Synergy Pharmaceuticals Inc.
- Company Name
- Synergy Pharmaceuticals Inc.
- Stock Symbol
- Class Period
- September 7, 2017 to October 25, 2018
- Motion Deadline
- April 12, 2019
- Eastern District of New York
The complaint charges certain of Synergy’s current and former officers with violations of the Securities Exchange Act of 1934. Synergy is a biopharmaceutical company focused on the development and commercialization of therapies to treat gastro-intestinal disorders and diseases. Synergy’s lead product is TRULANCE, a once-daily treatment for chronic idiopathic constipation.
In September 2017, Synergy entered into a $300 million senior secured loan from CRG Partners III L.P. (“CRG”), which provided an immediate cash infusion of $100 million, with a second $100 million tranche of financing less than six months later, on or before February 28, 2018, and a third tranche of up to $100 million in the following 13 months.
The complaint alleges that during the Class Period, defendants made false and misleading and/or failed to disclose adverse information regarding Synergy’s business and prospects. Specifically, defendants failed to disclose that, contrary to their Class Period representations, including, among other things, that TRULANCE was a “high value asset” backed by the “right strategy and right team,” the Company’s launch of TRULANCE was not as successful as represented and, as a result, revenues from TRULANCE were underwhelming. In addition, due to the Company’s poor launch of TRULANCE, Synergy faced substantial risk that it would not be able to satisfy various covenants in its senior secured loan from CRG and, as a strategic review by the Company failed to find a financing alternative or any partnership opportunities, the Company was likely to default and enter into bankruptcy. As a result of this information being withheld from the market, Synergy securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of $3.46 per share.
Then on October 25, 2018, defendants revealed that Synergy’s strategic review process had failed to yield offers other than those significantly below the Company’s market value or to produce any partnership opportunities. Further, defendants disclosed that efforts to renegotiate the senior secured loan with CRG had proven unsuccessful and that, due to TRULANCE’s poor performance, the Company was likely to be in breach of several covenants of the senior secured loan and, thus, default on the loan. On this news, the price of Synergy shares fell $0.97 per share on October 25, 2018, to close at $0.43 per share on October 26, 2018.
After the Class Period, on December 12, 2018, Synergy announced that it had voluntarily filed for Chapter 11 bankruptcy.