Ocera Therapeutics fka OCRX

[king oil]

Looks like a ton of buying ahead of the deadline. People looking to get in on the CVRs?

[shareholder_boar]

"...before the market opens on Friday"

After checking my calendar - make that Monday.
Although there's always a chance it will actually be Tuesday (or later).

[shareholder_boar]

".all of that $3M cash must be gone and Ocera is currently operating on debt. "

Let's hope not because any deficit gets deducted from the milestone payments. Mallinckrodt made sure to write into the CVR agreement that shareholders pay for any shortfall.

[king oil]

yes, I hadn't thought of that. Fortunately it won't be an issue for me but I'm sure there are many who prefer to have the funds available sooner. Hopefully the popular tax software packages include features for handling payments via a CVR.

[king oil]

good points longx. I suppose the lack of cash is the reason MNK was able to defer so much of the potential into the CVR rather than paying more in cash for the shares. I agree that with MNK's resources the drug has a better chance of coming to market. I'm guessing that the increasing share price ahead of the deadline indicates the market believes there is growing chance of the deal being finalized.

[shareholder_boar]

"...holding my shares..."

The only downside to that is you won't receive your $1.52/share until a week to a month after those who tender get their proceeds. Shares will be delisted before the market opens on Friday so you won't have access to the funds should you need them.

[longx]

We all do see the huge potential in OCR-002 once the drug is approved. Unfortunately, Ocera is running out of cash for continuing Phase-3 clinical trials. Please take a look at the most recent 10-Q filing, which can be viewed via the following link:
http://quote.morningstar.com/stock-filing/Quarterly-Report/2017/9/30/t.aspx?t=:OCRX&ft=10-Q&d=3e7ed4398bddc48c25fd56a88e98712c

As of 09/30/2017:
- Cash and cash equivalents $14.35M
- Total current assets $14.96M
- Total current liabilities $11.74M

Minus the debt/liabilities, there are only about $3M cash as of 09/30/17 for running the upcoming clinical trials. And for the current quarter (ended by 12/30/17), as analysts estimated Ocera to post a loss of -$0.20/share or -$5.5M/quarter (see Yahoo! finance page). Therefore, by now (12/07/2017) all of that $3M cash must be gone and Ocera is currently operating on debt.

If the tender offer is rejected by shareholders, Ocera will have to do a couple reverse splits and issue new shares for obtaining cash in order to continue its operations and this will cause share-price dropping significantly in the future.

Mallinckrodt (MNK) is a large pharmaceutical company with over $3.2B/yr revenue, they have the resources for continuing OCR-002 clinical trials, the chance for the drug to be approved will be higher and hopefully, we will be able to receive the final (3rd) milestone payment.

By rejecting the tender offer you don't know what the future of Ocera will be like, but by accepting the offer you know the exact amount of money you're going to receive.

http://quote.morningstar.com/stock-filing/Quarterly-Report/2017/9/30/t.aspx?t=:OCRX&ft=10-Q&d=3e7ed4398bddc48c25fd56a88e98712c

[king oil]

thanks longx, that article is very helpful in understanding the mechanics of a tender offer.

My broker gave me the number of an info line that was setup for the OCRX offer: 1-800-341-6292.

I called and they explained the following options available:


Option 1) the shareholder accepts the tender offer before the deadline:

The deadline is December 8 at 11:59pm. The date might vary across different brokerage firms. Once the sale is finalized, the shareholder effectively sells all of their shares and receives $1.52 per share in cash and 1 CVR per share. If the sale isn't approved/finalized, the offer is cancelled and the shareholder will keep their OCRX shares.

Option 2) the shareholder doesn't accept the tender offer before the deadline:

The shareholder keeps their OCRX shares. If the sale is approved/finalized, the shares are cancelled and the shareholder automatically receives $1.52 per share in cash and 1 CVR per share. If the sale isn't approved/finalized, the offer is cancelled and the shareholder continues to keep their shares.


Basically, this is a way for shareholders to 'vote' on the sale by either accepting the tender offer or not. If enough shares are sold to meet the minimum required for the sale to go thru, then all shares are cancelled and every shareholder receives the $1.52 and 1 CVR per share. If not enough shares are sold then the offer is cancelled. At that point there might be new offers from the same or other companies, or there is no new offer and the shares continue to trade as they normally would.

