Synaptic Pharmaceutical Corp. signed a definitive merger agreement with like-minded central nervous system-focused H. Lundbeck A/S in a deal worth about $121 million.

Although completion of the merger is contingent on Synaptic shareholders approval and regulatory clearance, Synaptic expects to hold a stockholder meeting in 2003's first quarter and close the transaction soon after.

"We were in discussions [with Lundbeck] and are always looking for various options in terms of financing," Synaptic CEO and President Errol De Souza said. "And the proposal came out of those discussions."

Copenhagen, Denmark-based Lundbeck would pay $6.50 in cash per share for Synaptic, giving the deal its $121 million value. The per-share price is a decent markup to Synaptics' closing price Wednesday of $6, but a healthy premium to its $3.90 close about a week earlier, on Nov. 13. Its stock has ranged from $3.65 to $7.52 over the past 52 weeks.

Warburg Pincus Equity VIII LP is Synaptic's largest shareholder with a 35 percent stake in the Paramus, N.J.-based company. Warburg has agreed to vote its shares in favor of the merger.

Synaptics' stock (NASDAQ:SNAP) rose 41 cents Thursday to close at $6.41.

The share price was reached on guidance from bankers, De Souza said.

"They advise us of what is fair for a company like Synaptic," he told BioWorld Today.

What is fair for a biotechnology company these days is a question that could draw widely varying answers, with the divide especially gaping between companies themselves and investors. In December 1995 Synaptic went public with an offering that priced shares at $12.50 apiece and raised $25 million. It was Synaptic's second effort at becoming a public entity, its first attempt in 1992 being ruined by deflated markets.

With many biotechnology companies facing Nasdaq delisting and the financing trail grown cold, the markets are again in a down cycle. But at $6-plus per share, Synaptic can still look down at the valley of penny stocks, one reason being its G protein-coupled receptor intellectual property - the company has 165 issued patents and 260 pending.

Although unwilling to say what Lundbeck would do with Synaptic programs once the merger is finalized, De Souza pointed to the synergies between the companies.

"I can say that from our discussions with them, they are interested [in our programs] and we both have a CNS focus," De Souza said. "We have a very nice overlap of their current focus and our current focus."

Lundbeck focuses mainly on the treatment of depression and psychoses and has about 4,800 employees. In 2001, it generated about US$1 billion in revenue, most of that through the sales of its antidepressants such as Cipramil/Celexa, a selective serotonin reuptake inhibitor, although it also has products for migraine and sleep disorders, among others.

Synaptic's lead product is SNEC-2, for depression. De Souza said the company plans to initiate Phase II trials sometime in the next two quarters. Lower in the pipeline, Synaptic has a program investigating a melanin-concentrating hormone receptor antagonist in animal models of obesity, anxiety and depression. Over the next "couple of quarters" Synaptic should select development candidates for the program, De Souza said. It also has a program for anxiety that is early stage, and a target for diabetes, SMT3, that is in the lead-identification stage.

In July, Synaptic licensed two alpha-2 adrenergic receptor compounds to Procter & Gamble Pharmaceuticals Inc., receiving an up-front licensing fee and the potential for milestone payments and royalties. Synaptic's list of licensees also includes Eli Lilly and Co., of Indianapolis; Novartis Pharma AG, of Basel, Switzerland; and Ranbaxy Laboratories Ltd., of India. (See BioWorld Today, July 11, 2002.)

As of Sept. 30, Synaptic had cash, cash equivalents and marketable securities of $27.8 million. It lost about $8.1 million in the third quarter, a quarter that saw De Souza replace retired CEO Kathleen Mullinix, who had been with Synaptic for 15 years. If and when the merger closes, revenue-generating Lundbeck will be there with financial muscle for product development.

"What we really gain [through the merger] is scientific and clinical development and financial support, so we can accelerate our proprietary portfolio that we have built over the years," De Souza said.