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Replies to post #164697 on Biotech Values
On March 14, 2012, Mr. Bonney, Mr. Perez and Mr. Lichtinger had lunch together in New York City, during which Mr. Bonney mentioned Cubist's interest in an acquisition of Optimer and suggested a purchase price of $20.00 per share in cash. Mr. Bonney sent Mr. Lichtinger a letter later that day in which Mr. Bonney stated that Cubist had an interest, based on existing knowledge of Optimer and publicly available information, in a transaction at a purchase price of $20.00 per share in cash, subject to performing due diligence and the negotiation of a definitive agreement. Optimer convened a meeting of the Optimer board on March 26, 2012 and discussed Cubist's expression of interest. Members of Optimer senior management, as well as representatives from Optimer's outside legal counsel, Sullivan & Cromwell LLP (referred to as Sullivan & Cromwell), and representatives from J.P. Morgan, who advised Optimer on financial matters from time to time, were in attendance at this meeting. At the meeting, Mr. Lichtinger informed the Optimer board about his discussions with Mr. Bonney and Mr. Perez, and J.P. Morgan advised the Optimer board on the financial aspects of Cubist's proposal. Following a full discussion, the Optimer board unanimously decided that it was committed to creating stockholder value through the pursuit of its existing strategy and instructed that the offer be rejected, which it subsequently was.
On June 18, 2012, Mr. Bonney, Mr. Perez and Mr. Lichtinger had dinner together in Boston to discuss, among other things, matters related to the co-promotion of DIFICID. During this meeting, they also discussed Cubist's continuing interest in a transaction in which Cubist would acquire Optimer, and Mr. Bonney indicated that Cubist might be willing to pay $25.00 per share, subject to conducting due diligence. Mr. Lichtinger told Mr. Bonney that he would review the indication of interest with the Optimer board and asked Mr. Bonney to submit a written proposal. Mr. Bonney declined. On June 19, 2012, Mr. Bonney contacted Mr. Lichtinger to follow up on their earlier oral conversation and indicated that Cubist was interested in conducting due diligence on Optimer. Mr. Lichtinger explained that he had arranged a call with the Optimer board to review Cubist's oral expression of interest. Mr. Bonney then asked Mr. Lichtinger whether he would personally support an acquisition of Optimer by Cubist at the terms he proposed. Mr. Lichtinger indicated that he was not personally supportive of moving forward with the potential transaction on the terms that Mr. Bonney had described to him. In response, Mr. Bonney informed Mr. Lichtinger that Cubist's expression of interest was withdrawn, and that Cubist would not pursue a transaction with Optimer.
Beginning in early March 2013, representatives of J.P. Morgan and Centerview made contact with, or were contacted by, 37 parties, including Cubist, that might be interested in exploring a potential strategic transaction with Optimer. Each of the contacted parties was a strategic bidder, although two of the parties are controlled by private equity sponsors. No party that contacted representatives of J.P. Morgan or Centerview regarding the strategic review process was excluded from exploring a strategic transaction with Optimer. J.P. Morgan and Centerview did not contact private equity sponsors because of their views, which they shared with the Optimer board, that private equity sponsors were unlikely to be interested in a transaction due to the expectation of Optimer management of continuing negative cash flow in the future as well as the absence of potential synergies. Of the 37 parties, 19 parties expressed an interest in a potential transaction with Optimer, and each was sent a draft non-disclosure agreement. Between March 21, 2013 and April 29, 2013, 15 of those 19 companies (including the two companies controlled by private equity sponsors) proceeded to negotiate and execute a non-disclosure agreement with Optimer. Cubist executed its non-disclosure agreement with Optimer on April 15, 2013. The four remaining parties that were sent non-disclosure agreements declined to participate in the strategic review process and, thus, did not execute a non-disclosure agreement.
Beginning on April 7, 2013, after discussion with various Optimer board members and members of Optimer senior management, and at the direction of the Optimer board, representatives of J.P. Morgan and Centerview delivered instructions to each of the 15 parties that had executed a non-disclosure agreement, setting forth procedures and guidelines for submitting non-binding preliminary indications of interest to acquire Optimer. Preliminary indications of interest were requested by April 29, 2013.
