UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material Pursuant to §240.14a-12

Paratek Pharmaceuticals, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☒	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 

PRELIMINARY PROXY MATERIALS—SUBJECT TO COMPLETION

 

 

PARATEK PHARMACEUTICALS, INC.

75 Park Plaza

3rd Floor

Boston, MA 02116

(617) 807-6600

[                ], 2023

Dear Stockholder:

You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of Paratek Pharmaceuticals, Inc., a Delaware corporation (the “Company” or “Paratek”), to be held virtually via live webcast on [                ], 2023, at [                ] Eastern Time at [                ]. The Special Meeting will be held in a virtual meeting format only, via live webcast, without a physical meeting location. Please be sure to follow the instructions found in the accompanying proxy statement and the accompanying Notice of Special Meeting (the “Notice of Special Meeting”). Details regarding the business to be conducted at the Special Meeting are described in the accompanying proxy statement and the Notice of Special Meeting.

At the Special Meeting, you will be asked to consider and vote upon the proposal to approve and adopt the Agreement and Plan of Merger, dated as of June 6, 2023 (as amended from time to time, the “Merger Agreement”) by and among the Company, Resistance Acquisition, Inc., a Delaware corporation (“Parent”), and Resistance Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company being the surviving corporation (the “Merger”). Parent and Merger Sub are controlled by affiliates of Gurnet Point Capital, LLC, a Delaware limited liability company (“Gurnet Point”), and Novo Holdings A/S, a Danish public limited liability company (“Novo Holdings”).

Under the terms of the Merger Agreement, an entity controlled by affiliates of Gurnet Point and Novo Holdings will acquire the Company in a transaction with an enterprise value of approximately $462,000,000, assuming full payment of contingent value rights, in each case, as contemplated by the Merger Agreement. For each share of common stock, par value $0.001 per share, of the Company (the “Company Common Stock”), Paratek stockholders will receive (i) $2.15, payable to the holder thereof in cash, without interest (the “Cash Consideration”) but subject to reduction for any applicable withholding taxes payable in respect thereof and (ii) one contractual contingent value right (a “CVR”) that shall represent the right to receive $0.85 upon the satisfaction of certain conditions pursuant to a Contingent Value Rights Agreement (the “CVR Agreement”) to be entered into between Parent and a rights agent selected by Parent and reasonably acceptable to the Company (the “Rights Agent”) (the Cash Consideration and one CVR, collectively, the “Merger Consideration”). The board of directors of the Company (the “Company Board”) believes this transaction maximizes value for Paratek stockholders and is in the best interest of the Company and the holders of the Shares (as defined below). Following the Merger, Dr. Evan Loh will continue to be a substantial stockholder in the Company, serve on the Company Board and serve as the Company’s Chief Executive Officer. Management also supports this transaction as evidenced by certain members of the Company’s management team (the “Management Stockholders”), including Dr. Loh, holding an aggregate of 4.73% of the outstanding Company Common Stock, concurrently with the execution and delivery of the Merger Agreement, entering into a voting and support agreement with Parent (the “Voting Agreement”). The Merger Agreement and each of the transactions contemplated thereby (the “Contemplated Transactions”), including the Merger, are described further in the accompanying proxy statement.

Your vote is very important. Whether or not you plan to attend the virtual Special Meeting, you are urged to vote your Shares as promptly as possible to ensure your representation at the Special Meeting. Please review the instructions in the accompanying Notice of Special Meeting and proxy statement regarding voting.

If the Merger is completed, each issued and outstanding share (each, a “Share”) of Company Common Stock (other than (i) Shares held in the treasury of the Company or owned by the Company or any direct or indirect wholly owned subsidiary of the Company and each Share owned by Parent, Merger Sub or any direct or indirect wholly owned subsidiary of Parent or Merger Sub immediately prior to the effective time of the Merger (the “Effective Time”) or (ii) Shares outstanding immediately prior to the Effective Time and held by stockholders who are entitled to demand, and properly demand, appraisal for such Shares in accordance with Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) will be cancelled and retired and automatically converted into the right to receive the Merger Consideration.

The proposed transaction constitutes a “going-private transaction” under the rules of the Securities and Exchange Commission (the “SEC”).

The Company Board formed a transaction committee (the “Transaction Committee”) consisting solely of independent and disinterested directors of the Company Board to facilitate the Company Board’s oversight of the Company’s evaluation of potential business combination transactions. The Transaction Committee was authorized to (1) direct, oversee and monitor the Company’s evaluation of potential business combination transactions; (2) approve new or amended engagement letters with financial advisors and compensation arrangements with such financial advisors relating to potential business combination transactions; (3) determine potential counter-parties that the Company or its financial advisors should contact regarding potential interest in a business combination transaction with the Company; (4) approve entering into confidentiality agreements or other preliminary agreements with any such potential counter-parties and the terms of such agreements; and (5) take such other actions or approve such other matters reasonably related thereto as determined by such committee; provided that the Company Board retained authority over final approval of any business combination transaction.

The Company Board, as more fully described in the accompanying proxy statement, evaluated the Merger, in consultation with the Company’s management and the Company’s independent legal and financial advisors and considered various material factors. After careful consideration, the Company Board unanimously: (i) determined that the Merger Agreement and the Contemplated Transactions, including the Merger, are fair to, and in the best interests of, the Company and the holders of the Shares, and that it is advisable to enter into the Merger Agreement and the Contemplated Transactions, including the Merger, (ii) approved the Merger Agreement and (iii) resolved to recommend that the holders of the Shares adopt the Merger Agreement.

The Company Board recommends that you vote “FOR” the proposal to approve and adopt the Merger Agreement and the Contemplated Transactions, including the Merger.

Your vote is very important, regardless of the number of Shares you own. In accordance with the DGCL, the approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of Shares of Company Common Stock outstanding as of the close of business on the record date for the Special Meeting (the “Record Date”). Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date. If you fail to vote on the proposal to adopt the Merger Agreement and the Contemplated Transactions, including the Merger, the effect will be the same as a vote against such proposal.

You will also be asked to vote at the Special Meeting on (i) a non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger, which requires the affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon; and (ii) a proposal to approve one or more adjournments of the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement, which requires the

affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present. Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date.

The Company Board recommends that you vote “FOR” the advisory, non-binding, proposal regarding certain Merger-related executive compensation arrangements, and “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate.

