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Prollenium appears to be a competitor of Teoxane. They manufacture fillers. https://prollenium.com/
That's an excellent point. Note that there are about 7 1/2 pages of reps by Crown (vs twice that rep volume for Revance), but all relate, in one way or another, to Crown's ability to close the deal (financing in place, duly authorized, etc.). This is the only rep by Crown relating to the conduct of its business and you have to ask, why would Revance care? The answer is, because they want to know whether it triggers the Teoxane cancellation right. I can just imagine how the negotiation might have gone, something like the Moe Green/Godfather negotation, you don't buy me out, I buy you out. That is, you, Crown, want a rep that no termination rights are triggered, well, then you tell me you are not triggering by being a competitor within the meaning of the license agreement.
Re: Novavax
This is the first time that I've seen it offered at our local CVS, they offer Moderna, Pfizer and now Novavax covid vaccines. I've been alternating Moderna and Pfizer but I am thinking of going with Novavax. Although I'm not convinced that there's much benefit in getting my 6th or 7th booster (I can't keep track) plus natural immunity from one or two infections, beyond the relatively short period the antibodies hang around.
Anyone have a strong view on protein v. mrna vaccines?
So continuing this discussion, the following are some musings on the merger agreement. This will be a somewhat dense post for nonlawyers.
A little background, merger agreements and other acquisition agreements typically have a section containing various representations ("reps" to corporate lawyers, of which I am not one). Typically there will be closing conditions, one of which will be that there has not been a Material Adverse Change ("MAE") and that certain "fundamental" reps are true (like the corporation is duly organized and the stated capital structure is accurate) and that other reps are not false in such manner as would result in a MAE. Reps typically include statements to the effect that there is no outstanding litigation, that the financial statements are accurate, that the corporation is duly organized, etc. Generally, reps are qualified by company disclosure, that is, there will be an exhibit listing outstanding litigation, and other exception to the reps. So the rep is, in essence, qualified by the disclosures.
The Revance-Crown merger agreement contains a rep that the tender/offer won't create a termination right in any material contract. I don't know for sure given that the Company Disclosure Letter is not filed, but I would guess that there some disclosure in there about the Teoxane contract. If there isn't, either it is clear that there is no termination right (e.g., the redacted language in the Teoxance contract makes that clear) or Skadden didn't do it's job and a whiff of that magnitude would be shocking for a firm of their caliber. If there is such disclosure, I think the parenthetical ("in each case...") at the end of the excerpt from the MAE definition must be intended to mean, that doesn't count as an MAE.
If true, this just means that Crown has to close and can't escape because there is a termination right, or some argument that there might be a termination right, of the Teoxane contract. In other words, Crown signed knowing that risk, which has to be true given the agreement was publicly filed and Crown's law firm would have reviewed it. That just means that if they back out, they pay the break fee, unless Revance tries to sue for more or tried to compel them to close. As a practical matter, it is possible that Crown's bankers, who gave them the debt committment, are nervous and they wouldn't be able to close until this is resolved. Of course, this is all wild, uninformed speculation. Could be 100% wrong and the delay could be some juicy competing offer.
Here are some excerpts from the Revance-Crown merger agreement.
"Company" = Revance.
Annex I sets forth the conditions to the offer and clause D relates to the accuracy of the reps, basically, certain fundamental reps are correct and other reps are correct except to the extent it would cause a Company Material Adverse Effect. 5.4, copied below, is not a fundamental rep, it goes into the basket subject to the MAE standard. I have highlighted what I think is the language most pertinent to the Teoxane issue discussed in prior posts.
Re: Teoxane right to terminate
I'm reasonably certain that the language you quote is not applicable here because the termination right is directed at an acquisition of Revance by a competitor of Teoxane. The trigger is a "Change of Control," which is defined in the Teoxane agreement as folllows:
It depends why the tender doesn't go through. If it's because Crown lacks the funding or otherwise fails to close when 50% of the shares have been tendered, Crown pays $43,140,000. If it's because less than 50% of the shares are tendered and not withdrawn, Revance pays $28,760,000.
The merger agreement contains as exhibits equity and debt committments sufficient to fund the tender and merger; the equity committment is guaranteed by various Hildred Capital funds. The actual committments are not attached to the merger agreement filed with the SEC, available here: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001479290/000119312524198448/d876039d8k.htm
Here is a bit of background on Hildred and Crown from a March 2024 article in the WSJ:
I'm looking at the merger agreement and I suppose that is possible. You need an unsolicited "Superior Proposal" and that is defined by reference to an "Acqusition Transaction," which includes:
Indeed. I wouldn't rely on Revance management's concern for shareholders, rather, their self-interest in complying with the securities laws. Whatever is going on, I assume Skadden is advising them.
On (a), the tender offer document will be filed by Crown and Revance doesn't have to do much. And Revance is represented by Skadden, a first rate law firm, and it will do most of the actual work. Hard to believe (a) is the hold up. If it's (c), that's not an excuse for Crown backing out and Revance could compel them to tender and close; at a minimum the $42 million break fee would be payable.
Possibly Crown is having difficulties raising debt, but they did have a committment and if anything the markets are somewhat more favorable than when the committment was obtained, so hard to believe it is that.
I don't see why an offer for a part of the company (therapeutics) would postpone the tender (as opposed to an unsolicited topping offer for the whole company). I suppose the parties could agree, but if the offer is favorable, you would think that Crown would just tender, close and sell the therapeutics. Not sure why they would give the upside to Revance shareholders. At least, I don't see that the merger agreement requires them to.
Re Fosun approval, the original 8-K announcing the Fosun deal said:
Yes. Last time, they filed the 8-K on the same day, August 27, that they entered into the extension, and that was several days before the August 30 date by which the tender was initially required to be started.
They extended the time to commence the tender offer till yesterday, Friday, September 13, but I see no tender offer filing on the SEC website, nor do I see an 8-K announcing that the parties agreed to extend again. Perhaps we will see something Monday.
I have no idea what to make of this.
I have only used the Dexcom G7, for 6 weeks. Same for my wife. I will likely try the new Dexcom at some point. The G7 was absurdly expensive without insurance ($1200 + I believe for 3 month supply), partly that was an education in the insanity of US law governing pharmaceutical coupons; 50% coupons are available but the online Amazon pharmacy told me it was unlawful for them to honor it since I have insurance (Medicare and medicare supplement), even though my insurance wouldn't cover the G7 since I'm not diabetic and was just interested in the CGM for my amusement/self-flagellation. Dexcom told me that was a crock and I just didn't have the stomach to move the prescription to some place that would honor the coupon, if such a pharmacy could even be found.
However, I think we will both try the new over the counter Dexcom. The G7, being designed for diabetics, has an insane level of warnings/alerts that you can't turn off other than actually turning off your phone. But the nonprescription device does not. I familiar with the Dexcom app and while I'm sure I could deal with whatever Abbott has, I don't see the point.
It's mildly interesting to take the link that semi_infinite provided, which is to a Korean news report, and compare the results of Google translate to the AI translation that you get if you click on the English button on the website itself. I can't speak to which is more accurate but the Google translate is certainly better English and reads more naturally.
This is probably both uninformed and incredibly naive, but given that Paxlovid failed to show symptom improvement on an 11 symptom scale (ancient news, already discussed on this board, see https://www.nejm.org/doi/full/10.1056/NEJMoa2309003#ap2, see symptoms at S1 at https://www.nejm.org/doi/suppl/10.1056/NEJMoa2309003/suppl_file/nejmoa2309003_appendix.pdf), is it reasonable for the FDA to allow Paxlovid to be sold into a highly vaccinated, previously infected multiple times, population while refusing to approve drugs that might be superior in at least some aspects?
Right, I should have just stated the fee and not attempted to divide by my incorrect recollection of the outstanding shares.
In fact the $28,760,000 fee Revance pays is smaller than the $43,140,000 termination fee Crown pays.
You are right. There are 104.2 million shares outstanding so it’s about .27 a share. I didn’t check the outstanding shares and for some reason recalled it was roughly 28 million.
The merger agreement prohibits RVNC from soliciting another bid but they are permitted to consider and even accept an unsolicited bid. RVNC would have to pay a break fee of about $1 per share.
I’d also point out that the $200 of debt isn’t $200 anymore, its been partially paid down. The 6/30/2024 Q says the balance as of 6/30/2024 is $174 million. See page 12 of https://www.sec.gov/Archives/edgar/data/1177648/000095017024092714/enta-20240630.htm
If you believe that 54.5 percent of the royalty stream is worth at least $174 as of 6/30, the remaining unemcumbered 45.5 is worth at least $145.
You mentioned the Athyrium debt but there’s also the convertible notes, due 2/15/2027, another $287.5 million. And yhose notes bear interest at 1.75 percent and so any refinance (if possible) would be at much higher interest
I agree. Focusing on the “shareholder equity” line on the GASP balance counts the royalty stream obligation as a liability but fails to include any value for the royalty stream — that may be the proper GAAP treatment but seems especially wrong from an economic standpoint where the “liability” is nonrecourse and secured by only 54 percent of the royalties.
Stepping back, I understand this is old, but I never understood this entire discussion and now that I’ve looked at the financial statements, it seems clearer than ever that it’s all semantics.