Based on all of this I'm leaning to holding my shares and wait to see what happens.

[longx]

Sorry for my mistake. The following link provide a more clear explanation:
https://www.thebalance.com/what-is-a-tender-offer-4129430

[shareholder_boar]

"But you will receive a one time cash payment which is calculated based on the stock share price of the very last trading day. And the share price could be higher or lower than the current price as explained via this link: "



The article you referenced does not apply to the OCRX merger. Even it did your interpretation is incorrect.

There will be no one time cash payment based on the final share price.

[longx]

longx, in your opinion, do you think it's better to tender the shares before the deadline or hold onto the shares and see what might happen after the deadline?

Hi king oil,
I don't know the amount of shares you own and your average share price. Perhaps you should take at look at the link in my previous reply to smallbio, and make your own decision.
As for me the reason I decided to accept the tender offer:
- I'm happy with the $1.52/share payment since my average share price @ $1/share, and I think the first two milestones in the CVR are easily achievable.
- Tax filing advantage: I've already accumulated a huge capital gain in this year, so I don't mind to spend a small portion of pretax money from the OCRX gain for the chance of receiving first two milestone payments.

https://www.investopedia.com/ask/answers/06/rejecttenderofferpublictoprivate.asp

[longx]

If you want to accept the tender offer, then you'll need to contact your broker ASAP to let them know that you want to do so.
By not doing anything as you stated in your post you will NOT receive $1.52 plus the CVR. But you will receive a one time cash payment which is calculated based on the stock share price of the very last trading day. And the share price could be higher or lower than the current price as explained via this link:
https://www.investopedia.com/ask/answers/06/rejecttenderofferpublictoprivate.asp

[king oil]

longx, in your opinion, do you think it's better to tender the shares before the deadline or hold onto the shares and see what might happen after the deadline? You've made some very good decisions and appear to have a great deal of experience in this sector. thanks

[king oil]

ok, thanks. I was hoping that perhaps there would be a counteroffer from a bigger player in pharma, but it doesn't look like that will happen.

[smallbio]

I plan to hold through 12/7 deadline without doing anything.
I expect to receive $1.52 for each ocrx share plus one CVR.
I don't expect to see any changes of the deal.

[king oil]

thanks for the info. I spoke with Fidelity today and they mentioned the $38 fee for voluntarily tendering the offer. I asked what happens if no action is taken before the December 7 deadline. They said it's up to the company, but usually the offer for $1.52 per share plus 1 CVR becomes mandatory, or it's possible that there will be a new offer at a higher or lower price per share. They confirmed that the CVRs will not be transferable or trade-able. They will sit in the account until milestone dates have passed.

Is anyone planning to hold on to their shares past the December 7 deadline, and any thoughts on what might happen to the shares after that point?

[shareholder_boar]

Did management give those odds..

They were given to the third party hired to give the required fairness opinion of the offer. Can be found in the Solicitation statement from the board (p. 39-40).

[king oil]

Did management give those odds on a conference call or somewhere else?
thanks

[shareholder_boar]

"is each Milestone paid out SEPARATELY.."

The milestone payments are paid as they are earned (within 60 days).


For valuation purposes, OCRX management put the odds of the IV milestone being met at 75% and the oral at 35.7% (I kid you not), most likely to occur in 2018 and 2020 respectively.

[allisondbl]

"Contingent Consideration if the milestones set forth below are achieved on or before December 31, 2029"

It depends on A) where they are in Phase 1 or 2 at the moment as to how far out in time a single patient in Ph 3 might take; and B) I skimmed not scanned the document ... is each Milestone paid out SEPARATELY or does one have to wait until 2029 to see how much one gets if anything? Alley

[allisondbl]

If you mean past CVRs in general, then the answer is yes. And yes: a ton of lawsuits result, just as this offer by Mallincrodt has resulted in several lawsuits. Speaking as a class-action lawyer, the lawyers make money sometimes/often, the investors; seldom.

