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RVNC, in its original PR, indicated that they could not see a path to ever be able to sell Daxxi profitably.
Of course that could just be what Foley said to justify his selling RVNC at what many consider a way too low price. With interest rates coming down, raising capital should be easier, and approval in China means milestones down the road.
what a mess, all these is telling us is Foley was rushing to do a deal... really wonder why he was in such as rush giving $RNVC's cash position and up tick in sales.
why not wait till CD sales kick in? why not wait for China approval and sales? Why not try to explore selling commercial rights to raise cash?
I don't mind the deal failed...better if Crown end up paying up $42mm, they should help bridging the funding gap.
Prolennium is a private Canadian manufacturer of an HA filler called Versa that is known for high HA concentration and adding substantial volume at very competitive price. They have been in the market some 5 to 6 years I believe. I would guess they generate less than $100M a year in US filler sales.
They are definitely a competitor to Teoxane/RHA. I would view this rumor as unlikely.
I can't imagine that a tender offer would have been initiated under legal supervision from both sides which threatened the Teoxane agreement. Furthermore: Teoxane is likely generating $50M a year in sales to Revance and those sales are growing and taking marketshare from Allergan and Galderma in a competitive filler market. Teoxane can't be disappointed with the agreement and definitely wouldn't want to walk away from this cash flow.
Therefore, the only other delays I can think of is that Crown is not confident in being able to get the 50% of shares necessary to complete the acquisition or that a competitive bid may be in the works and that they are completing due diligence. The board would have to seriously consider this offer if they have funding in place.
There has been all kinds of junk notes from RVNC "reps" on Cafepharma about Prollenium. Cafepharma is one of the most unreliable sources of information out there. I doubt anyone on there is legitimate as a result of the posting anonymously
Prollenium is a Canadian-based company that specializes in the development and manufacturing of dermal fillers, particularly hyaluronic acid-based fillers. One of their well-known products is Revanesse®, a line of dermal fillers designed for aesthetic treatments, including facial wrinkles, volume loss, and lip enhancement. Prollenium is recognized for its commitment to high-quality cosmetic and medical products in the aesthetics industry.
RVNC, in its original PR, indicated that they could not see a path to ever be able to sell Daxxi profitably.
If Crown Labs has come to the same conclusion, then it’s conceivable they are rigorously, searching for a material adverse event which allows them to avoid the break fee.
If something else happened, wouldn’t crown labs have been forced to issue either an 8K or a press release?
The definition [of competitor] includes companies that are merely doing research and development on dermal fillers and don't yet have a commercial product
Indeed, but so does matching rep by Crown that it is not doing that.
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.
But note the broad definition of a competitor in the text you excerpted. The definition includes companies that are merely doing research and development on dermal fillers and don't yet have a commercial product.
I think that may be an over-read of the provision on change in control.
You could be right, of course. But something of consequence is delaying the tender offer.
Dew, I think that may be an over-read of the provision on change in control.
The clause says:
"For the purpose of this definition a Competitor shall be any entity (including but not limited to a company or an Affiliate thereof) that at the time of the Change of Control is active in the research on, the development of, the manufacturing of, the marketing of the commercialization of, the distribution of, and/or the promotion of any
, such as but not limited to
. For clarity, a change of control at the level of the Distributor by a Third Party that does not qualify as a Competitor shall not be a Change of Control pursuant to this Agreement."
So obviously there are redacted provisions in the
, but what's important is that the definition is limited to a specific type of competitor.
Then you can read section 6.15 of the Merger Agreement. It's a representation by Crown as the buyer and says:
"6.15 Non-Competitor. Each Buyer Party, on behalf of itself and its Subsidiaries, acknowledges that, as of the date hereof, it is not active in the research on, the development of, the manufacturing of, the marketing of, the commercialization of, the distribution of, and/or the promotion of any hyaluronic acid-based dermal fillers."
Notice how this particular clause almost exactly mirrors the clause in the Teoxane agreement with manufacturing, marketing, commercialization, distribution or promotion. This leads to the extremely high likelihood that the Teoxane clause was aimed at dermal filler companies. This also makes sense as any public company that would essentially stop itself from being sold within its industry (aesthetics) would essentially be committing fiduciary neglect since the board needs to make sure the company can sell itself. Narrowly tailoring a non-compete provision to a very specific area would be more befitting a public company with fiduciary duties and the limitation to dermal fillers makes sense since Revance could argue that if Allergan/Abbvie wanted to buy them they would probably scuttle the filler anyway.
It does not make economic sense for Crown to close the buyout of RVNC without securing the US rights to Teoxane’s dermal fillers.
