Flawed numbers, misstated facts, and the usual fantasies. First of all, thanks to the recent 30 million share dilution at $3, I believe Synergy has $90 million more than you state in cash. (You, the shareholders, by the same token, have 1/6 less of the company.)
In addition to the roughly 50% of Linzess in the US, plus royalties from other markets, Ironwood also owns 100% of IW 9179 and IW 3718, which are in phase II trials for functional dyspepsia and refractory GED (acid reflux). They also own US rights to Zurampic, an approved gout drug and a successor combo drug which they just bought from Astra-Zeneca for $265 million. They were able to borrow this money because of their cash flow, and it represents a substantial part of the $429 million debt which you use in your calculations. The salient point is that Ironwood is so confident in their imminent profitability that they are acquiring the rights to new products. Their $1.12 billion in accumulated operating losses will make the income from these products essentially taxfree. Which will further bolster their cashflow.
Synergy, on the other hand, even in its current state of hibernation, is burning through about $130 million a year. If it were to actually market plecanatide, this cash burn rate would increase exponentially. Paulson may have to buy the entire company. At this point, he has given them enough money to exist for another year, but not enough money to do anything significant.
PS Medivation is also apparently unwilling to "sell cheap to the first suitor". But they have suitors. Where are the suitors for Synergy? And far from being a "cash cow", plecanatide is, for the foreseeable future, a cash sinkhole.
From Synergy's 2015 8K: "Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing." In fact, they have not been able to obtain financing, other than through dilution by issuing shares to those who are already on the hook: the convertible noteholders and Paulson.
There were, as you must know, four co-authors of that article. The article was vetted and published by The Journal of Gastroenterology. Where is the substantiation for the claim that plecanatide is superior? I still think that you are miffed about not getting the free Linzess pen and notepads.
Since the beginning of 2015, this stock has been diluted by more than 80 million shares. In the case of Paulson, the price was about $3 a share. In the case of the convertible noteholders, it was about $2.80. Why is this potential "jewel" forced to sell itself so cheaply? Where are the eager buyers? The stock answer is that the buyers are either waiting for IBS-C data or final FDA approval. This implies that there is substantial doubt as to these outcomes. Which would also imply substantial risk for investors. I don't believe this. I believe that the IBS-C data will be satisfactory and that plecanatide is likely to be approved eventually. I also believe that these eventualities are priced into the stock. Nitabosco argues that other drugs have been bought out for large premiums. But this is not an expensive or unique drug for a life-threatening condition. Plecanatide is not ibrutinib or Harvoni. It is a me-too prescrption laxative. If I recall correctly, during the last quarter Ironwood's margin on Linzess was about 52%. Not stunning. And (stupid me), I ask again, ...what are the buyers waiting for? This board is periodically awash in buyout rumors, all of which turn out to be phony. If there were no buyers except Paulson at $3, why would there be buyers at $10? Or $6? Or $4?
An independent panel of four gastroenterologists, examining all the available trials data, concluded exactly that. What is your basis for concluding otherwise? And, I ask once again: if plecanatide is the prettiest girl in the room, why can't she get a date? And why is she so desperate as to seek one night stands with such conspicuous losers as BIND?
First of all, to buy out the present float at $5 a share would cost the potential acquirer about $1 billion. Then, assuming plecanatide is approved, it would cost at least another $1 billion to bring the drug to market. This is probably conservative. To launch Linzess - even though Forest Labs was paying half the marketing and developmental costs - Ironwood needed secondary offerings and loans of $711 million. Even though they had received substantial licensing and milestone fees from their four partners.
So you've spent $2 billion to create an as-yet unprofitable competitor to the entrenched Linzess. Since the drugs are roughly comparable, the only way to dislodge Linzess from the formularies would be via a lower price. Ironwood would be forced to respond. This would cut their profits, but as the established brand, they could cut their sales force, eliminate dtc advertising, and take other steps to maintain profitability. It would be a much less attractive business for Linzess, but an impossible one for plecanatide.