In considering the recommendations of the Company Board, Paratek stockholders should be aware that the executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of Paratek stockholders generally. Those interests are more fully described in the accompanying proxy statement. The Company Board was aware of these interests and the Company Board considered them, among other matters, in making its recommendations.

On June 6, 2023, concurrently with the execution and delivery of the Merger Agreement, the Management Stockholders (including Evan Loh, M.D.) holding an aggregate of 4.73% of the outstanding Company Common Stock entered into a voting and support agreement with Parent (the “Voting Agreement”). Pursuant to the Voting Agreement, the Management Stockholders have agreed to vote, and have granted Parent an irrevocable proxy with respect to the voting of, all Shares of Company Common Stock owned by them in favor of the adoption of the Merger Agreement and the approval of the Contemplated Transactions and against certain actions that would prevent, interfere with or delay the consummation of the Merger. The Voting Agreement terminates upon the earlier of the Effective Time, the termination of the Merger Agreement in accordance with its terms or upon mutual agreement of Parent and the Management Stockholder. A copy of the form of Voting Agreement entered into by each Management Stockholder and Parent is attached as Annex C to the accompanying proxy statement.

On June 6, 2023, concurrently with the execution and delivery of the Merger Agreement, certain management employees and former management employees of the Company (the “Subscribers”) each entered into a subscription agreement (the “Subscription Agreement”) with Resistance TopCo L.P., a Delaware limited partnership (“TopCo”), the Company, pursuant to which, immediately after the Effective Time, each Subscriber subscribes for a number of non-voting common units of TopCo based on the Subscriber’s gross, pre-tax payments under the Company’s Revenue Performance Incentive Plan that become due in connection with the closing of the Contemplated Transactions (the “Closing”). For certain Subscribers, the Subscription Agreement further provides that the Equity Award Consideration (described below) that becomes payable after the Closing may be settled in the form of cash or vested non-voting common units of TopCo with a fair market value, as of the payment date, equal to the amount of Equity Award Consideration that has become payable; provided, that the Company will retain a number of TopCo units sufficient to satisfy all withholding taxes that become due with respect to the Equity Award Consideration.

The Closing is subject to the satisfaction or waiver (if such waiver is permissible under the Merger Agreement or under applicable law) of certain conditions set forth in the Merger Agreement.

The accompanying proxy statement provides you with more detailed information about the Special Meeting, the Merger Agreement and the Contemplated Transactions, including the Merger. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement. We encourage you to carefully read the entire proxy statement and its annexes, including the Merger Agreement and the documents referred to or incorporated by reference in the accompanying proxy statement in their entirety. You may also obtain additional information about the Company from other documents we have filed with the SEC. In particular, you should read the “Risk Factors” section beginning on page 35 in our annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 16, 2023 (as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on April 27, 2023) and other risk factors detailed from time to time in the Company’s reports filed with the SEC and incorporated by reference in the accompanying proxy statement in their entirety, for risks relating to our business and for a discussion of the risks you should consider in evaluating the proposed transactions and how they may affect you.

If you have any questions or need assistance voting your Shares, please contact the Company’s proxy solicitor in connection with the Special Meeting:

Morrow Sodali LLC

509 Madison Avenue

New York, New York 10022

+1 (800) 662-5200 (toll-free in North America)

+1 (203) 658-9400 (outside of North America)

Email: PRTK@info.morrowsodali.com

Thank you in advance for your cooperation and continued support.

Sincerely,

William M. Haskel

Corporate Secretary

The accompanying proxy statement is dated [                ] 2023, and is first being mailed to the Company’s stockholders on or about [                    ], 2023.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE CONTEMPLATED TRANSACTIONS, INCLUDING THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT OR THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

PARATEK PHARMACEUTICALS, INC.

75 Park Plaza

3rd Floor

Boston, MA 02116

(617) 807-6600

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

To be held virtually via the internet on [                ], 2023

Dear Stockholder:

You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of Paratek Pharmaceuticals, Inc., a Delaware corporation (the “Company,” “Paratek,” “we” or “us”), to be held virtually via live webcast on [                ], 2023, at [                ] Eastern Time at [                ]. The Special Meeting is being held to consider and vote on the following proposals:

 

1.

a proposal to approve and adopt the Agreement and Plan of Merger, dated as of June 6, 2023 (as amended from time to time, the “Merger Agreement”) by and among the Company, Resistance Acquisition, Inc., a Delaware corporation (“Parent”), and Resistance Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company being the surviving corporation (the “Merger”), and to approve each of the transactions contemplated thereby (the “Contemplated Transactions”), including the Merger (the “Merger Agreement Proposal”);

 

2.	a non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger (the “Management Compensation Proposal”); and

 

3.	a proposal to approve one or more adjournments of the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal (the “Adjournment Proposal”).

Under the terms of the Merger Agreement, an entity controlled by affiliates of Gurnet Point Capital, LLC, a Delaware limited liability company and Novo Holdings A/S, a Danish public limited liability company, will acquire the Company in a transaction with an enterprise value of approximately $462,000,000, assuming full payment of contingent value rights, in each case, as contemplated by the Merger Agreement. The board of directors of Paratek (the “Company Board”) has determined that this transaction is fair to and is in the best interest of the Company and its stockholders.

These items of business are more fully described in the proxy statement accompanying this notice of Special Meeting (the “Notice of Special Meeting”).

The record date for the Special Meeting is [                 ], 2023 (the “Record Date”). Only stockholders of record at the close of business on the Record Date are entitled to notice of and to vote at the Special Meeting or any adjournment or postponement thereof, as set forth in the accompanying proxy statement. If on the Record Date your issued and outstanding shares (each, a “Share”) of common stock, par value $0.001 per share, of the Company (the “Company Common Stock”) were held not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of Shares of Company Common Stock held in “street name” and this Notice of Special Meeting is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of

voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the Shares in your account. You are also invited to attend the virtual Special Meeting, although in order to attend, you must show proof of ownership of Shares of Company Common Stock, such as a current account statement. However, since you are not the stockholder of record, you may not vote your Shares at the Special Meeting unless you request and obtain a legal proxy or broker’s proxy card form from your broker, bank or other nominee. You may vote at the Special Meeting, vote by proxy over the telephone, vote by proxy through the internet or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Online check-in will begin at [        ] Eastern Time, and you should allow ample time for the check-in procedures. A list of stockholders entitled to vote at the Special Meeting will be available for inspection during ordinary business hours at the Company’s principal executive office at least ten (10) days prior to the date of the Special Meeting and continuing through the date immediately preceding the date of the Special Meeting for any purpose germane to the Special Meeting.

