UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 20, 2012

Synergy Pharmaceuticals Inc.

(Exact name of Registrant as specified in its charter)

(212) 297-0020

(Registrant’s telephone number including area code)

N/A

(Former name and former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

x         Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

Merger Agreement

On July 20, 2012, Synergy Pharmaceuticals Inc. (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Callisto Pharmaceuticals, Inc., a Delaware corporation (“Callisto”).  Pursuant to the Merger Agreement, following the satisfaction or waiver of each of the applicable conditions set forth in the Merger Agreement, Callisto and the Company will merge (the “Merger”), whereupon Callisto’s separate corporate existence will cease and the Company will continue as the surviving corporation of the Merger.  Callisto is Synergy’s largest shareholder and is a development stage biopharmaceutical company focused primarily on the development of drugs to treat gastrointestinal disorders and diseases.

As a result of the Merger, each outstanding share of Callisto common stock (other than shares owned by any stockholder of the Company who is entitled to and properly exercises dissenters’ rights under Delaware law) will be converted into the right to receive 0.17 of one share of Synergy common stock (the “Exchange Ratio”) as set forth in the Merger Agreement and the 22,295,000 shares of the Company held by Callisto will be canceled. Under the terms of the Merger Agreement at closing, Synergy will issue, and Callisto stockholders will receive in a tax-free exchange, shares of Synergy common stock such that Callisto stockholders will own approximately 38.3 percent of the combined company on a pro forma basis and Synergy stockholders will own approximately 61.7 percent. Each share of Synergy Common Stock received in connection with the Merger shall be subject to a lock-up beginning on the effective date of the Merger and ending on the earlier of (i) eighteen (18) months after such date or (ii) a Change in Control (as defined in the Merger Agreement).

The consummation of the Merger is subject to various customary closing conditions, including but not limited to, (i) approval by Callisto’s and the Company’s stockholders, (ii) the Registration Statement on Form S-4 shall have been declared effective by the SEC and (iii) the shares of Synergy common stock to be issued in the Merger shall have been approved for listing on The NASDAQ Capital Market.

The Merger Agreement includes customary representations, warranties and covenants of the Company and Callisto made solely for the benefit of the parties to the Merger Agreement. The assertions embodied in those representations and warranties were made solely for purposes of the contract among the Company and Callisto and may be subject to important qualifications and limitations agreed to by the Company and Callisto in connection with the negotiated terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to stockholders or may have been used for purposes of allocating risk among the Company and Callisto rather than establishing matters as facts. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants in the Merger Agreement or any description thereof as characterizations of the actual state of facts of the Company, Callisto or any of their respective subsidiaries or affiliates.

The Company has also agreed to customary covenants governing the conduct of its business, including an obligation to conduct its business in the ordinary and usual course consistent with past practice through the effective time of the Merger or the earlier termination of the Merger Agreement.

The Merger Agreement may be terminated under certain customary circumstances, including by the Company if, among other things, (i) the stockholders of Callisto do not approve the Merger, (ii) if the Merger is not consummated within six (6) months following the date of the Merger Agreement for any reason or (iii) Callisto’s board of directors withdraws or changes its recommendation in support of the Merger, or by the Company if Callisto’s board of directors determines to accept a Superior Offer (as defined in the Merger Agreement). The

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Company is not obligated to pay or reimburse Callisto or any of their affiliates for any of their costs or expenses upon termination of the Merger Agreement.

In connection with the Merger, each share of Callisto preferred stock and each stock option exercisable for shares of Callisto common stock that is outstanding at the effective time of the Merger will be assumed by the Company and converted into a share of preferred stock or stock option to purchase the number of shares of the Company's common stock that the holder would have received if such holder had exercised such share of preferred stock or stock option for shares of Callisto common stock prior to the Merger and exchanged such shares for shares of the Company's common stock in accordance with the Exchange Ratio, respectively. In addition, each Callisto stock option exercisable for shares of Company common stock that is outstanding at the effective time of the Merger will be assumed by the Company and each outstanding warrant or obligation to issue a warrant to purchase shares of Callisto common stock, whether or not vested, shall be cancelled.

Completion of the Merger is anticipated to occur in the fourth quarter of 2012, although there can be no assurance the Merger will occur within the expected timeframe or at all.

The board of directors of the Company has unanimously approved the Merger and the Merger Agreement.  This summary of the principal terms of the Merger Agreement and the copy of the Merger Agreement filed as an exhibit to this Form 8-K are intended to provide information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about the Company in its public reports filed with the SEC. In particular, the Merger Agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as an exhibit to this Form 8-K and is incorporated into this report by reference.

