Pharma, R&D

Constipation drug maker Synergy looks to renegotiate bloated loan agreement — shares tumble

Grappling with the slow uptake of its constipation drug Trulance, Synergy Pharmaceuticals $SGYP has practically thrown in the towel saying that it does not anticipate receiving any takeover offers that sit well with its current market value and is thus hoping to renegotiate its hefty loan agreement.

Two years prior to the approval and launch of Trulance in 2017, Synergy said, it was evaluating strategic options, including partnerships and a sale. Having received no offers that met its expectations, the New York-based drugmaker elected to go it alone. This May, however, Synergy said it was undergoing a strategic review and in parallel trying to renegotiate its term loan agreement with CRG, which was announced in September 2017 as $300 million in debt financing structured as senior secured loans.

So far, Synergy has failed to amend its agreement with CRG. The loan deal contains “a minimum liquidity covenant that absent relief from CRG may not be satisfied. Synergy is continuing discussions with CRG for covenant relief and in parallel the company is currently pursuing financing alternatives…but there is no assurance that the company can secure CRG’s consent or otherwise obtain any such financing…in which case the company could default under the term loan agreement and may have to pursue or otherwise accelerate strategic alternatives, including the possibility of seeking bankruptcy protection,” Synergy said in a statement on Friday.

Shares plunged 67% after Synergy put out the release at market close Thursday.

Trulance secured FDA approval in January 2017 for chronic idiopathic constipation (CIC), and brought in a paltry $16.8 million over the course of the year, in which Synergy also launched Poop Troop — a series of animated emojis designed to encourage conversation about the impact of CIC.

After winning approval for the drug in irritable bowel syndrome with constipation (IBS-C) this January, sales were expected to perk up. But Ironwood Pharma’s $IRWD 2012-approved Lizness has remained in its pole position, and Trulance failed to perform in line with Synergy’s expectations.

Now, Synergy is projecting Trulance net sales for 2018 in the range of $42 million to $47 million, well below the minimum revenue covenant of $61 million in its term loan agreement with CRG. In fact, things could get worse for Synergy come 2019, as competitor Ardelyx’s $ARDX drug tenapanor, which is currently under FDA review, is expected to hit the market.

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