Synergy Pharmaceuticals has spent years looking for a buyer. The developer of a struggling drug for two types of chronic constipation finally has one—now that it’s gone bankrupt.
New York-based Synergy (NASDAQ SGYP) cut a deal on Wednesday to sell itself to Bausch Health, a Canadian specialty pharma company, for roughly $200 million in cash. The deal is subject to an auction that will be carried out through a Chapter 11 bankruptcy filing, which allows businesses to reorganize their finances or sell themselves while being protected from creditors. Bausch would serve as the lead, or “stalking horse” bidder for that auction, which Synergy hopes to wrap up by the end of the first quarter of 2019.
The deal would give Bausch rights to plecanatide (Trulance), a once-daily pill on the market for both chronic idiopathic constipation and irritable bowel syndrome with constipation, and an experimental drug called dolcanatide, which is being developed for ulcerative colitis. And it will help Synergy avoid defaulting on its debt. Court papers show that Synergy owes roughly $180 million to creditors, led by a senior loan with CRG Servicing.
Since April 2015, Synergy has been searching high and low for a buyer. During that time, the company developed, and has since won, FDA approval of plecanatide. Synergy didn’t want to commercialize the drug on its own, but it didn’t get any buyout offers before the FDA approved the drug in 2017, and the offers it did receive weren’t “aligned with the company strategically or financially,” the company said in a statement in October. Synergy was only able to get roughly $15 million in up front cash in two separate 2018 deals for rights to plecanatide in Canada and China. Synergy started a new search in May, but found only bids that were well below its market value, it said in October.
In the meantime, Synergy has struggled mightily to sell plecanatide, which competes for market share with a rival drug from Ironwood Pharmaceuticals (NASDAQ: IRWD) and Allergan (NYSE: AGN) called linaclotide (Linzess). Linaclotide generated about $556 million the first nine months of 2018. Plecanatide banked just roughly $31 million in sales over the same timeframe. In October, Synergy warned it would likely fall short of the $61 million in 2018 total sales needed to avoid defaulting on its debt, and was considering bankruptcy. It cited a “highly competitive market access environment and slower than anticipated overall market growth” for the sluggish sales.
“We have worked diligently to serve our patients, health care professionals and other stakeholders by bringing [plecanatide] to market and developing other GI therapies to address previously unmet needs. Unfortunately, we have now reached a point where our financial challenges are preventing us from taking this important work to the next level,” Synergy CEO Troy Hamilton said in a statement on Wednesday.
Equity stakes are typically wiped out in bankruptcy filings. Documents show that Vanguard Group (8.87 percent) held the largest piece of Synergy as of Sept. 30, followed by BlackRock Advisors (8.38 percent). Synergy’s shares closed at just $0.34 apiece on Tuesday.