Madrigal Pharmaceuticals will merge with Synta Pharmaceuticals in a deal creating a combined drug developer focused on novel small-molecule drugs addressing major unmet needs in cardiovascular-metabolic diseases and nonalcoholic steatohepatitis (NASH).
The deal follows Synta losing nearly 87% of its stock value last year, placing it at number five on GEN’s List of Top 10 Wall Street Losers of 2015. Much of that value was lost on October 21 after saying it would terminate a failed Phase III trial of Synta’s lead oncology drug candidate ganetespib and docetaxel in second-line treatment of patients with advanced non-small-cell lung adenocarcinoma.
In addition to ganetespib, the merger will bring to the combined company Madrigal’s MGL-3196, a Phase II-ready once-daily, oral, liver-directed selective thyroid hormone receptor-ß (THR-ß) agonist indicated for NASH and heterozygous and homozygous familial hypercholesterolemia (HeFH and HoFH).
“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,” Synta Chairman Keith R. Gollust said in a statement.
As part of the deal, an investor syndicate that includes Bay City Capital, Fred Craves, Ph.D., founder of Bay City Capital, and SQN—a corporation held by Synta director Paul A. Friedman, M.D., and Madrigal founder and CEO Rebecca Taub, M.D.—committed to invest up to $9 million in Madrigal before the closing of the merger.
The combined company intends to use these proceeds, plus Synta’s cash balance at the closing of the merger, to fund development of MGL-3196 through Phase II clinical studies in NASH, as well as HeFH and HoFH, Synta and Madrigal said.
MGL-3196 is designed to target thyroid hormone beta receptors specifically in the liver involved in metabolism and cholesterol regulation and avoid side effects associated with thyroid hormone receptor activation outside the liver.
MGL-3196 has a favorable safety profile and did not show adverse findings in chronic animal toxicology studies with a prior thyroid agonist, Dr. Taub added.
The companies said Madrigal has designed Phase II clinical programs to establish proof of concepts in both NASH and FH, with data readouts for each program anticipated throughout 2017.
The companies’ pipelines include Madrigal’s preclinical MGL-3475 THR-ß agonist (backup), whose indication has not been disclosed, and Synta’s preclinical STA-12-8666, an Hsp90 inhibitor conjugated to SN-38. Also in preclinical phases are several candidates Synta is developing from its Hsp90 inhibitor Drug Conjugate Program (HDC Program).
Madrigal will merge with a wholly-owned subsidiary of Synta in an all-stock transaction. Synta will acquire all outstanding shares of Madrigal in exchange for approximately 253.9 million newly ssued shares of Synta common stock. At a closing price yesterday of 24 cents a share, that Synta stock is valued at $60.9 million.
Upon closing of the deal, the combined company will take the name of Madrigal Pharmaceuticals, with Dr. Friedman serving as chairman and CEO. Dr. Friedman, who was Incyte Pharmaceuticals CEO from 2004 until his retirement in 2014, has stepped down from Synta’s board, the companies said.
Dr. Taub will assume the newly created role of CMO, evp, R&D following the closing of the merger. Synta’s current CFO, Marc Schneebaum, will hold that position with the combined company.
Drs. Friedman and Taub will be two of seven directors of the combined company. The other five directors will be Gollust, Dr. Craves, two additional Madrigal directors who will be designated, and an independent director to be agreed upon by Synta and Madrigal.
Headquarters for the combined company will be “in the Philadelphia area,” Synta and Madrigal said. Madrigal is now based in the Philadelphia suburb of Fort Washington, PA; Synta is in Lexington, MA.
The deal has been approved by the boards of both companies and Madrigal shareholders and is set to close by the end of the third quarter, subject to conditions that include approval by Synta shareholders. Upon completion, Madrigal shareholders will own 64% of the combined company, with the other 36% to be held by existing Synta shareholders.