Filing of Certain Prospectuses and Communications in Connection With Business Combination Transactions (425)
Filed by Foamix Pharmaceuticals Ltd.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Exchange Act of 1934
Subject Company: Foamix Pharmaceuticals Ltd.
Commission File No.: 001-36621
November 14, 2019
Dear Foamix Employees:
As you know, earlier this week, on November 11, 2019, Menlo Therapeutics Inc. (“Menlo”) and Foamix Pharmaceuticals Ltd. (“Foamix”) entered into a merger agreement pursuant to which Foamix will become a wholly-owned subsidiary of Menlo. While Menlo is the legal acquirer in the transaction, Foamix shareholders will receive shares in Menlo such that Foamix shareholders will own at least 59% of the combined company following the closing of the merger.
This note is intended to summarize the treatment of your Foamix equity awards that will be converted into equity awards of Menlo if and when the merger is closed. Please note that the following is only a general summary and that the terms of the merger agreement, together with your equity award agreement and the applicable equity plan under which your award was granted, will govern in the event of any conflict between this communication and those documents.
Stock Options. As of the closing of the merger, each outstanding Foamix stock option, whether or not vested, will be assumed by Menlo and converted (in a manner intended to preserve the “spread” value of the Foamix stock options at the time of the conversion) into a stock option to purchase Menlo common stock (“Menlo Options”). More specifically, if you hold Foamix stock options at the closing of the merger, you will receive Menlo Options that will convert into a number of shares of Menlo common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying: (1) the number of Foamix shares subject to stock options that you have immediately prior to the closing of the merger by (2) the Exchange Ratio (0.5924, which is subject to adjustment, as described below).
Each Menlo Option will have a per share exercise price equal to the quotient obtained by dividing: (1) the per share exercise price of the Foamix stock option by (2) the Exchange Ratio (with any fractional cents rounded up to the next higher number of whole cents). The Menlo Options will be subject to the same terms and conditions as applied to your applicable Foamix stock options as of immediately prior to the closing of the merger, including terms related to tax, vesting schedule, expiration and treatment on termination of employment.
The Exchange Ratio is subject to adjustment if the results of Menlo’s two Phase III PN trials are adverse. If the results of Menlo’s two Phase III PN trials are known prior to the closing of the merger, then the Exchange Ratio will be adjusted as follows: (1) if goals are achieved in both Phase III PN trials before May 31, 2020, then no adjustment will be made to the Exchange Ratio; (2) if goals are achieved in only one Phase III PN trial by May 31, 2020, the Exchange Ratio will be adjusted to 1.2739; and (3) if goals are not achieved in either of the Phase III PN trials, the Exchange Ratio will be adjusted to 1.8006. If the closing of the merger occurs after May 31, 2020, and the results of the two Phase III PN trials have not yet been delivered in accordance with the merger agreement, then the Exchange Ratio will be adjusted to 1.8006.
For example, if you hold a total of 100 outstanding Foamix stock options with a $3 per share exercise price as of immediately prior to the closing of the merger and the goals are achieved for both of the Phase III PN trials, your Foamix stock options will be converted into a total of 59 Menlo Options with a $5.07 per share exercise price at the closing of the merger.
If the goals are not achieved for either of the Phase III PN trials, your Foamix stock options will be converted into a total of 180 Menlo Options with a $1.67 per share exercise price at the closing of the merger.
If, however, the results of Menlo’s two Phase III PN trials are not known prior to the closing of the merger and the closing is occurring prior to May 31, 2020, then the holders of shares of Foamix common stock will receive contingent stock rights (“CSRs”) convertible into shares of Menlo common stock based on the results of Menlo’s two Phase III PN trials. If any CSR is converted into shares of Menlo common stock after the closing of the merger, then the board of directors of Menlo will adjust the number of shares and exercise price of your stock option in accordance with the terms of the applicable equity plan. The CSR adjustment mechanic is complicated, and additional details regarding the mechanics of this adjustment will be communicated if an adjustment is necessary when the results of the Phase III PN trials are known.
RSUs. Similarly, as of the closing of the merger, each outstanding Foamix restricted stock unit (“RSU”), whether or not vested, will be assumed by Menlo and converted (in a manner intended to preserve the value of the Foamix RSU at the time of the conversion) into an RSU of Menlo (a “Menlo RSU”) that settles into a number of shares of Menlo common stock (rounded down to the nearest whole number of shares) equal to the product obtained by multiplying: (1) the number of Foamix shares subject to Foamix RSUs that you have immediately prior to the closing of the merger by (2) the Exchange Ratio. The Exchange Ratio may be adjusted as described above if the results of Menlo’s two Phase III PN trials are known prior to the closing of the merger or if the closing of the merger occurs after May 31, 2020, and the results of the two Phase III PN trials have not yet been delivered in accordance with the merger agreement. If, however, the results of Menlo’s two Phase III PN trials are not known prior to the closing of the merger and the closing is occurring prior to May 31, 2020, then the holders of shares of Foamix common stock will receive CSRs. If any CSR is converted into shares of Menlo common stock after the closing of the merger, then you will receive additional restricted stock units so that the total number of restricted stock units is equal to what you would have received had such results been known prior to the closing of the merger.
Your Menlo RSUs will be subject to the same terms and conditions as applied to your applicable Foamix RSUs as of immediately prior to the closing of the merger, including terms related to tax, vesting, and treatment on termination of employment.
ESPP. The closing of the merger is estimated to occur in late Q1/early Q2 of 2020. At that time, we expect to be in the middle of an offering period under our Foamix ESPP. At the closing of the merger, the outstanding offering period will be shortened and terminated shortly prior to the closing date (the “designated date”). Foamix will make any pro-rata adjustments that may be necessary to reflect the shortened offering period, and will cause each outstanding purchase right under the Foamix ESPP to be exercised as of the designated date. At the closing of the merger, you will own outright shares of Foamix common stock purchased under the Foamix ESPP for that offering period, and each such share of Foamix common stock will then be converted into shares of Menlo common stock using the Exchange Ratio as described above. At the closing of the merger, Menlo will assume the Foamix ESPP and thereafter Menlo will be permitted to grant purchase rights under the assumed ESPP in accordance with applicable law.
2
If you have any questions, please contact me at 908.458.9213.
Sincerely,
Mutya Harsch
General Counsel
3