Voting Agreements

Concurrently with the execution of the Merger Agreement, each of Callisto’s officers, directors and 5% or greater shareholders (each, a “Stockholder”) entered into a Votiing Agreement, dated as of July 20, 2012, with the Company (each, a “ Voting Agreement” and collectively, the “Voting Agreements”).  Pursuant to each Voting Agreement, each such Stockholder has agreed, among other things, to (i) vote in favor of the Merger Agreement and (ii) vote against any Acquisition Proposal (as defined in the Merger Agreement), each on the terms and subject to the conditions set forth in the Voting Agreements. Each Voting Agreement will terminate automatically, without any notice or other action by any Person, upon the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, (ii) the effective time of the Merger, (iii) the date that any amendment to or waiver of the Company’s rights under the Merger Agreement is effected without Stockholder’s consent that: (A) increases the Exchange Ratio or otherwise increases the value to be delivered to any stockholder of Callisto upon conversion of securities of Callisto in the Merger; or (B) adversely affects any stockholder in any material respect or in any manner that does not apply in the same fashion to other stockholders of Callisto; or (iv) the date that Company effects a Superior Offer, solely if such Superior Offer (as defined in the Merger Agreement) is made pursuant to Section 5.2(c) of the Merger Agreement.  An aggregate of 27,680,354 shares of Callisto common stock (representing approximately 17.4% of the outstanding shares of Callisto common stock) are subject to the Voting Agreements.

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Item 8.01.              Other Events.

On July 20, 2012, the Company and Callisto issued a joint press release announcing the Merger.  A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this Current Report on Form 8-K:

(d)  Exhibits.

Cautionary Statements Regarding Forward-Looking Information

Certain statements in this Current Report on Form 8-K are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words such as “anticipate,” “planned,” “believe,” “forecast,” “estimated,” “expected,” and “intend,” among others. These forward-looking statements are based on Synergy’s and Callisto’s current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the conditions to and the anticipated timing of the closing of the merger between Callisto and Synergy; substantial competition; the need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payer reimbursement; limited sales and marketing efforts and dependence upon third parties; risks related to failure to obtain FDA clearances or approvals and noncompliance with FDA regulations; and risks relating to the ability to obtaining the requisite approvals for the transaction and the failure of Synergy or Callisto (as the case may be) to satisfy the other conditions to the transaction such that the merger is not consummated. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. There are no guarantees that future clinical trials will be completed or successful or that any product will receive regulatory approval for any indication or prove to be commercially successful. Investors should read the risk factors set forth in Synergy’s and Callisto’s Form 10-K for the year ended December 31, 2011 and other periodic reports filed with the Securities and Exchange Commission (SEC).  While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and neither Synergy nor Callisto undertake any obligation to update publicly such statements to reflect subsequent events or circumstances.

Additional Information about the Merger and Where to Find It

This communication does not constitute an offer to buy, or solicitation of an offer to sell, any securities of Synergy or Callisto, and no offer or sale of such securities will be made in any jurisdiction where it would be unlawful to do so.  In connection with the merger, Synergy will file with the SEC a registration statement on Form S-4 that will include a proxy statement and prospectus of Synergy relating to the Merger. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT SYNERGY,

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CALLISTO AND THE MERGER. Investors and security holders will be able to obtain these materials (when they are available) and other documents filed with the SEC free of charge at the SEC’s website, www.sec.gov. In addition, copies of the registration statement and proxy statement/prospectus (when they become available) may be obtained free of charge by accessing Synergy’s website at www.synergypharma.com or upon written request to Synergy at Synergy Pharmaceuticals Inc., 420 Lexington Avenue, Suite 1609, New York, New York 10170, Attention: Investor Relations or upon written request to Callisto at Callisto Pharmaceuticals, Inc., 420 Lexington Avenue, Suite 1609, New York, New York 10170, Attention: Investor Relations. Stockholders may also read and copy any reports, statements and other information filed by Synergy or Callisto with the SEC, at the SEC public reference room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.

Participants in the Solicitation

Synergy and Callisto and their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Synergy and Callisto in connection with the proposed transaction. Information regarding the special interests of these directors and executive officers in the merger transaction will be included in the proxy statement/prospectus referred to above. Additional information regarding the directors and executive officers of Synergy is also included in Synergy’s Annual Report on Form 10-K for year ended December 31, 2011. This document is available free of charge at the SEC’s web site (www.sec.gov) and from Investor Relations at Synergy at the address set forth above. Additional information regarding the directors and executive officers of Callisto is also included in Callisto’s Annual Report on Form 10-K, for the year ended December 31, 2011. This document is available free of charge at the SEC’s web site (www.sec.gov) and from Investor Relations at Callisto at the address set forth above.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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