This Notice of Special Meeting and the accompanying proxy statement constitute notice of the availability of appraisal rights pursuant to Section 262 of the Delaware General Corporation Law (“Section 262”), a copy of which is attached as Annex E to the accompanying proxy statement. Any holder seeking to demand appraisal of its Shares, or wishing to preserve its right to do so, should review Section 262 and the accompanying proxy statement.

The Company Board has approved the Merger Agreement and the Contemplated Transactions, including the Merger, and recommends that you vote “FOR” the Merger Agreement Proposal, “FOR” the Management Compensation Proposal, and “FOR” the Adjournment Proposal.

The proposed transaction constitutes a “going-private transaction” under the rules of the Securities and Exchange Commission.

Your vote is very important, regardless of the number of Shares you own. In accordance with the General Corporation Law of the State of Delaware (the “DGCL”), the approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of Shares of Company Common Stock outstanding as of the close of business on the Record Date. Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date.

Your failure to vote on the proposal to adopt the Merger Agreement and the Contemplated Transactions, including the Merger, will have the same effect as a vote against such proposal.

The approval of the Management Compensation Proposal requires the affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon, so long as a quorum is present. The approval of the Adjournment Proposal requires the affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon.

Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date.

Your vote is very important. To ensure your representation at the Special Meeting, it is important that you submit a proxy for your Shares promptly, whether or not you plan to attend the virtual Special Meeting. As promptly as possible, please complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy over the internet or by telephone by following the instructions set forth on the enclosed proxy card. Stockholders who attend the Special Meeting may revoke their proxies and vote by attending the Special Meeting virtually.

By order of the Board of Directors,

William M. Haskel

Corporate Secretary

[                ], 2023

TABLE OF CONTENTS

 

EXPLANATORY NOTE REGARDING THE MERGER AGREEMENT			1
SUMMARY TERM SHEET			2
Special Factors			2
The Merger Agreement			7
Parties to the Merger			10
Other Interested Parties in the Merger			11
The Special Meeting			11
Other Important Information Regarding the Company			11
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING			12
SPECIAL FACTORS			23
Background of the Merger			23
Considerations of the Company Board and Procedural Safeguards with respect to the Contemplated Transactions			40
Certain Company Management Forecasts			44
Opinion of the Company’s Financial Advisor			52
Position of Parent Entities as to the Fairness of the Merger			59
Purpose and Reasons of the Parent Entities for the Merger			62
Position of Dr. Loh as to the Fairness of the Merger			62
Purpose and Reasons of Dr. Loh for the Merger			63
Plans for the Company After the Merger			64
Certain Effects of the Merger			65
Certain Effects on the Company if the Merger is Not Completed			67
Interests of Executive Officers and Directors of the Company in the Merger			67
Intent of the Directors and Executive Officers to Vote in Favor of the Merger			73
Commitment of Dr. Loh to Vote in Favor of the Merger			73
Material U.S. Federal Income Tax Consequences of the Merger			74
Financing of the Merger			78
Limited Guarantee			80
Fees and Expenses			82
Provisions for the Company’s Stockholders			83
Accounting Treatment			83
Regulatory Approvals			83
Litigation Relating to the Merger			83
Appraisal Rights			83
Contingent Value Rights Agreement			84
Voting Agreement			84
Subscription Agreement			85
Effective Time of the Merger			85
Payment of Merger Consideration			85
THE MERGER AGREEMENT			87
The Merger Agreement			87
The Merger			87
The Merger Consideration			88
Impact of Stock Splits, Etc.			88
Treatment of Equity Awards and Company Warrants			88
Exchange Procedures and Payment Procedures			89
Withholding			91
Dissenters’ Rights			91
Organizational Documents, Directors and Officers of the Surviving Corporation			91
Closing and Effective Time of the Merger			92

 

-i-

Closing of the Merger			92
Delisting and Deregistration			92
Representations and Warranties			92
Covenants Related to the Company’s Conduct of Business			94
Employment and Employee Benefits Matters			97
Acquisition Proposals			97
Parent Financing and Company Cooperation			100
Company Convertible Notes			103
Company Stockholder Approval			104
Takeover Laws			106
Indemnification; Directors’ and Officers’ Insurance			106
Stockholder Litigation			107
Other Covenants			107
Conditions to the Completion of the Merger			107
Termination			109
Termination Fees			110
Expenses			111
Specific Performance			111
Amendment and Waiver			112
Governing Law			112
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION			113
PARTIES TO THE MERGER			114
The Company			114
Parent and Merger Sub			114
OTHER INTERESTED PARTIES IN THE MERGER			115
Affiliates of Parent			115
Dr. Loh			116
INFORMATION ABOUT THE SPECIAL MEETING			117
Date, Time and Place			117
Purpose of the Special Meeting			117
Recommendation of the Company Board			117
Record Date and Quorum			117
Vote Required			118
Voting Intentions of the Company’s Directors and Executive Officers			118
Voting			119
Abstentions			120
How to Vote			120
Proxies and Revocation			121
Adjournments and Postponements			122
Anticipated Date of Completion of the Merger			122
Appraisal Rights			123
Solicitation of Proxies; Payment of Solicitation Expenses			129
Householding of the Proxy Statement			130
Questions and Additional Information			130
THE MERGER (THE MERGER AGREEMENT PROPOSAL — PROPOSAL 1)			131
The Proposal			131
General			131
Vote Required			131
Appraisal Rights			131
Vote Recommendation			132

 

