Synergy Pharmaceuticals Inc (SGYP): A Small-Cap Biotech With Momo On Its Side

Synergy Pharmaceuticals Inc (NASDAQ:SGYP), up nearly 100% over the past three months, tacked on about 6% of that Monday morning on above-average volume before settling at a gain of about 3% as of this writing.

Synergy Pharmaceuticals Inc (SGYP)These gains come despite the small biotech (it has a market cap of just less than $1 billion) missing earnings for each quarter this year. In fact, since missing earnings a week ago, SGYP stock is up about 16%. Such is the nature of this “momo” stock.

And while Synergy hasn’t been profitable, that’s not really the name of the game here. Rather, investors are keeping their collective ear to the news regarding plecanatide — the company’s treatment of chronic idiopathic constipation — as SGYP transforms into a commercial operation:

“The rest of 2016 promises to be an exciting time as we expect top-line results in our two phase 3 IBS-C trials with plecanatide,” Synergy CEO Gary S. Jacob said in the biotech’s second-quarter report. “We are especially pleased with our ongoing dialogue with the FDA, including the results of our recent mid-cycle review meeting.”

It’s expected that plecanatide will win approval on its Jan. 29 Prescription Drug User Fee Act date. That bodes well for the buyout crowd (which is prominent enough to make “synergy pharmaceuticals buyout” Google’s second suggestion in search). Couple that with a positively trending biotech sector, and you can see just why this small-cap stock keeps going up.

Shares of SGYP have trailed the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) for most of the year, but recently have diverged from the exchange-traded fund in a positive way. And shares still are well off from the average analyst price target of $9.90.

But not everyone is bullish — SGYP stock is sold short to the tune of 15% of its float. Meanwhile, technical traders are likely looking at the Relative Strength Index, which is indicating that Synergy is running hot and might be due for a pause.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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