmaceuticals, Inc. (SGYP).
In the last year, the Nasdaq Biotechnology sector (IBB) rose by around 20 percent but Synergy Pharmaceuticals underperformed greatly, falling by over 60 percent. 2018 is early and still, the stock is seeing losses. On Jan. 5, Oppenheimer downgraded the stock to market perform. Markets are negative on the Trulance supplier. Trulance is a once-daily tablet approved for adults with CIC and is being evaluated for IBS-C. But the company needs money to promote and bring Trulance to the market. Last Nov. 13, 2017, it issued a public offering for ~21.7M shares of stock and warrants, bringing in $56 million. The stock dilution hurt existing shareholders, causing the stock to fall sharply from the $3 level. The move runs contrary to maximizing shareholder value because the company previously said it had enough capital.
In Sep. 2017, Synergy raised $300 million in debt financing.
What’s next? In Q3, the company reported revenue of $5 million but lost $0.22 a share. While revenue is growing at a rapid rate, getting to $250 million will not happen quickly. Doctors need to give patients time to use the drug before they prescribe to more patients. If that happens, that is when SGYP stock will perform in-line or better than the biotech index.
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