Synergy Soars as Drug That May Spur Buyout Beat Expectations

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Synergy Pharmaceuticals Inc. shares surged as much as 69 percent after a late-stage study of a gastrointestinal drug exceeded expectations, increasing the chance that the company will receive a takeover offer.

In a trial of 1,346 patients with chronic idiopathic constipation, 21 percent responded to plecanatide at a 3-milligram dose, compared with 10 percent given a placebo, the New York-based company said in a statement on Wednesday. The chief side effect of diarrhea was experienced by 5.9 percent of patients at that dose, a far lower rate than analysts expected.

The results differentiate plecanatide from Linzess, a drug sold by Cambridge, Massachusetts-based Ironwood Pharmaceuticals Inc., that caused diarrhea in 16 percent of people in clinical trials. Synergy needed a rate of about 10 percent to be markedly better and make the company a takeover candidate, Corey Davis, an analyst at Canaccord Genuity Group Inc., said last month.

“All options are open at this point as to how we can maximize the value of our asset to our shareholders,” Gary Jacob, Synergy’s chairman and chief executive officer, said by phone. The company’s shares traded 64 percent higher at $7.59 as of 1:31 p.m. in New York, boosting the company’s market value to about $761 million. Ironwood declined as much as 4.1 percent.

Synergy has been exploring a sale after competitor Salix Pharmaceuticals Ltd. agreed to be bought by Valeant Pharmaceuticals International Inc., Bloomberg News reported in March, citing people with knowledge of the matter.

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“We view Synergy as an attractive takeout target following its positive phase three data,” which was “unexpectedly strong,” Irina Rivkind Koffler, an analyst at Cantor Fitzgerald LP, said in a note to investors on Wednesday. She raised her target share price to $14 from $8.50, adding that Synergy’s management may be receptive to takeover discussions given that compensation incentives are aligned with a sale of the company, she said.

Synergy plans to report results from a second late-stage study in the third quarter of this year and file an application for U.S. approval by the end of 2015, the company said. Synergy has “high confidence” that data from the second trial will be positive, Jacob said.

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