That may be but there is the little matter of the merger agreement that they signed. And it explicitly provides that Revance can seek specific performance, not just the payment of the breakup fee, although they can't seek both. Whether Revance would or should do so is a different matter.
I suppose if you want to entertain fantasies, you can argue that the harm to Crown in closing without Teoxane would be greater than the detriment to Revance and so Crown should be willing to negotiate an exit from the deal for more than the specified breakup fee.
11.8 Remedies.
(a) Remedies Cumulative. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby or by Law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy.
(b) Specific Performance.
(i) The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the Parties do not perform the provisions of this Agreement (including any Party failing to take such actions as are required of it hereunder in order to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. The Parties acknowledge and agree that, subject to Section 10.2(b), Section 10.3(f) and this Section 11.8, (A) the Parties will be entitled, in addition to any other remedy to which they are entitled at Law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of this Agreement and to enforce specifically the terms and provisions hereof; (B) the provisions of Section 10.3 are not intended to and do not adequately compensate the Company, on the one hand, or the Buyer Parties, on the other hand, for the harm that would result from a breach of this Agreement, and will not be construed to diminish or otherwise impair in any respect any Party’s right to an injunction, specific performance and other equitable relief; and (C) the right of specific enforcement is an integral part of the Merger and without that right, neither the Company nor the Buyer Parties would have entered into this Agreement. Notwithstanding anything to the contrary in this Agreement, it is acknowledged and agreed that the Buyer Parties have an obligation under this Agreement to cause the Equity Financing to be funded (subject to the requirements that all of the conditions to the funding of the Equity Financing have been and continue to be satisfied or waived) and that the Company shall have the right to obtain an injunction, specific performance or other equitable remedies in connection with enforcing the Buyer Parties’ obligations to consummate the Merger and cause the Equity Financing to be funded (including to cause Parent to enforce the obligations of the Guarantor under the Equity Commitment Letter in order to cause the Equity Financing to be timely completed in accordance with and subject to the terms and conditions set forth in the Equity Commitment Letter) if, and only if, and for so long as: (i) all of the conditions with respect to the Offer set forth in Annex I and with respect to the Merger set forth in Section 9.1 have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Acceptance Time or the Closing, as applicable, each of which is capable of being, and reasonably expected to be, satisfied or waived at the Acceptance Time or the Closing, as applicable), (ii) the Debt Financing (or Alternative Debt Financing) has been or is capable of being funded in full or the Financing Sources have irrevocably confirmed in writing to Parent that the Debt Financing will be funded in full at the Closing if the Equity Financing is funded at the Closing, (iii) the Company has irrevocably confirmed to Parent in writing (and not revoked such notice) that if specific performance is granted and the Equity Financing and Debt Financing are funded, then the Company is ready, willing and able to consummate the Closing, (iv) Parent and/or Merger Sub fails to accept to purchase the Shares in accordance with Section 2.1 and consummate the Closing within three (3) Business Days following the later of (x) the date by which the Closing is required to have occurred pursuant to Section 3.1(b) and (y) receipt of written notice from the Company in accordance with clause (iii) above, and (v) all of the conditions with respect to the Offer set forth in Annex I and with respect to the Merger set forth in Section 9.1 have continued to be satisfied during the entirety of such three (3) Business Day period (other than those conditions that by their terms are to be satisfied at the Acceptance Time or the Closing, as applicable, each of which is capable of being, and reasonably expected to be, satisfied at the Acceptance Time or the Closing, as applicable) and (vi) the Company remains ready, willing and able to consummate the Offer and the Closing. Notwithstanding the foregoing and subject to the rights of the parties to the definitive agreements for any Debt Financing under the terms thereof, none of the Company and its Affiliates and their direct and indirect equity holders shall have any rights or claims (whether in contract or in tort or otherwise) against any Financing Source, solely in their respective capacities as lenders or arrangers in connection with the Debt Financing, and in no event shall the Company, any of its Affiliates or its or their direct or indirect equity holders be entitled to directly seek the remedy of specific performance of this Agreement against any Financing Source.
…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.
It does not make economic sense for Crown to close the buyout of RVNC without securing the US rights to Teoxane’s dermal fillers. Hence, if the hypothetical scenario we’ve been discussing is what’s actually holding things up, there are two plausible outcomes: 1) Teoxane negotiates a higher buyout price, thereby reducing Teoxane’s capital loss on its RVNC shareholding; or 2) Crown walks and pays the breakup fee, an outcome I don't mind for the reasons mentioned in #msg-175091770.
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.