-ii-

MERGER RELATED EXECUTIVE COMPENSATION ARRANGEMENTS (THE MANAGEMENT COMPENSATION PROPOSAL — PROPOSAL 2)			133
The Proposal			133
General			133
Vote Required			133
Vote Recommendation			133
ADJOURNMENT OF THE SPECIAL MEETING (THE ADJOURNMENT PROPOSAL — PROPOSAL 3)			134
The Proposal			134
General			134
Vote Required			134
Vote Recommendation			134
OTHER IMPORTANT INFORMATION REGARDING THE COMPANY			135
Selected Historical Consolidated Financial Data			135
Book Value per Share			136
Market Price of Shares and Dividends			136
Beneficial Ownership of Common Stock by Management and Directors			137
Beneficial Ownership of Common Stock by Principal Stockholders			138
Prior Public Offerings			139
Certain Transactions in the Shares			139
Past Contracts, Transactions, Negotiations and Agreements			139
Directors and Executive Officers of the Company			139
DELISTING AND DEREGISTRATION OF COMMON STOCK			146
STOCKHOLDER PROPOSALS AND NOMINATIONS			146
Requirements for Stockholder Proposals and Director Nominations for Paratek’s 2024 Annual Meeting			146
WHERE YOU CAN FIND MORE INFORMATION			147
ANNEX A — AGREEMENT AND PLAN OF MERGER			A-1
ANNEX B — FORM OF CONTINGENT VALUE RIGHTS AGREEMENT			B-1
ANNEX C — FORM OF VOTING AND SUPPORT AGREEMENT			C-1
ANNEX D — OPINION OF MOELIS & COMPANY LLC			D-1
ANNEX E — SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW			E-1

 

-iii-

EXPLANATORY NOTE REGARDING THE MERGER AGREEMENT

The summary of the material provisions of the Agreement and Plan of Merger, dated as of June 6, 2023 (as amended from time to time, the “Merger Agreement”) set forth below and elsewhere in this proxy statement is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference in this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully in its entirety.

The Merger Agreement is described in this proxy statement and included as Annex A only to provide you with information regarding its terms and conditions and not to provide any other factual information regarding Paratek Pharmaceuticals, Inc., a Delaware corporation (the “Company” or “Paratek”), Resistance Acquisition, Inc., a Delaware corporation (the “Parent”) or Resistance Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (the “Merger Sub”), or their respective businesses. Such information can be found elsewhere in this proxy statement or, in the case of the Company, in the public filings that the Company makes with the Securities and Exchange Commission (the “SEC”), which are available without charge through the SEC’s website at www.sec.gov. For additional information, see the section entitled “Where You Can Find More Information.”

The representations, warranties and covenants made in the Merger Agreement by and among the Company, Parent and Merger Sub are qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the Merger Agreement and were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to close, whereas Merger Sub will merge with and into the Company, with the Company being the surviving corporation (the “Merger”), if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by confidential disclosures that were made by the Company, which disclosures are not reflected in the Merger Agreement. The representations and warranties in the Merger Agreement will not survive completion of the Merger. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may or may not have been included in the Company’s periodic and current reports, this proxy statement and other documents filed with the SEC. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference in this proxy statement.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING

The following questions and answers are intended to briefly address some commonly asked questions regarding the Special Meeting, the Merger Agreement and the Contemplated Transactions, including the Merger. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, all of which you should read carefully in their entirety. See “Where You Can Find More Information.”

 

Q:	Why am I receiving this document?

 

A:

On June 6, 2023, the Company entered into the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company, with the Company being the surviving corporation. The Company, in its capacity as the corporation surviving the Merger, is sometimes referred to in this proxy statement as the surviving corporation (the “Surviving Corporation”). Parent and Merger Sub are controlled by affiliates of Gurnet Point Capital, LLC, a Delaware limited liability company (“Gurnet Point”) and Novo Holdings A/S, a Danish public limited liability company (“Novo Holdings”). If the Merger is completed, each Share issued and outstanding immediately prior to the Effective Time of the Merger (but excluding any Cancelled Shares and Dissenting Shares) will be cancelled and retired and automatically converted into the right to receive the Merger Consideration, in accordance with and subject to the terms and conditions set forth in the Merger Agreement. A copy of the Merger Agreement is attached to this proxy statement as Annex A and is incorporated by reference in this proxy statement in its entirety

After careful consideration, the Company Board unanimously: (i) determined that the Merger Agreement and the Contemplated Transactions, including the Merger are fair to, and in the best interests of, the Company and the holders of the Shares, and that it is advisable to enter into the Merger Agreement and the Contemplated Transactions, including the Merger, (ii) approved the Merger Agreement and the Contemplated Transactions, including the Merger and (iii) resolved to recommend that the holders of the Shares adopt the Merger Agreement. In evaluating the Merger, the Company Board also consulted with the Company’s management, legal, financial and other advisors and considered various material factors.

The Company is holding the Special Meeting so that the Paratek stockholders may vote to approve the Merger Agreement Proposal; a non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger (the “Management Compensation Proposal”); and a proposal to approve one or more adjournments of the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal (the “Adjournment Proposal”).

The Company is soliciting proxies for the Special Meeting. You are receiving this proxy statement because you own Shares. This proxy statement contains important information about the Merger and the Special Meeting, and you should read it carefully. The enclosed proxy card allows you to vote your Shares without attending the Special Meeting.

Your vote is extremely important, and we encourage you to submit your proxy as soon as possible. For more information on how to vote your Shares, please see the section of this proxy statement entitled “Information about the Special Meeting.”

 

Q:	What is the proposed transaction and what effects will it have on the Company?

 

A:	The proposed transaction is the Merger of Merger Sub with and into the Company, subject to and in accordance with the terms and conditions of the Merger Agreement.

 

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Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company with the Company being the Surviving Corporation. If the Merger is completed, each Share issued and outstanding immediately prior to the Effective Time (but excluding Cancelled Shares and Dissenting Shares) will be cancelled and retired and automatically converted into the right to receive the Merger Consideration, in accordance with and subject to the terms and conditions set forth in the Merger Agreement.

In addition, following completion of the Merger, there will be no further market for the Shares and, as promptly as practicable after the Effective Time and in compliance with applicable law, the Shares will be delisted from Nasdaq and as promptly as practicable after such delisting, the Shares will be deregistered under the Exchange Act. As a result of the Merger, the Company will no longer be an independent public company, the Shares will no longer be listed on any exchange or quotation system, price quotations will no longer be available and the Company’s registration and reporting obligation under the Exchange Act will cease.

Following completion of the Merger, your Shares will represent only the right to receive the Merger Consideration, subject to and in accordance with the terms and conditions of the Merger Agreement, and you will no longer have any interest in the Company’s future earnings, growth or value other than the CVR, which provides the Company’s stockholders with an opportunity to realize additional value if the milestone is achieved, as described in the CVR Agreement.