On April 26, 2013, at a meeting of the Cubist board, Cubist management was authorized to submit to Optimer a preliminary indication of interest that valued Optimer at $17.00 per share.
By May 1, 2013, J.P. Morgan and Centerview had received three non-binding preliminary indications of interest—one from Cubist (submitted to Optimer on April 29, 2013), one from a company we refer to as Company A and one from a company we refer to as Company B. Each of those proposals contemplated an all-cash acquisition of Optimer. The non-binding proposal from Cubist valued Optimer at $17.00 per share, the non-binding proposal from Company A valued Optimer at a range of $17.00 to $19.00 per share and the non-binding proposal from Company B valued Optimer at $13.00 per share. Representatives of J.P. Morgan and Centerview subsequently confirmed that each of the remaining 12 companies that executed non-disclosure agreements declined to submit a non-binding preliminary indication of interest.
On May 7, 2013, the Optimer board held a meeting that also was attended by certain members of Optimer senior management and representatives of J.P. Morgan, Centerview and Sullivan & Cromwell. A representative of Sullivan & Cromwell reviewed with the Optimer board the fiduciary duties of directors in connection with the strategic review process, including a possible sale of Optimer. Representatives of J.P. Morgan and Centerview reviewed the terms of the three non-binding preliminary indications of interest. After discussion, the Optimer board determined, primarily based on the prices provided by the bidders in their non-binding indications of interest, that Cubist and Company A would be invited to conduct full due diligence on Optimer, and that Company B would be invited to conduct additional limited due diligence with a view toward improving its bid in order to participate in the full due diligence process. At that time, members of Optimer senior management also discussed preliminary analyses of certain additional initiatives that could be implemented so that remaining an independent company would be a viable alternative to a sale of Optimer. On May 8, 2013, representatives of J.P. Morgan and Centerview informed representatives of Company A that Company A was invited to conduct full due diligence on Optimer, and informed representatives of Company B that Company B would be invited to conduct additional limited due diligence on Optimer. The next day, a representative from J.P. Morgan informed a representative from Cubist's financial advisor, Morgan Stanley & Co. LLC (referred to as Morgan Stanley), that Cubist was invited to conduct full due diligence on Optimer.
On May 10, 2013, Optimer filed its Form 10-Q for the quarter ended March 31, 2013. In this Form 10-Q, Optimer stated that, based on its current forecast, it believed that its existing cash and cash equivalents would be sufficient to fund Optimer's requirements through March 31, 2014. However, Optimer noted that if it was not able to achieve its planned revenue, or incurred costs in excess of its forecast, it may be required to substantially reduce discretionary spending or raise additional capital. Optimer also noted that if it is forced to seek additional financing, which could include additional equity financing or funding through other third-party agreements, there could be no assurances that additional financing would be available on favorable terms or otherwise. Furthermore, any equity financing could result in dilution to existing Optimer stockholders.
On May 11, 2013, Optimer made available to Cubist and Company A non-public material in an electronic data room. After Cubist and Company A had an opportunity to review those materials, they each attended in-person meetings with Optimer management and its representatives. Representatives of Cubist and Morgan Stanley met with Optimer and its representatives on May 22, 2013, and representatives of Company A and its legal and financial advisors met with Optimer and its representatives on May 28, 2013. Both Cubist and Company A subsequently had additional time to review the material in the data room.
On May 13, 2013, Company B was provided access to a limited portion of the non-public material in the electronic data room, and attended an in-person meeting with Optimer management and its representatives on May 20, 2013, with a view toward sufficiently improving its bid in order to participate in the full due diligence and definitive proposal process.
Optimer management and its representatives provided responses to numerous additional due diligence requests from Cubist, Company A and Company B on an ongoing basis.
On May 24, 2013, following its limited due diligence of Optimer, Company B indicated that it was unwilling to substantially increase the $13.00 price provided in its initial non-binding indication of interest. On May 28, 2013, at the prior direction of the Optimer board, and after discussion with Dr. McKinnell, Company B was informed that it was not invited to further participate in the full due diligence process at that time.
On May 31, 2013, Cubist's Strategy Council (referred to as the Strategy Council), consisting of certain members of Cubist senior management, met to discuss the potential acquisition of Optimer and certain changes to the investment considerations and valuation assumptions with respect to Optimer.
On June 6, 2013 and June 7, 2013, representatives of Cubist and its outside legal counsel, Ropes & Gray LLP (referred to as Ropes & Gray) conducted due diligence calls with representatives of Sullivan & Cromwell.
On June 7, 2013, after discussion with certain directors and Optimer management, representatives of J.P. Morgan and Centerview delivered to Cubist and Company A an initial draft merger agreement along with letters setting forth procedures and guidelines for submitting a final, non-binding acquisition proposal to acquire Optimer. Final bids were requested by June 21, 2013.
On June 10, 2013, a representative of Company A informed Optimer that Company A had decided to withdraw from the strategic process due to Company A's concerns about the long-term growth prospects for DIFICID, the execution complexity of accelerating near-term DIFICID growth and its perceived inability to realize meaningful synergies from a potential transaction with Optimer. As a result, Cubist was the sole remaining third-party participant in the strategic review process.
On June 11, 2013, representatives of Optimer conducted a due diligence call with representatives of Cubist to discuss Optimer's clinical development plans and budget.
On June 20, 2013, Cubist's Strategy Council met to further discuss the potential acquisition of Optimer and recommended that Cubist's proposal be lowered to a price of $10.00 per share in cash plus one contingent value right entitling each holder to a one-time payment of $4.00 per share based on the net sales of DIFICID in the United States and Canada. Following that meeting, the transaction committee of the Cubist board had a telephonic meeting and authorized the submission of the revised proposal to Optimer.
On June 21, 2013, representatives of Cubist notified representatives of J.P. Morgan that Cubist intended to submit a final proposal for an acquisition of Optimer, but that such proposal would be at a price meaningfully lower than its previous indication of interest. That afternoon, Cubist submitted a revised draft merger agreement together with its proposal for an acquisition of Optimer for a price of $10.00 per share in cash plus one contingent value right, entitling each holder to a one-time payment of $4.00 per share if net sales of DIFICID in the United States and Canada exceeded $40 million in any calendar quarter by the end of calendar year 2015. Cubist's draft merger agreement contained, among other things, a requirement that a termination fee in the amount of $22 million be payable by Optimer in certain termination circumstances, including in the event Optimer stockholders did not approve the merger. In addition, Cubist's draft merger agreement contained restrictions that would prohibit Optimer from obtaining financing in the event such financing became necessary or advisable to fund Optimer's cash requirements during the pendency of the merger. Cubist's draft merger agreement also included a closing condition requiring the absence of any litigation relating to the transaction.
Later that same day, Dr. McKinnell, other Optimer management and representatives of J.P. Morgan, Centerview and Sullivan & Cromwell convened telephonically to discuss Cubist's proposal. At the direction of Dr. McKinnell, representatives of J.P. Morgan and Centerview contacted
representatives of Company A to invite them to renew their due diligence investigation of Optimer with a view to reconsidering their decision not to make an offer for an acquisition of Optimer.
On June 22, 2013, the independent directors of the Optimer board, Dr. McKinnell, other Optimer management and representatives of J.P. Morgan, Centerview and Sullivan & Cromwell met in New York to discuss the status of the strategic review process. During the discussion, representatives of Sullivan & Cromwell provided a review of the issues presented by Cubist's draft merger agreement, and representatives of J.P. Morgan and Centerview provided a review of Cubist's financial proposal and updated the Optimer board on the last communications the financial advisors conducted with Company A and Company B. The directors determined not to proceed with a transaction with Cubist and expressed their support of the decision to invite Company A to renew its due diligence investigation of Optimer and to submit a revised acquisition proposal. The directors also instructed representatives of J.P. Morgan and Centerview to invite Company B to conduct further due diligence.
On June 23, 2013, representatives of J.P. Morgan and Centerview invited representatives of Company B to renew their due diligence investigation of Optimer with a view to making an offer for the acquisition of Optimer.
