As embarrassing and difficult to manage as chronic constipation and irritable bowel syndrome (IBS) are, there are surprisingly very few treatments available for patients at the moment. The treatments that do exist often cause diarrhea and nausea as side effects. Synergy Pharmaceuticals Inc (NASDAQ:SGYP) has been focusing on its lead investigational drug Plecanatide, which is aimed at treating chronic constipation and constipation predominant irritable bowel syndrome.

Plecanatide is currently in Phase 2b/3 clinical trials. The hallmark of the drug is that it does not cause diarrhea as a side effect. Moreover, Synergy's Chairman Gabriel Cerrone purchased 87,820 shares of Synergy for an amount of $317,250, attracting the attention of many investors and observers. Below, I will examine the constipation drug Plecanatide and the theory behind the insider buying.

Irritable bowel syndrome can cause extreme distress to individuals. Much of the discomfort is related to not being able to pass stools in spite of experiencing an urge to move. The condition is treated with drugs that ease constipation and promote bowel movement without causing discomfort. When such treatment fails, psychotherapy is often recommended, as chronic IBS has often been linked to psychosomatic causes as well. Often, a combination of psychotherapy to reduce psychological distress and drugs to ease physical discomfort are used when treating individuals with irritable bowel syndrome and chronic constipation. Synergy’s Plecanatide could prove to be a panacea to those who suffer from this embarrassing but common condition.

Plecanatide: How it Works

Plecanatide is an analogue of Uroguanylin (UroG), which is critical for digestion to take place normally. While Uroguanylin (UroG) is a natural human hormone, Plecanatide is eight times more potent. The drug targets a large underserved market, which until now has depended on psychotherapy and drugs that cause unpleasant side effects. The Phase 2a clinical study revealed that plecanatide eases constipation and improves bowel movement without causing diarrhea. Reduction in abdominal discomfort, severity of constipation and increased gastric relief can be experienced within seven hours of ingestion of the drug, as compared to 16 hours for the placebo. All adverse events were both mild to moderate, and certainly transient. These factors make plecanatide a very attractive drug that could potentially target a market worth $2 billion annually. Moreover, plecanatide is a new class of drug and has only one competitor, Linzess .

Plecanatide Compares Favorably With Linzess

Linzess is developed and marketed by Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) . Linzess is currently prescribed in the United States for chronic constipation and irritable bowel syndrome with constipation. But Plecanatide could outperform Linzess due to its lack of adverse side effects. Linzess (linaclotide) can cause diarrhea and nausea, both of which are as uncomfortable as the symptoms of irritable bowel syndrome. The Boston Globe reported that Linzess could achieve blockbuster status and generate sales of $1 billion annually. However, with the announcement of Plecanatide and its benefits over Linzess, Synergy could trounce Ironwood and achieve sales of $2 billion each year. Ironwood also borrowed $175 million to support Linzess, which increased the company’s liability.

Will Linzess Affect Synergy’s Profitability?

One cause for concern among investors is that Ironwood has already entered the IBS market with Linzess. The fact that it entered the market first does not mean the drug will ultimately be successful. The first few months are often a test for the drug and its maker, as side effects and other issues often arise during this time. Since Linzess can cause severe diarrhea, the drug may not be as well received as Synergy's plecanatide. Consider the following examples of drugs that faced headwinds after launch: