Madrigal Pharmaceuticals buys Synta in $80M all-stock deal
Fort Washington-based Madrigal Pharmaceuticals, which is developing a drug to treat hereditary and obesity-related liver troubles, is combining with Synta Pharmaceuticals Corp., of Lexington, Mass., which has cash and a stock-market listing but no product after its lung-cancer treatment failed to advance in clinical trials last year.
Fort Washington-based Madrigal Pharmaceuticals, which is developing a drug to treat hereditary and obesity-related liver troubles, is combining with Synta Pharmaceuticals Corp., of Lexington, Mass., which has cash and a stock-market listing but no product after its lung-cancer treatment failed to advance in clinical trials last year.
The deal will pay Madrigal's owners and managers Synta stock worth more than $80 million. Madrigal shareholders will control 64 percent of the shares in the combined company.
"Madrigal will be [the name of] the new company and will still be in the Philadelphia area," its founder, Rebecca Taub, said in an interview.
Madrigal, which is closely held, has named as its new board chairman and chief executive officer Paul A. Friedman, a past Synta director and former CEO and chairman of Incyte, the Wilmington drug company he spun off from DuPont Co.
Friedman praised Taub for building an "astoundingly efficient and cost-effective" virtual drug research and development firm with just a handful of staff, by relying on contract researchers and consultants instead of hiring a lot of people.
"Now, they are going to finally be funded," he said of five-year-old Madrigal.
Friedman added that the company could add staff, or partner with a larger company, once it commercializes drugs under development.
A group of investors including Boston-based Bay City Capital and its founder, Fred Craves, along with SQN L.L.C., representing Friedman and Taub, "has committed to investing $9 million" in Madrigal before the merger takes effect. Madrigal will use the money to bring its liver drug closer to market.
Madrigal's leaders expect to hire additional staff following the merger. Both firms currently are "virtual companies," each with a dozen or fewer direct employees, plus outside researchers, drug developers, and consultants, Taub said.
Taub will be chief medical officer and executive vice president for research at the combined company, which will focus on bringing Madrigal's most promising drug, MGL-3196, a treatment for hepatitis- and cholesterol-related liver problems, through the last clinical trials and onto the market.
Synta will pay off all Madrigal owners in exchange for about 253 million shares of Synta, which was trading at about 33 cents a share before the deal announcement, and closed at 41 cents Thursday, up almost 68 percent.
Synta shareholders still have to approve the deal.
In a statement, Synta chairman Keith R. Gollust said the Madrigal merger presents the best value the board could find in an "extensive" search for a way forward after last year's disappointing results.
Synta's share price fell and it laid off staff after halting a late-stage trial of its lung-cancer treatment, which an independent review said had proved ineffective.
215-854-5194 @PhillyJoeD