Why Synergy Pharmaceuticals, Inc. Shares Are Surging Higher

By Markets Fool.com

Source: Synergy Pharmaceuticals

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What: Shares in Synergy Pharmaceuticals jumped by over 40% earlier today after the company announced positive late stage trial results for plecanatide as a treatment of patients with chronic ideopathic constipation, or CIC.

So What: Synergy Pharmaceuticals' phase 3 preliminary trial results show that plecanatide was statistically significantly better than placebo at treating patients with CIC.

Patients participating in the trial were randomized to receive either a 3 mg or 6 mg dose of plecanatide, taken orally once-daily, or placebo, for 12-weeks. Overall, 1,346 adult patients participated in the study, 80.8% of whom were women.

Now What: The trial is the first of two phase 3 trials that investors will get data from this year, and Synergy Pharmaceuticals expects to announce results from the second trial in the third quarter. If results in the second trial confirm findings in the first trial, then Synergy Pharmaceuticals expects to file for FDA approval before the end of this year.

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That timeline suggests that an FDA decision regarding plecanatide could come in 2016, and, if approved, Synergy Pharmaceuticals could find that there's significant demand for plecanatide.

According to the National Institutes of Health, or NIH, 63 million Americans are affected by chronic constipation, and that large patient population has resulted in commercial success for Ironwood Pharmaceuticals'Linzess, a leading therapy used to treat CIC that won FDA approval in 2012 and generated U.S. sales of $95 million in the first quarter, up 57% year-over-year.

Overall 20%of Linzess patients experience diarrhea, which isfar greater than the 5.9% and 5.5% incidence rates reported in patients taking the 3 mg or 6 mg dose of plecanatide, respectively.That advantage could suggest that plecanatide has a chance at winning away significant market share from Linzess, if it gets approved.

However, before investors get too excited, they should remember that Synergy Pharmaceuticals is a clinical-stage company without any products on the market or revenue. Also, investors need to remember that there's no guarantee that an FDA approval would be granted, even if the second trial succeeds, and Synergy Pharmaceuticals is saddled with more debt than cash on its books. For those reasons, I'm unwilling to chase this one higher on today's spike and will wait on the sidelines for now.

The article Why Synergy Pharmaceuticals, Inc. Shares Are Surging Higher originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns the equity research firm E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.