[longx]

Do you think Mallinckrodt would gamble $42Mil only not to see the 1st & 2nd milestones? And these two milestones should be easily achievable within 18 months as it's simply the enrollment of the first patient in a Phase 3 Clinical Trial. For detailed info on this, please search for the text “IV Milestone” and "“Oral Milestone” in the following merger agreement document:
https://www.sec.gov/Archives/edgar/data/1274644/000119312517330223/d487980dex21.htm
The 3rd milestone is very difficult to achieve (probability of success is less than 5%), but by that time Mallinckrodt already spent $67M (= $42M + $10M + $15M), and I hope they had already studied the clinical data from the first two phases carefully and not to gamble $67Mil to see OCR-002 failed in phase 3.
Anyway I'm into this mainly for the 1st & 2nd milestone payments.

[king oil]

I hadn't thought of that. I wonder if there is precedent with past deals? Imagine if they missed a milestone date by 1 day? That would likely trigger a bunch of lawsuits.

[allisondbl]

Yes. I worry the milestones wont' be met - too often I find they are not. And NEW management has too many ways to manipulate sales and/or accounting if things are close enough to the edge. And the dates are WAY too far off. Not sure, just thinking.

[king oil]

I haven't had any experience with a CVR. Do you think it won't pay off because the milestones won't be achieved or some other reason?

[allisondbl]

Well the question is sell and take the extra $.22 I think it is - and in my case get a fairly substantial loss to offset gains this year - or a slightly lesser payout now and hope the CVR pays off which, in my experience, is highly unlikely. And honestly, then I end up with a CVR clogging my stock list which if it's worth ANYTHING, requires paying a fee that's likely MORE than the value of the damn things to sell it. As well as thinking about the $38 or so fee v. $4.95 for selling. Alley

[king oil]

ok thanks. I'll check into it and perhaps do something similar. I can't help wonder though if perhaps we're missing something? why wouldn't institutions and more investors be purchasing shares before the acquisition closes? The share price is a huge discount vs. potential payments. It's as if the market is only giving a 25% chance of the first couple milestones being achieved.

[longx]

thanks for sharing your plan. On the first point -- that the loss won't be treated as a wash sale -- is it because of the timeframe of greater than 30 days between the 2 transactions, or because of special treatment when shares are cancelled due to a buyout?

I believe that that as long as you make sure that the date you purchase OCRX shares and the date you receive the payment for your shares to be acquired by the buyer (for the shares to be canceled) is more than 30 days then the transaction should not be under wash sale. I'm unaware of any exception or special treatment to be applied in case of acquisition/merger.

I think you can get the answer on this by contacting D.F. King & Co., the agent handling the purchase/acquisition. The contact info can be found in the document:
Toll Free#: 1-800-341-6292
Email: [e-mail]

[king oil]

thanks for sharing your plan. On the first point -- that the loss won't be treated as a wash sale -- is it because there are more than 30 days between the 2 transactions, or because of special treatment when shares are cancelled due to a buyout?

[longx]

Mallinckrodt is now owning over 12% of Ocera:
https://fintel.io/i/mallinckrodt
As the majority shareholder of 8M institutional shares, it's 100% certain that the deal will go through.
https://fintel.io/so/us/ocrx

I increased my holding by nearly 200K shares between 11/05 -> 11/09 with an average price of $1.69/share. The reason I'm doing this:
1. Tax advantange: When the deal closed by the year end (hopefully after 12/10), as the shares being canceled I will receive only $1.52, so the difference $1.69 - $1.52 = $0.17 (which is not subjected to wash sale) will be claimed as capital loss, which can be used for offsetting a portion of the capital gain I received from the original shares I owned before 11/02.

2. The 1st & 2nd milestones should be achievable by the end of 2018 or Q1/2019, therefore the investment of only $0.17 (pre-tax money) in order to receive at least $0.70 (or almost 300% gain) in 12 -> 16 months is definitely very attractive.

If you decide to so the same like what I did, please make the date you purchase shares at least 30 days before the date the Ocera stop trading (as shares canceled) or will be considered as wash sale.

[king oil]

I think it’s better to hold the stock and pay the fee. If you sell the stock you won’t get the CVR which will probably pay more than the 25 cent premium on the buyout price.

[allisondbl]

Re: $38 brokerage charge - Unfortunately most brokers do charge about that if you either tender into the tender offer or if you wait until after the date of the tender and do nothing and thus get taken out by default (prob. not what it's called.) at the tender price.

Thus with these relatively cheap stocks, depending on how much you own, if the fee to sell is, say, $4.95, you need to compare those fees in the mix.