For more information about the Merger Agreement and the Contemplated Transactions, including the Merger, see “The Merger Agreement.”

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger Agreement Proposal is not approved by the Company’s stockholders or if the Merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their Shares in connection with the Merger. Instead, unless the Company is sold to a third party, the Company will remain an independent public company, and the Shares will continue to be listed and traded on the Nasdaq, so long as the Company continues to meet the applicable listing requirements. In addition, if the Merger is not completed, the Company expects that management will operate the Company’s business in a manner similar to that in which it is being operated today, after giving effect to an anticipated reduction in workforce by at least 30%, including substantial reductions among the sales force, and that the Company’s stockholders will continue to be subject to the same risks, uncertainties and potential substantial dilution to which they are currently subject. Further, with the Company Convertible Notes coming due on May 1, 2024, the Company will need to successfully execute one or more financing transactions prior to that time to raise sufficient cash for the Company to be able to repay or refinance that debt. If the Company can successfully refinance the Company Convertible Notes, the Company anticipates that such financing transactions would likely be substantially dilutive to current common stockholders. The effect of these risks on the future value of your Shares is uncertain, including the risk that the market price of Shares may decline to the extent that the current market price of Shares reflects a market assumption that the Merger will be completed. For more information about what happens if the Merger is not completed, see “Special Factors — Certain Effects on the Company if the Merger is Not Completed.”

Under certain circumstances, if the Merger is not completed, the Company may be required to pay Parent a termination fee of $4,900,000 (the “Company Termination Fee”), as well as, under certain circumstances, to reimburse up to $1,750,000 of Parent’s fees and expenses incurred in connection with the Merger Agreement and the Contemplated Transactions (the “Reimbursement Payment”), or Parent may be required to pay the Company a termination fee of $6,750,000 (the “Parent Termination Fee”). For more information about such fees, see “The Merger Agreement — Termination Fees.”

 

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Q:	When and where is the Special Meeting?

 

A:

The Special Meeting of stockholders of the Company will be held virtually via live webcast on [            ], 2023, at [            ] Eastern Time at [            ]. Stockholders of the Company will be able to attend the Special Meeting by visiting the Special Meeting website. If you choose to attend the Special Meeting and vote your Shares via the Special Meeting website, you will need the control number included on your proxy card. For more information about the Special Meeting, see “Information about the Special Meeting.”

 

Q:	Who can vote at the Special Meeting?

 

A:

All record holders of Shares as of the close of business on [            ], 2023, the Record Date, are entitled to notice of, and to virtually attend and vote at, the Special Meeting or any adjournment or postponement thereof. You are entitled to receive notice of, and to attend and vote at, the Special Meeting if you are a record holder of Shares at the close of business on the Record Date.

Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date on each matter properly brought before the Special Meeting.

If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, and you wish to vote by attending the Special Meeting virtually, you will need to provide proof of ownership, such as a recent account statement or letter from your broker, bank or other nominee, along with proper identification. Please note that if you are a beneficial owner and wish to vote by attending the Special Meeting virtually, you must have a legal proxy from your broker, bank or other nominee naming you as the proxy. You should allow yourself enough time prior to the Special Meeting to obtain this proxy from the holder of record.

For more information about who can vote at the Special Meeting, see “Information about the Special Meeting — Voting.”

 

Q:	What is the difference between being a “stockholder of record” and a “beneficial owner” of Shares held in “street name”?

 

A:

If on [                ], 2023 your Shares were registered directly in your name with Paratek’s transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote at the Special Meeting or vote by proxy. Whether or not you plan to attend the Special Meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted.

If on [                ], 2023 your Shares were held not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of Shares held in “street name” and the notice of Special Meeting (the “Notice of Special Meeting”), is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the Shares in your account. You are also invited to attend the virtual Special Meeting, although in order to attend, you must show proof of Share ownership, such as a current account statement. However, since you are not the stockholder of record, you may not vote your Shares at the Special Meeting unless you request and obtain a legal proxy or broker’s proxy card form from your broker, bank or other nominee.

For more information about the stockholders of record and beneficial owners of Shares held in “street name,” see “Information about the Special Meeting — Voting.”

 

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Q:	What am I being asked to vote on at the Special Meeting?

 

A:	You are being asked to consider and vote on the following:

 

•

Merger Agreement Proposal: A proposal to approve and adopt the Merger Agreement, and the Contemplated Transactions, including the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference in this proxy statement in its entirety.

 

•

Management Compensation Proposal: A non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger, as disclosed in the “Potential Change-in-Control Payments to Named Executive Officers” table contained in the section captioned “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger — Golden Parachute Compensation.”

 

•

Adjournment Proposal: A proposal to approve one or more adjournments of the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal.

For more information on each of these proposals, see “The Merger (The Merger Agreement Proposal — Proposal 1),” “Merger Related Executive Compensation Arrangements (The Management Compensation Proposal — Proposal 2)” and “Adjournment of the Special meeting (The Adjournment Proposal —Proposal 3).”

 

Q:	What is a quorum?

 

A:

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the outstanding Shares entitled to vote are present at the Special Meeting or represented by proxy. On the Record Date, there were [            ] Shares outstanding and entitled to vote. Thus, the holders of [            ] Shares must be present or represented by proxy at the Special Meeting to have a quorum.

Your Shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote electronically at the Special Meeting. Abstentions will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of the Shares present at the meeting or represented by proxy may adjourn the meeting to another date. For more information about the quorum of the Special Meeting, see “Information about the Special meeting — Record Date and Quorum.”

 

Q:	What votes are required for the Company’s stockholders to approve the Merger Agreement Proposal?

 

A:

In accordance with the DGCL, the approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of Shares of Company Common Stock outstanding as of the close of business on the Record Date. Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date. As of the close of business on [                ], 2023, which is the most recent practicable date before this proxy statement was distributed to our stockholders, there were [            ] Shares of Company Common Stock outstanding.

As of the date of the filing of this proxy statement, none of Parent, Merger Sub or any of their respective affiliates (as defined under Rule 405 of the Securities Act of 1933, as amended, (the “Securities Act”) and the rules and regulations promulgated thereunder own any Shares.

