Synlogic: 50% Upside Ahead?

Today we take a look at Synlogic. This 'Tier 4' biotech concern has a deep early stage pipeline and is well-funded

Today we look at a small ‘Tier 4’ biotech concern that is undervalued by 50% or more if one believes recent analyst price targets on the stock. We take a look at this ‘off the radar’ name in depths in the paragraphs below.

Company Overview:

Synlogic (SYBX) is a Massachusetts-based biotech concern focused on developing living medicines which capitalize on the principles of synthetic biology to genetically re-program beneficial bacteria. The company came public late in 2015 and currently sports a market cap of approximately $300 million. The shares change hands at the $11.75 level.

Pipeline:

The company believes that by utilizing their Synthetic Biotic platform technology, they can engineer probiotic bacteria for accomplishing therapeutic functions that have established connections to disease. Treatments generated from the platform would be administered orally, acting from the gut microbiome to correct dysfunctional (or missing) metabolic activities in the body. Clinical candidates could also be delivered locally at the site of disease, as in the case with certain types of cancers. A key strength of this approach would be the expedited translation of technology into clinical candidates that could make an impact on the patients they are seeking to aid.

Source: Company Website

Synlogic has a deep pipeline (but very early stage) consisting of wholly-owned candidates (rare diseases and inborn errors of metabolism), while partnered product candidates are targeting the areas of broad metabolic diseases and immunomodulation. The one trial milestone that should hit in 2018 is a Phase 1a/2b study around drug candidate SYNB1020 for the treatment of cirrhotic patients with elevated ammonia that is due out sometime in the fourth quarter of this year.

Recent Analyst Commentary & Balance Sheet:

As one would expect on such an early stage developmental concern, analyst commentary is sparse. Wedbush initiated coverage on SYBX with a Buy rating and $20 price target on November 28th. Its analyst stated the company's technology platform has the " potential to disrupt the current standard of care for a number of disorders". Piper Jaffray reissued its Buy rating and $15 price target on April 9th. This Friday, H.C. Wainwright reiterated its own Buy rating with a $20 price target.

Synlogic ended 2017 with cash, cash equivalents, and short-term investments of $87 million. The company then raised just under $55 million via a secondary offering in January. Management has stated its new cash balance is more than adequate to fund all planned activities through 2019.

Verdict:

Synlogic’s pipeline is too early stage to merit a full recommendation. However, the concern is well-funded, aiming at potentially lucrative niches of the market, has multiple ‘shots on goal’ and a potential upcoming catalyst. A ‘watch item’ position within a well-diversified biotech portfolio seems merited at the moment while awaiting future developments. The stock has traded in a relatively narrow trading range over the past year and had a 10% drop in the shares on Friday as its CEO was replaced by its CMO to run the company. A Buy-Write strategy would be an ideal play on this name as it is one that might be able to repeated successfully several times in the coming quarters. Unfortunately, no option yet are available against this equity. Until then, only a small purchase is recommended while the company advances its pipeline to later stage development.

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Comments (2)
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Bret Jensen
Bret Jensen

Editor

Agree on the Alzheimer's, biggest black hole in biotech

NeoPedEdu
NeoPedEdu

there are 3 types of biotechs I avoid like plague (Alzheimer treatments, vaccines for oncology and microbiome flora) I definitely pass on this one.



Bret Jensen
EditorBret Jensen
alexandra
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alexandra
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