|9 Months Ended|
Sep. 30, 2018
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Business Overview||Business Overview
Synergy Pharmaceuticals Inc. ("the Company" or "Synergy") is a biopharmaceutical company focused on the development
and commercialization of novel gastrointestinal (GI) therapies. Synergy has pioneered discovery, research and development efforts around analogs of uroguanylin, a naturally occurring and endogenous human GI peptide, for the treatment of GI diseases and disorders. Synergy's proprietary uroguanylin based GI platform includes one commercial product, plecanatide, and one development stage compound, dolcanatide.
The Company's first and only commercial product, plecanatide, is available and being marketed in the United States (U.S.), under the trademark name TRULANCE®, for the treatment of adults with chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C). On February 27, 2018 Synergy entered into a definitive licensing, development and commercialization agreement ("Cipher Agreement") with Cipher Pharmaceuticals (Cipher) under which the Company granted Cipher the exclusive right to develop, market, distribute and sell TRULANCE in Canada. Under the terms of the Cipher Agreement, Synergy received an upfront payment of $5.0 million and is eligible for an additional milestone payment upon regulatory approval in Canada, as well as royalties from product sales in Canada. Cipher expects to file a New Drug Submission with Health Canada in the second half of 2018. On August 6, 2018, Synergy entered into a definitive licensing, development and commercialization agreement ("Luoxin Agreement") with Luoxin Pharmaceutical Group Co., Shangdong (Luoxin) under which the Company granted Luoxin the exclusive right to develop, market, distribute and sell TRULANCE in Mainland China, Hong Kong and Macau. Under the terms of the Luoxin agreement, Synergy received an upfront payment of $10.1 million (net of China withholding tax and VAT ) and is eligible for additional regulatory and commercial milestone payments, as well as royalties from product sales. Synergy is continuing to evaluate other potential U.S. and ex-U.S. partnership opportunities for TRULANCE.
Dolcanatide is the Company's development stage compound that has demonstrated proof-of-concept in treating patients with opioid induced constipation (OIC) and ulcerative colitis. Synergy is considering OIC as a potential life-cycle growth opportunity for TRULANCE and is currently exploring potential business development opportunities to further advance dolcanatide development in ulcerative colitis. In April 2018, the Company initiated a partnership with the National Cancer Institute (NCI) on a NCI-funded clinical biomarker study designed to evaluate the potential for dolcanatide to prevent colorectal cancer.
Net cash used in operating activities was approximately $89.1 million for the nine months ended September 30, 2018. As of September 30, 2018, Synergy had approximately $45.6 million of cash and cash equivalents. During the nine months ended September 30, 2018, Synergy incurred losses from operations of approximately $97.4 million. As of September 30, 2018, Synergy had negative working capital of approximately $76.3 million.
On September 1, 2017, Synergy entered into a senior secured term loan (the "Term Loan") of up to $300 million with CRG Servicing LLC, as administrative and collateral agent, and the lenders and guarantors party thereto. The Term Loan is available for working capital and general corporate purposes. The Company borrowed $100 million at the time of closing.
The Term Loan has a maturity date of June 30, 2025, unless prepaid earlier. The Term Loan bears interest at a rate equal to 9.5% per annum, with quarterly, interest-only payments until June 30, 2022, subject to extension through the maturity date upon the Company’s satisfaction of certain conditions. At the Company’s option, until June 30, 2019, a portion of the interest payments may be paid in kind, and thereby added to the principal. Following, the interest-only period, the Term Loan will amortize in equal quarterly installments unless entirely payable at maturity.
On November 13, 2017, Synergy entered into an underwriting agreement with Jefferies LLC, as representative of the several underwriters, to issue and sell 21,705,426 shares of common stock of the Company together with accompanying warrants (“Warrants”) to purchase an aggregate of 21,705,426 shares of Common Stock in an underwritten offering pursuant to a Registration Statement on Form S-3ASR and a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission (the “Offering”). The offering price was $2.58 per share of Common Stock and accompanying Warrant. The net proceeds from the Offering were approximately $52.2 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.
In February 2018, Synergy amended the Term Loan agreement. The amended Term Loan provides for future borrowings of $25 million, $25 million and $50 million on or before June 30, 2018, September 30, 2018 and December 31, 2018, respectively. Additionally, the total amount of the commitment was reduced from $300 million to $200 million (excluding PIK loans) and the Minimum Market Capitalization covenant of $300 million was revised to be 200% of the outstanding principal amount of the Term Loan (excluding PIK loans).
In June 2018, Synergy further amended the Term Loan agreement to extend the draw down date of the second borrowing from June 30, 2018 to prior to August 29, 2018. In August 2018, Synergy subsequently amended the Term Loan agreement to extend the draw down date of the second borrowing from August 29, 2018 to prior to October 31, 2018. On October 30, 2018, Synergy entered into Amendment and Waiver No. 3 to the Term Loan agreement pursuant to which CRG waived compliance with Section 10.01 and related provisions of the Term Loan agreement from October 25, 2018 to November 6, 2018. On November 6, 2018, Synergy entered into Waiver No. 4 to the Term Loan agreement pursuant to which CRG waived compliance with Section 10.01 and related provisions of the Term Loan agreement through November 12, 2018.
On October 25, 2018, the Company disclosed that based on the Company’s current updated forecasts, it is projecting TRULANCE total net sales for 2018 to be between $42.0 million to $47.0 million, which will be below the minimum revenue covenant of $61.0 million set forth in its term loan agreement with CRG. Under the terms of the agreement, the Company will be required to repay principal and pay prepayment penalties in an amount equal to $38.0 million to $51.0 million if total net sales fall within the expected range noted above. Such principal repayment and prepayment penalties would be due no later than March 31, 2019.
Synergy did not draw down on the second borrowing available on October 31, 2018, and as a result there are no additional principal borrowings available under the Term Loan agreement.
The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef