What happened

Synergy Pharmaceuticals (NASDAQ:SGYP) updated investors on the performance of its chronic idiopathic constipation (CIC) drug, Trulance, at the Ladenburg Thalmann Healthcare Conference on Sept. 26 and the Cantor Fitzgerald global healthcare conference on Sept. 27. Its message appears to have resonated with investors, since shares in Synergy Pharmaceuticals finished 12% higher on Friday.

So what

Industry watchers have previously said they expect Trulance revenue of around $21 million this year. Based on Synergy Pharmaceuticals' investor presentations this week, Trulance's fast-growing prescription volume could have it on track to hit that target.

A businessperson points at a chart showing a rising stock price.


Trulance's sales totaled only $2.3 million in the second quarter. However, total prescription volume increased 22% between July and August to 8,774 prescriptions, and the August figure alone is substantially greater than the 6,386 prescriptions written in all of the second quarter. Management told investors this week that 43% of patients taking Trulance have switched to it from other medicines, suggesting it's gaining market share.

A ramp-up in scripts that translates into revenue growth would be good news for investors, because Synergy Pharmaceuticals has been spending heavily on marketing and on R&D (research and development) in support of Trulance. Through the first six months of 2017 alone, the company's R&D and SG&A (sales, general, and administrative) expenses totaled $41.4 million and $92.6 million, respectively.

Now what

Trulance competes with Allergan (NYSE:AGN) and Ironwood Pharmaceuticals' (NASDAQ:IRWD) drug Linzess, and Linzess sales of $626 million in 2016 (up 38% from 2015) indicate there's a valuable commercial opportunity here. That's especially true if marketing by these companies increases awareness and the overall pool of patients. According to Synergy Pharmaceuticals data, only 5% of the 33 million Americans who suffer from CIC are being treated with a prescription drug like Linzess or Trulance.

Synergy Pharmaceuticals' sales could increase even more quickly next year if the U.S. Food and Drug Administration agrees to expand Trulance's label to include patients who have irritable bowel syndrome with constipation (IBS-C); the company estimates there are 45 million Americans who have either CIC or IBS-C. An FDA decision on the expanded label is expected on Jan. 24, 2018.

Overall, it's undeniably good news that more prescriptions for Trulance are being written, but this company's got a long way to go before it turns a profit, so investors might want to temper their optimism a little bit.