Looking to build a bit of synergy

Synergy Pharmaceuticals to formally merge with Callisto Pharmaceuticals

Jim Cirigliano
NEW YORK—In a move that will resolve the ownership structureof New York-based Synergy Pharmaceuticals Inc., the company has acquired andformally merged with its former parent company, Callisto Pharmaceuticals.
 
According to the agreement, Callisto common stockholderswill receive 0.17 shares of Synergy common stock. Outstanding shares of Synergyowned by Callisto—totaling about 22.3 million shares—will be cancelled andexchanged tax-free for Synergy common stock in equal measure. These exchangedshares will be locked up for 18 months unless a subsequent change in companycontrol occurs. At the closing of the merger, Callisto stockholders will ownabout 38.3 percent of the combined company on a proforma basis, with Synergystockholders owning the remaining 61.7 percent.
 
 
The move opens a door for investors interested in Synergyand its products as the company proceeds through clinical trials. Someinvestors had raised questions about the ramifications of Callisto controllingsuch a large stake in Synergy, and about the implications of the ownershipstructure should Callisto have decided to sell off or distribute its shares. 
 
Completion of the merger is expected to take place beforethe end of October 2012, pending final approval by both companies' shareholdersand by regulatory agencies.
Synergy began as a wholly owned subsidiary of Callisto, butspun off and became a publicly traded entity in its own right. Callistoretained an ownership stake in Synergy, retaining close to 40 percent ofSynergy shares at the time the merger was announced.
 
 
Synergy is a biopharmaceutical company that focuses onresearching and developing treatments and drugs for gastrointestinal diseasesand disorders. It has two compounds currently in development. The first is asynthetic GI hormone called plecanatide, which is undergoing clinical trials inpatients being treated for chronic idiopathic constipation andconstipation-predominant irritable bowel syndrome (IBS-C). The company's seconddrug—SP-333, a compound designed to treat inflammatory bowel diseases—iscurrently in preclinical development.
 
 
Callisto Pharmaceuticals formerly produced oncologyproducts, but its products did not advance beyond Phase II clinical trials.Since its day-to-day operations were halted, Callisto became a holding companyfor ownership of shares of Synergy.
 
The merger between the two entities will have negligibleimpact on employees because the ownership and executives were largely shared.The employees that remained at Callisto after it ceased its operations werealso working for Synergy already, and the two companies already shared the sameCEO in Gary S. Jacob. Synergy expects no changes in management or in itsday-to-day processes.
 
 
"Operations of Synergy will not change as a result of thistransaction," says Adam Cutler, managing director at the Trout Group, whichserves as an investor relations representative for Synergy.
 
 
Synergy executives had hinted at an eventful year forstockholders in 2012.
"We expect significant news as we continue our ongoingplecanatide Phase II/III trial for chronic idiopathic constipation and prepareto start our plecanatide Phase IIb trial in IBS-C," Jacob said in a Februarynews release.
 
 
 

Jim Cirigliano

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