The Management Stockholders (including Evan Loh), holding an aggregate of 4.73% of the outstanding Company Common Stock, have entered into the Voting Agreement, pursuant to which the Management Stockholders have agreed to vote, and have granted Parent an irrevocable proxy with respect to the voting of, all Shares of Company Common Stock owned by them in favor of the adoption of the Merger Agreement

 

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and the Contemplated Transactions and against certain actions that would prevent, interfere with or delay the consummation of the Merger. A copy of the form of Voting Agreement entered into by each Management Stockholder and Parent is attached as Annex C to this proxy statement.

For more information, see “The Merger (The Merger Agreement Proposal — Proposal 1).”

 

Q:	What vote is required for the Company’s stockholders to approve the Management Compensation Proposal?

 

A:

Approval of the non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger requires the affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon, so long as a quorum is present.

Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date.

For more information on each of these proposals, see “Merger Related Executive Compensation Arrangements (The Management Compensation Proposal — Proposal 2).”

 

Q:	What vote is required for the Company’s stockholders to approve the Adjournment Proposal?

 

A:

Approval of the proposal to approve one or more adjournments of the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal, requires the affirmative vote of a majority of Shares of Company Common Stock present or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.

Each record holder of Company Common Stock is entitled to one (1) vote for each Share of Company Common Stock owned of record on the Record Date.

For more information on each of these proposals, see “Adjournment of the Special Meeting (The Adjournment Proposal — Proposal 3).”

 

Q:	How are the votes counted?

 

A:

For each of the Merger Agreement Proposal, the Management Compensation Proposal and the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” An abstention will have the same effect as an “AGAINST” vote for these proposals and will count for purposes of determining if a quorum is present at the Special Meeting. For more information, see “Information about the Special Meeting.”

 

Q:	How does the Company Board recommend that I vote?

 

A:	After careful consideration, the Company Board recommends that you vote:

 

•

“FOR” the Merger Agreement Proposal;

 

•

“FOR” the Management Compensation Proposal; and

 

•

“FOR” the Adjournment Proposal.

For more information, you should read “Special Factors — Considerations of the Company Board and Procedural Safeguards with respect to the Contemplated Transactions” for a discussion of the factors that the Company Board considered in deciding to recommend the approval of the Merger Agreement and the Contemplated Transactions, including the Merger. See also “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger.”

 

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Q:	How will the Management Stockholders vote on the Merger Agreement Proposal?

 

A:

On June 6, 2023, concurrently with the execution and delivery of the Merger Agreement, the Management Stockholders, including Dr. Loh, entered into a Voting Agreement with Parent. Pursuant to such Voting Agreement, the Management Stockholders, including Dr. Loh, have agreed to vote, and have granted Parent an irrevocable proxy with respect to the voting of, all Shares of Company Common Stock owned by them in favor of the adoption of the Merger Agreement and the approval of the Contemplated Transactions and against certain actions that would prevent, interfere with or delay the consummation of the Merger. A copy of the form of Voting Agreement entered into by each Management Stockholder, including Dr. Loh and Parent is attached as Annex C to this proxy statement.

 

Q:	How do I vote?

 

A:	If you are a stockholder of record as of the Record Date, you may vote your Shares on matters presented at the Special Meeting in any of the following ways:

 

•

by attending the Special Meeting virtually and casting your vote electronically;

 

•

by proxy (stockholders of record have a choice of voting by proxy);

 

•

on the internet, by following the internet proxy instructions printed on the enclosed proxy card;

 

•

by telephone, using the telephone number printed on the enclosed proxy card; or

 

•

by mail, by marking the enclosed proxy card, dating and signing it, and returning it in the accompanying prepaid reply envelope.

If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee that you must follow in order to have your Shares voted. Those instructions will identify which of the above choices are available to you in order to have your Shares voted. Please note that if you are a beneficial owner and wish to vote electronically by attending the Special Meeting virtually, you must have a legal proxy from your broker, bank or other nominee naming you as the proxy. You should allow yourself enough time prior to the Special Meeting to obtain this proxy from the holder of record.

The control number located on your proxy card is designed to verify your identity and allow you to submit a proxy for your Shares, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the internet or by telephone in advance of the Special Meeting.

Please refer to the instructions on your proxy card or voting instruction form to determine the deadlines for submitting a proxy over the internet or by telephone in advance of the Special Meeting. If you choose to submit your proxy by mailing a proxy card, your proxy card must be received by our Corporate Secretary by the time the Special Meeting begins.

For more information about voting, see “Information about the Special Meeting — How to Vote.”

 

Q:	What is a proxy?

 

A:

A proxy is your legal designation of another person to vote your Shares. This written document describing the matters to be considered and voted on at the Special Meeting is called a proxy statement. The document used to designate a proxy to vote your Shares is called a proxy card. For more information about voting by proxy, see “Information about the Special Meeting — How to Vote.”

 

Q:	If I am a stockholder of record, what happens if I do not vote or submit a proxy card?

 

A:	If you do not attend the Special Meeting and fail to vote, either electronically at the virtual Special Meeting or by proxy, your Shares will not be voted at the Special Meeting and will not be counted as present for purposes of determining whether a quorum exists.

 

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Additionally, if you do not attend the Special Meeting and fail to vote, electronically at the virtual Special Meeting or by proxy, your failure to vote will (a) have the effect of counting “AGAINST” the Merger Agreement Proposal, with respect to the approval threshold requiring the affirmative vote of a majority of Shares of Company Common Stock outstanding as of the close of business on the Record Date, in accordance with the DGCL, (b) have no effect on the Management Compensation Proposal (so long as a quorum is present) and (c) have no effect on the Adjournment Proposal (regardless of whether a quorum is present). For more information, see “Information about the Special Meeting.”

 

Q:	If my Shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my Shares for me?

 

A:

Your broker, bank or other nominee will only be permitted to vote your Shares if you instruct your broker, bank or other nominee as to how to vote. You should follow the instructions provided by your broker, bank or other nominee regarding the voting of your Shares. Under applicable stock exchange rules, absent your instructions, a broker, bank or other nominee does not have discretionary authority to vote on “non-routine” matters and all of the matters to be considered at the Special Meeting are, under such rules, “non-routine.” As a result, absent specific instructions from the beneficial owner of such Shares, your broker, bank or other nominee is not empowered to vote such Shares.

