Synergy's Launch Strategy Enables Competitive Positioning


Synergy announced details of their commercial launch of Trulance at the Leerink Global Healthcare Conference.

Launch strategy includes product readiness, branding strategy, and organizational readiness.

An effective early launch may be very important in attracting potential buyout suitors.

Synergy Pharmaceuticals (NASDAQ: SGYP) provided further details of their commercial launch of Trulance earlier today at the Leerink Global Healthcare Conference (see slide deck here). Although brief, it did provide some additional information for investors to consider. Given the importance of a successful launch, we decided to provide our take on what was described.

Background:

Trulance (plecanatide) is a peptide guanylate cyclase agonist that recently gained FDA approval for patients with chronic idiopathic constipation (CIC). This drug works to restore proper bowel function and improve symptoms associated with constipation. Synergy plans to file an sNDA for constipation-predominant, irritable bowel syndrome (IBS-C) later this quarter. They also plan to initiate their commercial launch for CIC later this quarter.

At the Leerink conference, Synergy described their launch strategy with three categories: product readiness, brand strategy, and organization readiness. We decided to dive into each of these categories to get a sense for how prepared (or not) they truly (pun intended) are.

Product Readiness

According to management, a robust supply chain has been established and samples are ready to be distributed this quarter. Management has not provided much further information regarding their manufacturing capacity and this has been a point of concern dating back prior to the PDUFA date. However, given the likelihood of a slow initial uptake, they are likely to have sufficient quantity for their launch. Quality control is more difficult to assess, but the high likelihood that the peptide is being produced synthetically decreases the chances for contaminations.

In our view, the most important new development discussed in this category was the decision to use a 30-day blister pack rather than a bulk bottle packaging. From what we have found, this packaging can provide some advantages regarding ease of use and adherence. One obvious concern here is that this packaging is more expensive and will decrease profit margins. However, because this can result in stricter adherence to daily use, overall therapeutic consumption is likely to be greater from using this packaging. Ultimately, this decision may actually result in more patients using this product daily rather than using it on an "as needed" basis, which has been a real issue for all products in the constipation market.

Brand Strategy

Unsurprisingly, Trulance will be priced at parity with Linzess. As such, their goal will be to differentiate primarily from their product profile. This competitive positioning will leverage a better tolerability profile and some other label advantages including ease of use. Since Trulance can be taken with or without food, this may be ideal for certain patients. Management indicated their outreach strategy has already started and includes a number of pre-launch activities with the goal of raising physician awareness. During the Q&A, concerns were raised about their cash position and whether it will be sufficient to target these physicians. In their response, they cited the 80/20 rule, implying that a focused effort on the subset of physicians doing the majority of prescribing would enable a cost-effective approach to gaining market share. They went on to suggest that 25K physicians account for 70% of prescriptions. While we generally agree that the 80/20 rule here is appropriate, we have not fact checked these numbers.

Organization Readiness

Synergy has been building their commercial team for some time now, starting with the appointment of Troy Hamilton as their Chief Commercial Officer in early 2016. He came to Synergy after holding senior positions at both Shire and J&J where he led global brands for multiple GI indications. Notably, he led the commercial launch of Lialda while at Shire, which now contributes to over 5% of their annual revenue.

At the VP level, the commercial team appears to have substantial experience in analytics, forecasting, marketing and sales. Below that, their structure will include regional business directors who will implement their outreach strategy, presumably targeting those aforementioned physicians doing the bulk of CIC prescribing.

Management has made it clear from the beginning that they planned to use a contract sales force, but noted today that they will also include their own regional GI account specialists. This arrangement will likely give them more control over their sales strategy while still retaining the flexibility to cut their sales team should an appropriate suitor come knocking.

Payers and reimbursement strategy: Management mentioned that their goal is to get as many patients on Trulance as possible. They indicated that they have a robust copay card and patient assistance program in place to ensure prescriptions get filled. Their initial feedback from payers has been positive.

To summarize, management appears to be aware of the need for a directed sales and marketing strategy that leverages awareness already built by Linzess. In our opinion, if they can implement a cost-effective strategy to engage the major prescribers and generate even modest sales, they will become a more attractive buyout target.

Note: we published an earlier report on SGYP prior to its PDUFA date. You can find it here.

Disclosure: I we are long SGYP.


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