Synergy Pharmaceuticals (SGYP), a company with major catalysts pending and a potential billion dollar product in the pipeline, and Callisto Pharmaceuticals (CLSP.OB) announced on Friday that the two companies have entered into a definitive merger agreement. Callisto had previously held over twenty two million shares of SGYP stock and under the terms of the agreement those shares will be cancelled and Callisto shareholders, in turn, will be granted 0.17 shares of Synergy common stock for each outstanding share of Callisto common stock.
Another key takeaway from Friday's announcement is that the Synergy shares issued to Callisto shareholders would be "locked up" for eighteen months following the completion of the deal, barring a "Change of Control" event, as noted in the press release.
These are key points to remember and the agreement should be viewed as an encouraging turn of events for Synergy shareholders, in my opinion.
Previous to this merger agreement, Callisto had already owned roughly forty percent of Synergy stock. Many large funds and institutions are hesitant to buy into a company when only one entity - in this case Callisto - already owns such a significant portion of that company. The fact that those Synergy shares owned by Callisto will now be cancelled and then reissued and spread evenly throughout the Callisto shareholder base alleviates that hurdle. Once the deal is consummated, the door is open for funds and institutions to start buying in again, which significantly enhances the prospects of growth for shareholders over the short, mid and long terms.
There were quite a few investors out there questioning why there was not more institutional interest in Synergy if the prospects for Plecanatide, currently being developed for the treatment of chronic idiopathic constipation (CIC) and constipation-predominant irritable bowel syndrome (IBS-C), were so bright. This merger agreement looks to be a move to answer those concerns.
As outlined on previous occasions, data from a key II/III Plecanatide trial are due to be released later this year. It is widely expected that the results from this trial will be positive, based on previous studies of both Plecanatide and also Linaclotide, a product being developed by Ironwood Pharmaceuticals' (IRWD) that shares origins and the same mechanism of action with Plecanatide.
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