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Report on: (NASDAQ: SNTA)
We told our readers and subscribers that Synta Pharmaceuticals Corp (NASDAQ:SNTA) was due for a bounce on February 1. We also said that there was a possibility of a deal happening after Scott Morenstein was appointed to the board of directors. His background as an investment banker indicated to us that Bruce Kovner brought him on board to engineer a deal for Synta. He certainly delivered for Kovner and Synta shareholders. While the deal doesn’t immediately erase the large losses suffered by long-term shareholders, it does give Synta hope down the road.
Synta is merging with Madrigal Pharmaceuticals Inc, a privately-held company. Under the terms of the merger agreement, Synta will acquire all outstanding shares of Madrigal in exchange for approximately 253.9 million newly issued shares of Synta common stock. Upon completion of the proposed acquisition, it is anticipated that existing Synta shareholders will own 36.0% of the combined company and Madrigal shareholders will own 64.0% of the combined company. The transaction has been approved by the boards of directors of both companies and the shareholders of Madrigal. The merger is expected to close by the end of the third quarter of 2016, subject to customary closing conditions, including approval of the merger by the shareholders of Synta.
The merger will create a company focused on the development of novel small-molecule drugs addressing major unmet needs in cardiovascular-metabolic diseases and non-alcoholic steatohepatitis (NASH). Madrigal’s lead compound, MGL-3196, is a Phase 2-ready once-daily, oral, liver-directed selective thyroid hormone receptor-ß (THR-ß) agonist for the treatment of NASH and heterozygous and homozygous familial hypercholesterolemia (HeFH, HoFH). Upon closing of the transaction, the combined company will be named Madrigal Pharmaceuticals, and Paul A. Friedman, M.D. will become Chairman and Chief Executive Officer.
An investor syndicate that includes Bay City Capital, Fred Craves, Ph.D., Founder of Bay City Capital, and SQN LLC, a corporation held by Dr. Friedman and Rebecca Taub, M.D., has committed to invest up to $9 million in Madrigal prior to the closing of the Merger. The combined company intends to use these proceeds, in addition to Synta’s cash balance at the closing of the merger, to fund the development of MGL-3196 through Phase 2 clinical studies in NASH, HeFH and HoFH.
While not a perfect deal, it does eliminate the cloud of uncertainty over Synta. Synta has been in a downward spital ever since the company announced that its lead drug, ganetespib, an Hsp90 inhibitor, was being discontinued in its phase 3 GALAXY-2 trial. An independent data-monitoring committee determined that it was unlikely to meet its primary endpoint of a statistically significant improvement in overall survival over the placebo in a lung cancer study. The one bright spot was the company’s $88 million in cash.
The merger also solves the question we had about Bruce Kovner and his investment in Synta. He owns 3 million shares personally and his investment firm Caxton Corp owns another 37 million shares. Last week, Kovner filed an amended 13D last week disclosing additional purchases of 60K or so SNTA shares as well as his support for the merger. Synta Chairman Keith Gollust said:
“Following an extensive review of strategic alternatives, Synta’s Board of Directors believes that a merger with Madrigal Pharmaceuticals offers shareholders the most compelling opportunity for enhancing long-term value. Madrigal’s lead compound, MGL-3196, is a selective THR-ß agonist with a unique lipid lowering profile that has been validated through early clinical and preclinical studies. The combined company will be well capitalized with a lead program that offers both a potentially substantial commercial opportunity in NASH, and an efficient clinical development plan with commercial potential in genetic lipid disorders.”
Currently trading with a market cap of $44 million, the merger at least gives long-term shareholders some hope. For our subscribers that bought on the lows, we’ll be booking our profits and watching how the merger plays out. In the meantime, we expect Synta to be dead money and we’ll look to employ capital elsewhere. Congrats to all that followed our recommendation!
Source: Insider Financial
Broad street alerts has not been compensated for the mention of any publicly traded companies in this article nor do we own positions in any of the companies in this article.
Broad Street Alerts was previously compensated eighteen thousand five hundred dollars by star media llc for the mention of FNJN however, that contract has expired.