If you instruct your broker, bank or other nominee how to vote on at least one, but not all of the proposals to be considered at the Special Meeting, your Shares will be voted according to your instructions on those proposals for which you have provided instructions and will be counted as present for purposes of determining whether a quorum is present at the Special Meeting. In this scenario, a “broker non-vote” will occur with respect to each other proposal for which you did not provide voting instructions to your broker, bank or other nominee.

A failure to provide instructions with respect to any of the proposals or a broker non-vote will (a) have the effect of counting “AGAINST” the Merger Agreement Proposal with respect to the approval threshold requiring the affirmative vote of a majority of Shares of Company Common Stock outstanding as of the close of business on the Record Date, in accordance with the DGCL, (b) have no effect on the Management Compensation Proposal (so long as a quorum is present) and (c) have no effect on the Adjournment Proposal (regardless of whether a quorum is present). For more information, see “Information about the Special Meeting — Voting.”

 

Q:	If a stockholder gives a proxy, how are the Shares voted?

 

A:

If you vote by proxy, regardless of the method you choose to submit a proxy, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your Shares in the way that you indicate. When completing the internet or telephone proxy processes or the proxy card, you may specify whether your Shares should be voted “FOR” or “AGAINST,” or to “ABSTAIN” from voting on, all, some or none of the specific items of business to come before the Special Meeting.

If you properly execute your proxy card but do not mark the boxes indicating how your Shares should be voted on a matter, the Shares represented by your properly executed proxy will be voted “FOR” the Merger Agreement Proposal, “FOR” the Management Compensation Proposal and “FOR” the Adjournment Proposal. For more information, see “Information about the Special Meeting — How to Vote.”

 

Q:	Can I change or revoke my vote?

 

A:	Stockholder of Record: Shares Registered in Your Name

Yes. You can revoke your proxy at any time before 5:00 pm Eastern Time on the day prior to the date of the Special Meeting. If you are the record holder of your Shares, you may revoke your proxy prior to that time in any one of the following ways:

 

•

You may submit another properly completed proxy card with a later date.

 

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•

You may grant a subsequent proxy by telephone or through the internet.

 

•

You may send a timely written notice that you are revoking your proxy to our Corporate Secretary at 75 Park Plaza, 3rd Floor, Boston, Massachusetts, 02116.

 

•

You may attend the virtual Special Meeting and vote electronically. Simply attending the virtual Special Meeting will not, by itself, revoke your proxy.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If your Shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

Only your last submitted proxy will be considered. Please cast your vote “FOR” each of the proposals, following the instructions set forth on your enclosed proxy card or voting instruction form provided by your broker, bank or other nominee, as promptly as possible. For more information, see “Information about the Special Meeting — Proxies and Revocation.”

 

Q:	What do I do if I receive more than one Notice or set of voting instructions?

 

A:	If you receive more than one Notice of Special Meeting, your Shares may be registered in more than one name or in different accounts. Please follow the voting instructions on each Notice of Special Meeting to ensure that all of your Shares are voted.

 

Q:	Should I send in my stock certificates or other evidence of ownership now?

 

A:

No. After the Merger is completed, you will be sent a letter of transmittal and instructions for effecting the surrender of your stock certificates in exchange for payment of the Merger Consideration. If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your Shares in exchange for the Merger Consideration. Please do not send in your stock certificates now.

 

Q:	What happens if I sell my Shares before the Special Meeting?

 

A:

The Record Date for stockholders entitled to vote at the Special Meeting is prior to both the date of the Special Meeting and the consummation of the Merger. If you transfer your Shares before the Record Date, you will not be entitled to vote at the Special Meeting and will not be entitled to receive the Merger Consideration. If you transfer your Shares after the Record Date but before the Special Meeting you will, unless special arrangements are made, retain your right to vote at the Special Meeting, but will transfer the right to receive the Merger Consideration to the person to whom you transfer your Shares. Unless special arrangements are made, the person to whom you transfer your Shares after the Record Date will not have a right to vote those Shares at the Special Meeting. For more information, see “Information about the Special Meeting — How to Vote.”

 

Q:	Who will solicit and pay the cost of soliciting proxies?

 

A:

The Company has engaged Morrow Sodali LLC to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay Morrow Sodali LLC a fee of approximately $15,000, and to reimburse Morrow Sodali LLC for certain out-of-pocket fees, charges and expenses. The Company will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners of the Shares and for their expenses in obtaining voting

 

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instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, over the internet or in person. Our directors, officers and employees will not be paid any additional amounts for soliciting proxies. For more information, see “Information about the Special Meeting — Solicitation of Proxies; Payment of Solicitation Expenses.”

 

Q:	What is householding and how does it affect me?

 

A:

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for notices of internet availability of proxy materials (the “Notices of Internet Availability of Proxy Materials”) or other Special Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Special Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.

A number of brokers with account holders who are Paratek stockholders will be “householding” our proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify your broker or Paratek. Direct your written request to Corporate Secretary, Paratek Pharmaceuticals, Inc., 75 Park Plaza, 3rd Floor, Boston, MA 02116, or by telephone (617) 807-6600. Stockholders who currently receive multiple copies of the Notices of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers. For more information, see “Information about the Special Meeting — Householding of the Proxy Statement.”

 

Q:	What rights do I have to seek an appraisal of my Shares?

 

A:

Each holder of Shares will have the right to seek appraisal of the fair value of such holder’s Shares as determined by the Delaware Court of Chancery, but only if such holder does not vote such Shares in favor of the Merger Agreement Proposal and otherwise complies with the statutory requirements and procedures for demanding and perfecting appraisal rights set forth in Section 262 of the DGCL, which is the appraisal rights statute applicable to Delaware corporations. Failure to precisely follow any of the statutory requirements and procedures will result in the loss of appraisal rights. A copy of Section 262 of the DGCL is included as Annex E to this proxy statement and is incorporated by reference in its entirety. The requirements and procedures are also summarized in this proxy statement. For more information about appraisal rights, see “Information about the Special Meeting — Appraisal Rights” and Annex E to this proxy statement.

 

Q:	What are the material U.S. federal income tax consequences of the Merger to me if I am a U. S. Holder?

 

A:

The receipt of cash and CVRs in exchange for Shares in the Merger will be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss recognized by a U.S. holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”), and the timing and character of such gain or loss, depend in part on the U.S. federal income tax treatment of the CVRs, with respect to which there is a significant amount of uncertainty. You should consult your tax advisor to determine the tax consequences (including the application and effect of any U.S. federal, state, local or non-U.S. income or other tax laws) to you in light of your particular circumstances. See “Special Factors —Material U.S. Federal Income Tax Consequences of the Merger.”