[lugan]

TD Ameritrade described it as a brokerage charge as part of the reorganization.

[DrShocker]

Please explain this charge?

[lugan]

Offer must be accepted by Dec 8.
TD Ameritrade will add a $38 charge if offer is accepted.

[longx]

at the current share price of $1.69, you can buy the possibility of making $2.58 for 17 cents. sounds like a good deal.

Yes, totally agree with you on this. The possibility for achieving the first two milestones (a) and (b) is very high, probably over 90%, and we will receive the payment of $0.90/share (almost 400% gain from the original $0.17 investment) by the end of 2018 or early 2019 after the enrollment of the very first patient in the clinical trial (see the text from the SEC filing attached below). The rest of the payment ($1.90/share) is simply a bonus, and I don't really care much about it; if we can receive it that would be awesome! Otherwise, I'm very happy with the 400% gain from the first two milestones.

Also, given the very low amount of breakup-fee $1.68M, there is the possibility of receiving counter higher bids in the upcoming weeks.

From the filing document:

* “Milestone Payment” means, as applicable, (a) with respect to achieving the IV Milestone, an aggregate amount equal to $10,000,000, (b) with respect to achieving the Oral Milestone, an aggregate amount equal to $15,000,000 and (c) with respect to achieving the Product Sales Milestone, an aggregate amount equal to $50,000,000, in each case as may be reduced, as applicable in accordance with Section 5.18 of the Merger Agreement, by the Closing Shortfall or Measurement Date Shortfall, if any.
* “Milestone Payment Date” means, (a) with respect to a Milestone Payment in connection with the IV Milestone and Oral Milestone, the date that is no later than sixty (60) days following the date of the achievement of the corresponding Milestone, and (b) with respect to the Milestone Payment in connection with the Product Sales Milestone, the date that is no later than sixty (60) days following the final determination of the Product Sales Statement reporting achievement of such Milestone.
(a) “IV Milestone” means the enrollment of the first patient in a Phase 3 Clinical Trial of an intravenous formulation of the Product by the Company, any of its Affiliates or their respective licensee or sublicensee with respect to rights to develop or commercialize the Product.
(b) “Oral Milestone” means the enrollment of the first patient in a Phase 3 Clinical Trial of an oral formulation of the Product by the Company, any of its Affiliates or their respective licensee or sublicensee with respect to rights to develop or commercialize the Product.
(c) “Product Sales Milestone” means the first occurrence of the achievement of cumulative Product Sales in excess of $500,000,000, by any Selling Entity or any combination thereof.
* “Breakup Fee” means $1,680,000.

[king oil]

The current share price is interesting. Assuming the acquisition goes thru, shareholders will receive $1.52 per share and then the possibility of up to $2.58 per share, dependent on meeting the milestones.

Therefore, at a current share price of $1.69, you can buy the possibility of making $2.58 for 17 cents. sounds like a good deal.

[king oil]

thanks. I've been reading that those types of payments are very complicated for tax reporting. ugh

[DewDiligence]

Trading in OCRX will cease when the merger closesin the next month or two.

When each CVR payment-triggering milestone is attained, the corresponding payment amount will be transferred automatically to the custodians/brokers for the OCRX shareholders of record.

[king oil]

anyone have any ideas on how they'll handle the CVR? do they purchase and retire all the OCRX stock and issue a stock dividend for the CVR's, or do they keep OCRX trading until the various milestones have passed?

[DewDiligence]

No—it's quite unlikely that the CVR milestone payments will be made in full—see #msg-135908501.

[DrShocker]

Think this is worth $4.10 a share?

[shareholder_boar]

No chance of the "investigation" by Tripp Levy derailing the merger.
Nuisance lawsuits are a part of all deals and are settled or dismissed before most closings.

No extra financial award for shareholders - just a a filing with more disclosure and, most importantly, an agreement to pay the plaintiff's attorneys. The last thing the suing firms want is for the deal to be killed!

Good business if you can get it - you can see why they spam internet newsgroups to drum up business.

[king oil]

Based on what I've read thus far the CVR doesn't sound like a great deal for OCRX shareholders.