IRWD closed last Friday at 13.19. This Friday it closed at 13.37. ( Ooch! Ouch!) SGYP and IRWD - even though their drugs are similar - are really quite dissimilar. IRWD is on a steady path to being cash flow positive - something they would have achieved this year if they hadn't chosen to spend a lot of money acquiring rights to that gout drug. When they start to earn money they have about $1.12 billion in accumulated operating losses which means that they will be operating essentially taxfree for years. They will undoubtedly deploy their untaxed earnings in other acquisitions. The stock is, in my opinion, a low-risk long term growth opportunity. ( My yearend price target was 12.50.)
SGYP is a high risk gamble on the company being acquired, or, much more likely, getting a cash infusion from a major player in return for marketing rights to plecanatide.
Some of us have profited by trusting David Hung and his team over recent years. I've never known them to engage in hyperbole or exagerated claims. If they say that, in addition to Xtandi, they have the best in class PARP inhibitor/blocker, I'm inclined to believe them.
In the words of Dr. Johnson, when he was auctioning off Mr. Thrale's brewery, "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."
I actually bought more shares ah after listening to the presentation. I have owned MDVN on and off for several years and have always found management to be conservative and accurate in their projections. Unlike the hustlers who head many of these companies, Hung is a scientist.
Well, if you believe Hung's presentation, then talazaparib is dramatically more effective than TSRO's PARB inhibitor. In fact, to achieve a significant level of PARP trapping, all of the other PARB inhibitors have to be dosed at ridiculously high levels. At the end of the cc, there were good questions from many analysts who seem well informed on the science. If they buy the talazaparib story, TSRO should weaken. Eventually.
I like XNCR. They have a proprietary technique for developing a new class of monoclonal antibodies, which has garnered them partnerships with Janssen(JNJ), Alexion, Boehringer-Ingelheim, Merck, Amgen, Novo Nordisk, and most recently, Novartis. The latter brings an upfront payment of $150 million and potential milestones of several times that.
PS Have to note that Tesaro, with a PARP inhibitor of much weaker apparent potency (niraparib) has shot up to a market cap of $4.14 billion today. Let's talk about $100 a share, Sanofi.
If the data presented are borne out, this PARP inhibitor is potentially a much more significant property than Xtandi. According to the presentation, this is a much more potent drug than the Tesaro PARP inhibitor. The argument is that the inhibition of the PARP enzyme is less significant then the ability of the drug to "trap" PARP. While talazaparib is 3-8x better at inhibiting the PARP enzyme, it is 50x more effective at trapping PARP. This translates into a 10,000 fold superiority at killing cancer cells. Most intriguing is the data that the combination of very low doses of talazaparib in combination with ultra-low doses ("homeopathic doses") of certain chemo drugs seems to suppress tumor growth completely.
But we know what "their price" is already. The company has repeatedly diluted their stock this year at $3.
You get 6 thumbs up for posting fantasies:(1) Plecanatide is a superior drug. (2) Ironwood's business is threatened by an unapproved drug in the hands of an underfunded company which cannot attract a single partner.
I get 7 thumbs down for posting a verifiable fact: (1) The Journal of Gastroenterology study demonstrated that, on the basis of all trials to date, the drugs are about the same. Obviously, the fantasists still hold sway here.
Where were you when the diarrhea hit the fan? "Based on this analysis, linaclotide and plecanatide have similar efficacy and there is no significant difference in odds of diarrhea adverse events in IBS-C or CIC patients." This was the conclusion of an article authored by a panel of four gastroenterologists and published in the Journal of Gastroenterology. Their findings were also presented in an abstract at Digestive Disease Week 2016. The poster session was #Mo1641.
Since the original poster posed his question on May 2, the stock has appreciated about 50%. The value here has to do with a proprietary drug development technique which has engaged JNJ, Alexion, Goehringer-Ingelheim, Merck, Amgen, Novo Nordisk, and lately Novartis, and absolutely nothing to do with dividends and earnings.