5.4 Non-Contravention. The execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and obligations hereunder, and the consummation of the Merger do not (a) violate or conflict with any provision of the organizational documents of the Company or any of its Subsidiaries; (b) violate, conflict with, result in the breach of, constitute a default (or an event that, with or without notice or lapse of time, or both, would become a default) pursuant to, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration pursuant to any Material Contract; (c) assuming compliance with the matters referred to in Section 5.5 and, in the case of the consummation of the Merger, violate or conflict with any Law applicable to the Company Group or by which any of its properties or assets are bound; or (d) result in the creation of any lien (other than Permitted Liens) upon any of the properties or assets of the Company Group, except in the case of each of clauses (b), (c) and (d) for such violations, conflicts, breaches, defaults, terminations, accelerations or liens that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(w) “Company Material Adverse Effect” means any change, event, occurrence, effect, condition, state of facts or circumstance (each, an “Effect”) that, individually or when taken together with any other Effect, has, or would reasonably be expected to have, a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Company Group, taken as a whole; provided, however, that none of the following (by itself or when aggregated) will be deemed to be or constitute a Company Material Adverse Effect or will be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur (subject to the limitations set forth below):
…
(vii) any Effect resulting from the negotiation, entry into or announcement of this Agreement, or the pendency of the Offer, the Merger and the transactions contemplated hereby, including (1) by reason of the identity of, or any facts or circumstances relating to Parent, Merger Sub or any of their respective Affiliates (without giving effect to the proviso in the definition of Affiliates), (2) by reason of any communication by Parent or any of its Affiliates (without giving effect to the proviso in the definition of Affiliates) regarding the plans or intentions of Parent with respect to the conduct of the business of the Company Group following the Acceptance Time, and (3) the impact of any of the foregoing on the relationships, contractual or otherwise, of the Company Group with suppliers, customers, partners, vendors, licensors, licensees, distributors, employees, regulators or any other third Person (in each case, other than for purposes of (a) any representation or warranty contained in Sections 5.4 or Section 5.5, or (b) the condition set forth in clause (D) of Annex I, solely as such condition relates to Sections 5.4 or Section 5.5, but, in each case, subject to disclosures in Sections 5.4 or Section 5.5 of the Company Disclosure Letter, to the extent the purpose of such representation and warranty is to address the consequences resulting from the execution of this Agreement or the consummation of the transactions contemplated hereby);
Teoxane has an amazing skincare line that RVNC did not bring in to sell in the USA. THIS was a huge mistake I becasue their hero product is called RHA Serum and has the same components as the RHA filler but for topical use. An easy tie in to sell Filler, Toxin and Skincare and promote the RHA line.
We carry Crown’s Biojuve and their Progen PRP. I wouldn’t think of them as competitors with a filler or toxin…..other than someone may allocate dollars one direction or the other. But I’m certainly not a legal expert on this. Wouldn’t surprise me that a case could be made for that though.
I contend that the Change of Control provision does pertain. Crown can be construed as a competitor of any company selling dermal fillers by dint of its Biojuve and ProGen PRP (platelet-rich plasma) products.
The best scenario for believers would be crowns paid the 42mm break up fee and move on. Then, fire Foley and hire a competent CEO. Selling RVNC at 6 bucks means he never believed in his own vision.
mouton29 - Very interesting info. Thank you once again for your exceptional effort and commentary!
So Teoxane most likely cannot just walk with their line but they can't be happy with how Revance stock has performed. If there is trouble with the deal, I'm sure they are right in the middle of it.
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:
Change of Control shall mean, with respect to the Distributor, the acquisition (directly or indirectly, whether by merger, consolidation, purchase and sale, share exchange or otherwise, and whether effected by one (1) or a series of transactions occurring prior to or after the Effective Date) by a Competitor of a beneficial interest in the securities of the Distributor representing more than
of the combined voting power of the Distributor’s then outstanding securities. For the purpose of this definition a Competitor shall be any entity (including but not limited to a company or an Affiliate thereof) that at the time of the Change of Control is active in the research on, the development of, the manufacturing of, the marketing of, the commercialization of, the distribution of, and/or the promotion of any
, such as but not limited to
. For clarity, a change of control at the level of the Distributor by a Third Party that does not qualify as a Competitor shall not be a Change of Control pursuant to this Agreement.
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
, HAS BEEN OMITTED BECAUSE REVANCE THERAPEUTICS, INC., HAS DETERMINED THE INFORMATION (I) IS NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO REVANCE THERAPEUTICS, INC., IF PUBLICLY DISCLOSED.