On June 24, 2013, Company B expressed an interest in returning to the due diligence process with a view toward exploring a transaction with Optimer at the $13.00 per share offer price provided in its initial non-binding indication of interest. Optimer granted Company B full access to the electronic data room later that day. Company B then was subsequently provided with a draft merger agreement and proceeded to conduct diligence on Optimer.
On June 26, 2013, in response to inquiries by Morgan Stanley, representatives of J.P. Morgan and Centerview contacted representatives of Morgan Stanley and indicated that, unless Cubist was willing to make material improvements to the terms of the proposal it submitted on June 21, 2013, including to both the offer price and the draft merger agreement, Optimer would not continue exploring a transaction with Cubist. The representatives of Morgan Stanley indicated that Morgan Stanley would review this feedback with Cubist and explore whether Cubist would be willing to improve its proposal. At that time, Optimer removed Cubist's access to Optimer's electronic data room. That same day, Company A contacted representatives of J.P. Morgan to inform them that it would not re-enter the strategic review process, even at a price significantly lower than Company A's initial non-binding indication of interest.
On June 30, 2013, representatives from Morgan Stanley contacted representatives from J.P. Morgan. The representatives from Morgan Stanley indicated that Cubist had considered the feedback on their proposal and determined that while Cubist might be willing to modify selected provisions in its draft merger agreement to address certain concerns of Optimer, it was not willing to improve its offer price at that time. Optimer, Cubist and their respective representatives ceased discussions regarding a potential transaction at that time.
On July 2, 2013, members of Optimer management and representatives of J.P. Morgan, Centerview and Sullivan & Cromwell conducted in-person management presentations with Company B.
On July 16, 2013, after conducting significant additional due diligence, representatives of Company B informed Centerview that Company B had, again, decided to withdraw from the process because it determined that it was only prepared to offer a price well below its previous $13.00 indication of interest. Later that day, Dr. McKinnell contacted the chief executive officer of Company B to explore whether Company B would submit a revised proposal with the addition of a contingent value right, to which the chief executive officer indicated that he would instruct his financial advisors to contact Optimer's financial advisors. On July 19, 2013, representatives of Company B contacted Centerview to inform Centerview that it was withdrawing from the process because, although Company B did not specify the price at which it was prepared to make an offer, Company B indicated that it was well below the original $13.00 per share offer. On July 22, 2013, the chief executive officer of Company B informed Dr. McKinnell that Company B was, in fact, withdrawing from the process.
On July 22 and 23, 2013, Dr. McKinnell, along with Optimer management and representatives of J.P. Morgan, Centerview and Sullivan & Cromwell, engaged in telephonic discussions regarding the status of the strategic review process. Dr. McKinnell directed representatives from J.P. Morgan and Centerview to re-contact the 12 parties who executed non-disclosure agreements, but declined to submit first-round bids, which they did.
On July 23, 2013, prior to any further contact by Optimer or its representatives, Cubist re-approached Optimer with renewed interest in a potential transaction. Mr. Bonney contacted Dr. McKinnell to inquire about the status of Optimer's strategic review process and to determine if an opportunity might exist for Cubist to re-engage with Optimer regarding a potential transaction. Dr. McKinnell told Mr. Bonney that Cubist would have to improve the consideration it was willing to offer and make significant modifications to the draft merger agreement. Dr. McKinnell indicated that Optimer might be amenable to moving forward with a transaction having a value of $10.75 in cash per share plus a contingent value right entitling each holder to a one-time cash payment of $5.00 per contingent value right if DIFICID achieved certain net sales levels, and Mr. Bonney indicated that Cubist would likely be amenable to those terms. Mr. Bonney also proposed an extension to the co-promotion agreement that was set to expire on July 31, 2013. Mr. Bonney indicated that Cubist would submit a revised proposal on July 25, 2013.
Shortly thereafter, Optimer and Cubist announced that they had agreed to enter into an agreement and plan of merger, whereby Cubist will acquire all of the outstanding shares of Optimer common stock for per share consideration of $10.75 in cash and one contingent value right entitling holders to receive an additional one-time cash payment of up to $5.00 for each share if certain cumulative net sales of DIFICID or other products containing fidaxomicin are achieved.
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