The bottom line is that ENTA received $200 million and agreed to pay back 1.42x that amount over time. Assuming the cap will be reached, you can view it as
(I) a sale of $200 million of future royalties for $284 million (providing the buyer with an estimated IRR of 5.6%), in which case the $284 million of royalties would be income to the buyer and not to ENTA but there would be no explicit financing charge on an the ENTA financial statements. Presumably ENTA would report the $200 million of proceeds as income or
(II) a borrowing, in which case ENTA is paid the $282 million of royalties, treats that as income but pays it all over to the “lender”, $200 million as principal and $82 million as interest. The net effect of this is that ENTA has $200 million of income (since the principal repayment is not a deduction) over the life of the deal, exactly equal to the cash “borrowing” proceeds, and the same net result as in (I).
The second of these is what ENTA bean counters decided was appropriate. And the financial statements, including the cash flow, which adjusts from income statement, makes appropriate adjustments.
Somewhat OT, but looking at your profile image and recalling iwfal's remark that only a drooling imbecile would lower prices and not permit advertising, recall Dr. Stangelove's observation:
"Of course, the whole point of a Doomsday Machine is lost, if you *keep* it a *secret*.""
Similarly, the point of a price cut -- to increase demand -- is lost if you keep it a secret (from the consumers who ultimately drive demand).
Here is an example of another transaction -- the Lilly tender/merger for Morphic. Centerview is the financial advisor to Morphic and to Revance. Page 14 has a very detailed discussion of the negotiations between Morphic and Lilly. We can expect disclosure of a similar nature when Crown files its tender off documents.
https://investor.lilly.com/static-files/72b21277-b00e-4038-af81-0d7524acc004
At that point, there should be a better sense of whether this was an unsolicited offer, what the negotiations were, whether there was a bidding process, etc. If there was an auction/marketing to a number of parties, then the chances of a higher bid at this point would be pretty slim.
I think the risk of Crown's offer failing to close is minimal. There are equity and debt committments, and 50% is a pretty low bar. I doubt institutional investors will hold back in the end. And there is the distinct possibility that a good chunk of the shares will be in the hands of arbs (or even Crown) given the trading. It may be, as you say, that the same one million shares have been trading been various funds but I doubt it, but that's just my non-trader instinct.
Right. The merger agreement requires the tender offer to commence by the end of August and it must remain open for at least 20 business days. So around end of September close on the tender, assuming it is not extended, as it can be.
The press release uses the vague phrase, "the transaction is expected to close by year end." The 8-k is more precise, "The Company expects the Merger to close in the fourth calendar quarter of 2024." But the tender will close a bit sooner. And October 1 is fourth quarter.
If we assume a close of the tender by end of September, the active trading can be explained by arbs. I miscalculated the return by assuming a close at year end. Even a .08 profit on an investment of 6.58 in 45 days annualizes to a return in excess of 9.5%. Even a .05 profit beats Treasuries. Extension of the tender for 30 days lowers the return but hardly into disaster territory.
I have speculations but no knowledge, I'm not a trader. However:
(i) hard to believe "arbs" are buying for a .06 or .07 profit, 1% or so, annualized return less than Treasuries.
(ii) hard to believe "arbs" are buying to speculate on a possible topping bid. RVNC hired Centerview Partners, a well-known investment bank, if they couldn't drum up a higher bid, how likely is one now that the buyer has to pay (or assume) the $29 million breakup fee? The options market suggests traders believe a higher bid is highly unlikely, the October 18 expiration with a 7.5 strike has a large ask of $.05 and no bids.
(iii) shorts covering. Maybe, but why the rush? My IBKR screen shows 3.6 million shortable shares and a fee rate of 0.48%, roughly the same as for AAPL. So shorts can just wait at little further cost to cover.
(iv) Crown. Incentive for them is they save a few pennies and get that much closer to meeting the 50% threshhold, which presumably is their goal. My understanding is it is legal for them to buy prior to commencing the tender. (I'm not securities lawyer, though). But if they are buying, we should see a form 4 filing soon, or at a mnimum some disclosure in the tender offer, which is required to be filed prior to the end of the month.
Millions of shares have been trading at 6.57 and 6.58, there have been large, consistent bids at 6.57 for days. I have no idea who is actually buying but one distinct possibility is Crown. They can accumulate enough shares to meet the 50% hurdle or at least get a good way there. At some point, if/when they cross 5%, they will have to file a disclosure form with the SEC. I believe a Form 4 has to be filed within 2 business days of crossing the threshhold.
If the tender offer condition fails, RVNC pays the breakup fee of $28,760,000, even if there is no higher offer. That would help their liquidity.
They entered into a merger agreement under which a sub of Crown will first tender for shares and after 50 percent or more are tendered, merger sub merges into RVNC. So ultimately there is technically a merger.
https://www.sec.gov/Archives/edgar/data/1479290/000119312524198448/d876039d8k.htm
Merger agreement attached as an exhibit.
Recursion and Exscientia agree to merge in all stock deal.
Here’s an article discussing cell penetrating peptides. https://www.tandfonline.com/doi/full/10.1080/17425247.2023.2251399