Shadowy Shares: The Dark Side of Contingent Value Rights

https://www.forbes.com/sites/greatspeculations/2011/05/09/shadowy-shares-the-dark-side-of-contingent-value-rights/#4b6026733343

[king oil]

HC Wainwright had target price of $4 since back in March. I wonder if there's also some tax advantage to structuring the deal in this way? It will be interesting to see what these lawsuits claim is a fair price for the stock.

H.C. Wainwright Pounds The Table On Ocera Therapeutics Inc (OCRX)
Jason Cohen, Editor-March 15, 2017, 12:40 PM EDT SHARE ON:
H.C. Wainwright analyst Ed Arce was out pounding the table on Ocera Therapeutics Inc (NASDAQ:OCRX), reiterating a Buy rating and a $4.00 price target, which implies an upside of 180% from current levels.

Arce wrote, “With complete STOP-HE data in hand, Ocera is well positioned for a successful End-of-Phase-2 meeting with FDA in 3Q17.
We believe that the complete data not only provided insight on why STOP-HE failed to reach its primary endpoint, but more importantly, established the main considerations for the Phase 3 design. Specifically, we will look for the Phase 3 trial to include: 1) a loading dose as well as an infusion dose of at least 20g to elicit a more pronounced treatment effect; 2) initiation of treatment promptly after randomization; 3) assessment of primary endpoint measurement at 48 hours post-infusion; and 4) exclusion of patients on rifaximin. We believe the incorporation of these changes into the Phase 3 design positions Ocera for a successful agreement with the FDA for a clear path forward which represents a major risk-reducing event.”

https://www.smarteranalyst.com/2017/03/15/h-c-wainwright-pounds-table-ocera-therapeutics-inc-ocrx/

[king oil]

Monteverde & Associates PC Announces An Investigation Of Ocera Therapeutics, Inc. - OCRX

NEW YORK, Nov. 2, 2017 /PRNewswire/ -- Juan Monteverde, founder and managing partner at Monteverde & Associates PC, a boutique securities firm headquartered at the Empire State Building in New York City, is investigating Ocera Therapeutics, Inc. ("Ocera" or the "Company") (NasdaqCM: OCRX) relating to the sale of the Company to Mallinckrodt PLC (NYSE: MNK). As a result of the merger Ocera shareholders are only anticipated to receive $1.52 in cash plus a contingent value right to receive one or more payments of up to $2.58 per share.

The investigation focuses on whether Ocera and its Board of Directors violated securities laws and/or breached their fiduciary duties to the Company's stockholders by 1) failing to conduct a fair process and 2) whether and by how much this proposed transaction undervalues the Company.

Monteverde & Associates PC is a boutique class action securities and consumer litigation law firm that has recovered millions of dollars and is committed to protecting shareholders and consumers from corporate wrongdoing. Monteverde & Associates lawyers have significant experience litigating Mergers & Acquisitions and Securities Class Actions, whereby they protect investors by recovering money and remedying corporate misconduct. Mr. Monteverde, who leads the legal team at the firm, has been recognized by Super Lawyers as a Rising Star in Securities Litigation in 2013 and 2017, an award given to less than 2.5% of attorneys in a particular field.

If you own common stock in Ocera and wish to obtain additional information and protect your investments free of charge, please visit our website or contact Juan E. Monteverde, Esq. either via e-mail at [e-mail] or by telephone at [phone].

Contact:
Juan E. Monteverde, Esq.
MONTEVERDE & ASSOCIATES PC
The Empire State Building
350 Fifth Ave. Suite 4405
New York, NY 10118
United States of America
[e-mail]
Tel: [phone]


https://www.morningstar.com/news/pr-news-wire/PRNews_20171102DC34189/shareholder-alert-monteverde-associates-pc-announces-an-investigation-of-ocera-therapeutics-inc-ocrx.html

[ClayTrader]

* * $OCRX Video Chart 11-02-17 * *

Link to Video - click here to watch the technical chart video

[~ Blue ~]

OCRX great, CYTR got good news..

[king oil]

I think every shareholder would agree :)

[longx]

Mallinckrodt to Acquire Ocera Therapeutics for Up to $117M
https://www.genengnews.com/gen-news-highlights/mallinckrodt-to-acquire-ocera-therapeutics-for-up-to-117m/81255121

Given the huge market opportunity of $5B -> $7B, I think Mallinckrodt should make one-time payment of $117M, rather than $42M plus contigent payment of $75M: