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Synta (SNTA) Cuts Q2 Loss Y/Y, Madrigal Merger in Focus

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Synta Pharmaceuticals Corp. reported a second-quarter 2016 loss of 2 cents per share, much lower than the year-ago loss of 15 cents.
With no approved product in its portfolio at the moment, the company does not generate revenues yet.

In the second quarter of 2016, research and development (R&D) expenses decreased by $16.5 million. General and administrative expenses increased 14.9% year over year to $3.6 million.

Focus on Merger

In Apr 2016, Synta announced that it will be merging with a privately held company, Madrigal Pharmaceuticals, Inc., in an all-stock transaction. This combined company will focus on the development of novel small-molecule drugs addressing major unmet needs in cardiovascular-metabolic diseases and non-alcoholic steatohepatitis (NASH).

MGL-3196, which is Madrigal’s lead candidate, is phase II-ready for the treatment of NASH and heterozygous as well as homozygous familial hypercholesterolemia.

Once the proposed merger closes, Madrigal shareholders will own 64% of the combined company while Synta shareholders will own 36%. The merger is slated to close in the third quarter of 2016.

We note that Synta had earlier focused on cancer treatments but the company suffered a setback last year when it decided to terminate a phase III study (GALAXY-2) on its lead pipeline candidate ganetespib (for the second-line treatment of advanced non-small cell lung adenocarcinoma) due to futility. Thereafter, the company implemented strategic restructuring and discontinued a substantial portion of its R&D activities relating to ganetespib and its oncology pipeline.

However, the company continues to conduct limited activities with respect to ganetespib including providing support for a couple of ongoing investigator-sponsored studies in ovarian cancer (phase II – GANNET53) and sarcoma (phase I – SARC 023) – enrollment in both studies expected to be completed in 2017. Limited activities will also be continued for the candidates from its Hsp90 inhibitor drug conjugate (HDC) program, including its lead HDC candidate STA-12-8666.

Synta has decided not to pursue an investigational new drug (IND) submission for STA-12-8666 in the immediate future. However, the company is currently conducting pre-clinical studies on STA-12-8666 to support an IND submission, if it determines to pursue such a submission at some point in the future.

We expect investor focus to remain on updates from the Madrigal transaction, going forward.

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