We can't be certain given the significant redaction, but it doesn't appear to me that Crown is a competitor, given their product line. But you can form your own view. See https://www.crownlaboratories.com/aesthetics/
What I am 99.9999% certain of is that Skadden Arps (representing Revance) and Kirkland and Ellis (representing Crown) would have reviewed the unredacted agreement and would have a view on the application of the clause.
If the above is wrong and Teoxane has a right of termination, Crown would have a right to walk with no termination fee if the Teoxane termination right (assuming it exists) would be a "Company Material Adverse Effect. There is some complex language in the definition of Company Material Adverse Effect that might have a bearing on this but it is hard to parse and moreover depends on what is on the "Company Disclosure Schedule," which of course is not filed. Corporate lawyers and other masochists are free to review the relevant definition and also section 5.4 in the Merger Agreement, available here. https://www.sec.gov/Archives/edgar/data/1479290/000119312524198448/d876039dex21.htm
Teoxane competes effectively in Europe without a Toxin line and probably thinks they can do so in the US without Revance (either on their own or with some new partner). Revance has already established Teoxane in the US Market and done all the heavy lifting to establish the line, so someone new could benefit greatly.
Revance without Teoxane is a disaster for Crown. (DAXXY sales are hurt as you have to cut the salesforce significantly and the synergy sales for DAXXIFY no longer exist, plus RVNC/Crown loses all the gross profit from Filler sales). Teoxane has tremendous negotiating power and probably can get a lot more than just European rights to DAXXIFY.
There is scenario that exists where Teoxane votes for the deal along with everyone else but makes it clear Crown won't get to keep their filler line. The deal passes and Crown is forced to back out and pay the breakup fee.
If Valérie Taupin doesn't want this deal to happen, I don't think it goes forward.
Teoxane has_the contractual right to_end_its_agreement_with_RVNC_if_there_is_a change of control; from Section 16.4 (page 66) of the Teoxane Agreement filed with the SEC as Exhibit 10.43 to RVNC’s 2020 10-K:
So did RVNC management forget to mention this to Crown or did they just not read their own agreement with Teoxane so were unaware?
Not sure why I couldn’t forward or reference my comments from last month. So I just copied and pasted:
Note from 8/12/24:
The Valerie/Teoxane connection is interesting. Dew outlined this in the past:
Teoxane received its initial 2.5M shares of RVNC as part of the dermal-filler licensing deal in 2020 June - August 2023 bought 1.9 million shares between $17-$25 per share They bought another 2.1 million shares of RVNC shares on the open market during Oct 2023 at prices between $8.52 and $9.44
Does Crown need them to tender to close the deal? The thing is….I believe Teoxane’s play was to get the European Daxxify rights. So they could get an agreement in place with Crown.
But the whole thing seems a bit off IMO.
Note from 8/13/24:
If Teoxane were to make a great deal with Crown for Daxxify rights, I think Teoxane could stomach the buyout price. I find the whole deal perplexing.
Dew brings up a good point. I also mentioned the Teoxane connection on this message last month. I had heard a couple years ago that Teoxane wanted the European Daxxify rights. That could have been their angle with continued stock ownership. Crown and Teoxane need to be on the same page IMO.
Teoxane has_the contractual right to_end_its_agreement_with_RVNC_if_there_is_a change of control; from Section 16.4 (page 66) of the Teoxane Agreement filed with the SEC as Exhibit 10.43 to RVNC’s 2020 10-K:
The Supplier shall have the right, but not the obligation, to terminate, with a [-redacted-] notice period, this Agreement at any time within [-redacted-] after having been notified by the Distributor or otherwise informed, of a Change of Control in the Distributor and/or its Affiliate.
If you’re using the iHub app, you only get a subset of its function compared to starting iHub in a browser.
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Thank you iwful. I really want to know how I could upload picture I wanna share it with you guys. Anyway this has been a good reference for the earnings
I reject the notion that RVNC is headed for bankruptcy if they don’t sell the company quickly. To the contrary, RVNC’s liquidity looks sufficient for continued operations
1) This makes assumptions about product ramp that, to date, have, with the exception of last quarter, significantly *underperformed* (because Foley is a remarkably incompetent decision maker).
2) This ignores that the debt has to be rolled over, and the terms on that new debt, assuming they can get it at all, will almost certainly be a much higher interest rate.
That said, RVNCFan, who has been the only one continuously tracking uptake (via Instagram in his case) says Q3 is gangbusters. Pity we don't see comments on this from Emannow and Borack on this any more.
BTW - If this agreement fails to go through, it may finally result in the board doing what it should have last year or early this year - fire Foley. It might almost be worth the $30M penalty.
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