Business Overview

9 Months Ended

Sep. 30, 2012

Business Overview

Business Overview

1. Business Overview

Synergy Pharmaceuticals Inc. (“Synergy” or the “Company”) is a biopharmaceutical company focused primarily on the development of drugs to treat gastrointestinal, or GI, disorders and diseases. Its lead product candidate is plecanatide (formerly called SP-304), a guanylyl cyclase C, or GC-C, receptor agonist, to treat GI disorders, primarily chronic idiopathic constipation, or CC, and constipation-predominant irritable bowel syndrome, or IBS-C. CC and IBS-C are functional gastrointestinal disorders that afflict millions of sufferers worldwide. CC is primarily characterized by constipation symptoms but a majority of these patients report experiencing bloating and abdominal discomfort as among their most bothersome symptoms. IBS-C is characterized by frequent and recurring abdominal pain and/or discomfort associated with chronic constipation. Synergy is also developing SP-333, its second generation GC-C receptor agonist for the treatment of gastrointestinal inflammatory diseases, such as ulcerative colitis, or UC.

On August 23, 2012, Synergy signed an Asset Purchase Agreement with Bristol-Myers Squibb Company and acquired the assets related to FV-100, an orally available nucleoside analogue, currently being developed for the treatment of shingles, a severe, painful skin rash caused by reactivation of the varicella zoster virus — the virus that causes chickenpox. The terms of the Agreement provide for an initial payment of $1 million, subsequent milestone payments covering marketing approval and achieving the milestone of aggregate net sales equal to or greater than $125 million, as well as a single digit royalty based on net sales.

On September 7, 2012, Synergy submitted an Investigational New Drug (IND) application for clinical evaluation of SP-333 to treat inflammatory bowel disease (IBD).  On October 19, 2012, Synergy began oral dosing of healthy adult volunteers in a Phase I clinical trial of SP-333 that is designed as a placebo-controlled, dose-escalating, single-dose study, planned to enroll up to 70 volunteers.  A multi-dose, dose-escalation trial is planned for early 2013.

On September 14, 2012, Synergy entered into a binding letter of intent (the “LOI”) with Ironwood Pharmaceuticals, Inc. (“Ironwood”) pursuant to which Synergy and Ironwood agreed to enter into a definitive license agreement giving Synergy an exclusive worldwide license to Ironwood’s method of use patents on plecanatide for the treatment of CC and IBS-C. The LOI contemplates a low single digit royalty on net sales and both parties agreed not to challenge each other’s patents covering certain GC-C agonists, with the exception that Synergy retains the right to challenge Ironwood’s method of use patent on plecanatide.