Synergy Pharmaceuticals – U.S. Trustee Appoints Official Equity Committee as Equity Activism Looks Set to Continue

January 29, 2019 – The U.S. Trustee assigned to the Synergy Pharmaceuticals case appointed an Official Committee of Equity Security Holders of the Debtors to be comprised of (i) Samuel Goldstein of Laguna Beach, CA, (ii) Jerome Lewis Jennings of Burnee, IL, (iii) John J. Sastry of Chesterfield, MO, (iv) Michael L. Meyer of Newport Beach, CA, (v) Dorin Toderas of Cluj-Napoca, Romania, (vi) Rohit Sharma of Philadelphia, PA  and (vii) Logan J. Reed of Branford, CT.

Equity holders have already been very active in the Debtors’ cases to date. On December 31, 2018, the Debtors’ Ad Hoc Committee of Equity Holders (the “Ad Hoc Committee”) objected [Docket No. 137] to the Debtors’ sale motion [Docket No. 17], arguing that, given the recent success of certain drugs, the Debtors have been too quick to seek Chapter 11 protection. The success of one drug in particular, TRULANCE, has equity holders particularly concerned, with the Ad Hoc Committe noting, “Since June 9, 2017, the weekly scripts for TRULANCE have been growing an average of 2.43% per week. If that trajectory continues, the Debtors would achieve sales close to $150 million in 2019, and with other developments would have been enough to support a restructuring.”

 

That objection further stated, “The Ad Hoc Committee believes the Debtors’ management made a terrible strategic decision by committing the Debtors to a chapter 11 sale process at this early stage of the commercialization of TRULANCE (the Debtors’ FDA-approved drug) and development of Dolcanitide (the Debtors’ valuable development-stage cancer treatment drug), particularly given the series of upcoming near term events which promise to substantially increase the Debtors’ sales. Rather than attempting to reduce the Debtors’ cash burn to capitalize on these events, however, the Debtors accepted the terms of an ultra-quick chapter 11 sale process demanded by either the prepetition lenders or the Stalking Horse Purchaser or both, which if not modified will seriously reduce the chance of having an auction and thereby undermine the Debtors’ ability to realize the fair market value of their assets.”

On January 14, 2019, the Ad Hoc Committee further objected to the Debtors’ proposed debtor-in-possession (“DIP”) financing motion [Docket No. 206] and the Debtors’ Key Employee Incentive Plan (the “KEIP”) motion [Docket No. 207], with their objection to the KEIP specifically citing  the potential impact of TRULANCE on the Debtors’ prospective results.