Synta Pharmaceuticals Corp.’s shares SNTA surged 67.7% after the company announced that it has entered into a definitive merger agreement with Madrigal Pharmaceuticals, Inc.This all-stock transaction will lead to the formation of a new company named Madrigal Pharmaceuticals, which will focus on the development of novel small-molecule drugs addressing major unmet needs related to cardiovascular-metabolic diseases and non-alcoholic steatohepatitis (NASH).Per the agreement, Synta will acquire all outstanding shares of Madrigal Pharma in exchange for approximately 253.9 million newly issued shares of its common stock. Madrigal Pharma shareholders will own 64% of the combined company, while Synta shareholders will own 36%. The deal is slated to close by the end of the third-quarter of 2016.In addition, the company stated that an investor syndicate has committed to invest up to $9 million in Madrigal Pharma prior to the closing of the deal. These proceeds, along with Synta’s cash balance at the close of the transaction, will be used to fund the development of Madrigal Pharma’s lead compound, MGL-3196, in phase II studies. MGL-3196 is a phase II-ready candidate that is being evaluated for the treatment of NASH, and heterozygous as well as homozygous familial hypercholesterolemia (HeFH, HoFH). Results from the phase II studies are expected throughout 2017.We are positive on Synta’s strategic decision to merge with Madrigal Pharma. We remind investors that the company has been undergoing restructuring initiatives to increase its efficiency and to boost shareholders’ value. A couple of months ago, in order to conserve cash, the company announced a reduction of its workforce and the discontinuation of a substantial portion of its research and development activities. Moreover, in Nov 2015, the company announced plans to reduce its workforce by approximately 60%.Meanwhile, other companies are also focusing on the development of their own candidates for the treatment of NASH. Intercept Pharmaceuticals, Inc. ICPT is one such company. It is currently evaluating obeticholic acid (OCA) in a phase III study (REGENERATE) for the treatment of non-cirrhotic NASH in patients with advanced liver fibrosis, and in a phase II study (CONTROL) to evaluate the effect of OCA in combination with statin therapy on lipid metabolism in patients with NASH.Synta currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the health care sector are AMAG Pharmaceuticals, Inc. AMAG and Emergent BioSolutions, Inc. EBS, both sporting a Zacks Rank #1 (Strong Buy).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AMAG PHARMA INC (AMAG): Free Stock Analysis Report SYNTA PHARMACT (SNTA): Free Stock Analysis Report EMERGENT BIOSOL (EBS): Free Stock Analysis Report INTERCEPT PHARM (ICPT): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research