 

20

Q:	What are the material U.S. federal income tax consequences of the Merger to me if I am a Non-U.S. Holder?

 

A:

Any gain realized by a Non-U.S. Holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”) in exchange for Shares in the Merger generally will not be subject to U.S. federal income tax unless (i) the gain is effectively connected with a U.S. trade or business of such Non-U.S. Holder, in which case the (x) Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder and (y) if the Non-U.S. Holder is a foreign corporation, an additional branch profits tax may apply at a rate of 30% (or a lower applicable treaty rate), or (ii) the Non-U.S. Holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the Effective Time and certain other conditions are met, in which case the Non-U.S. Holder may be subject to a 30% U.S. federal income tax (or a tax at a reduced rate under an applicable income tax treaty) on such gain (net of certain U.S. source losses, provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses).

Generally, if payments are made to a Non-U.S. Holder with respect to a CVR, such Non-U.S. Holder may be subject to withholding at a rate of 30% (or a lower applicable treaty rate) of the portion of any such payments treated as imputed interest, unless such Non-U.S. Holder establishes its entitlement to exemption from or a reduced rate of withholding under an applicable tax treaty by providing the appropriate documentation (generally, IRS Form W-8BEN or W-8BEN-E or other applicable IRS Form W-8) to the applicable withholding agent. See “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:	What do I need to do now?

 

A:

We urge you to read this proxy statement carefully, including its annexes and the documents referred to as incorporated by reference in this proxy statement, as well as the related Schedule 13E-3, including the exhibits thereto, filed with the SEC, and to consider how the Merger affects you. For more information, see “Where You Can Find More Information.”

Even if you plan to attend the Special Meeting virtually, after carefully reading and considering the information contained in this proxy statement, please submit your proxy promptly to ensure that your Shares are represented at the Special Meeting.

If you are a stockholder of record, please submit your proxy for your Shares:

 

•

on the internet, by following the internet proxy instructions printed on the enclosed proxy card;

 

•

by telephone, using the telephone number printed on the enclosed proxy card; or

 

•

by mail, by marking the enclosed proxy card, dating and signing it, and returning it in the accompanying prepaid reply envelope.

If you decide to attend the Special Meeting virtually and vote electronically, your vote at the Special Meeting will revoke any proxy previously submitted.

If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to see which of the above choices are available to you in order to have your Shares voted.

For more information, see “Information about the Special Meeting” and “Where You Can Find More Information.”

 

Q:	Who can help answer my other questions?

 

A:	If you have additional questions about the Special Meeting, the Merger or this proxy statement, need assistance in submitting your proxy or voting your Shares, or need additional copies of the proxy statement

 

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or the enclosed proxy card or voting instructions, please contact the Company’s proxy solicitor in connection with the Special Meeting:

Morrow Sodali LLC

509 Madison Avenue

New York, New York 10022

+1 (800) 662-5200 (toll-free in North America)

+1 (203) 658-9400 (outside of North America)

Email: PRTK@info.morrowsodali.com

 

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SPECIAL FACTORS

The following, together with the summary of the Merger Agreement set forth under the section titled “The Merger Agreement,” is a description of the material aspects of the Merger. While we believe that the following description covers the material aspects of the Merger, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire document, including the Merger Agreement attached to this proxy statement as Annex A, for a more complete understanding of the Merger. The following description is subject to, and is qualified in its entirety by reference to, the Merger Agreement. You may obtain additional information without charge as described in the section titled “Where You Can Find More Information.”

We are asking our stockholders to consider and vote on the approval and adoption of the Merger Agreement and the Contemplated Transactions, including the Merger. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly-owned subsidiary of Parent. If the Merger is completed, the holders of Shares (other than Cancelled Shares and except for any Dissenting Shares) will have the right to receive, for each Share, the Merger Consideration, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. This chronology does not purport to catalogue every conversation of or among members of the Company Board, the Transaction Committee, the Company’s representatives, Gurnet Point, Novo Holdings and their respective representatives and advisors, and other parties. Other than as described below, there have been no material contacts between the Company, Gurnet Point and Novo Holdings in the past two years.

The Company Board frequently reviews, with members of the Company’s management and with the assistance of its outside advisors, the Company’s strategic and financial alternatives in light of developments in the Company’s business, the sectors in which it competes, the economy generally and financial markets. As part of this process, members of the Company’s management have from time to time engaged in business development and strategic discussions with participants in the pharmaceutical and life sciences industries, all with the goal of enhancing value for stockholders and delivering the best possible treatments to patients and healthcare providers.

Over the course of mid 2021-mid 2022, the Company and Moelis, which had served as the Company’s banker for approximately the past five years, and has extensive experience in the biopharmaceutical space, contacted seven parties to discuss a potential strategic investment in, or other strategic transaction with, the Company, including a potential sale of the Company. One of the seven parties contacted declined to pursue an opportunity with the Company at that time. Four of the seven parties executed non-disclosure agreements, none of which contained a standstill provision. The Company held preliminary discussions with four of the seven parties, which ultimately did not advance beyond initial conversations. The Company and one of these parties had a two-way management presentation on June 6, 2022 to discuss a potential combination. Later on June 6, 2022, this party informed the Company that it did not have the capacity to engage in further discussions with the Company due to competing priorities.

On October 4, 2021, the Company entered into a non-disclosure agreement with a potential counterparty (“Party A”), who was originally contacted in mid-2021, which did not contain a standstill provision. Over the course of November 2021 to January 2022, Party A held several discussions with the Company and Moelis to conduct a preliminary, high-level due diligence investigation of the Company. On January 19, 2022, Party A indicated that it was interested in an acquisition of the Company but could not devote sufficient internal resources toward pursuing a transaction or advancing diligence of the Company in the near-term.

On December 22, 2021, the Company entered into a non-disclosure agreement with another potential counterparty (“Party B”), who was originally contacted in mid 2021, which did not contain a standstill provision.

 

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Between January 2022 and June 2022, Party B conducted preliminary diligence on the Company to evaluate a strategic opportunity that centered on a partnership for one of the Company’s developmental programs. During these discussions, Party B indicated that it had limited interest in acquiring the entire Company.

On January 11, 2022, a representative of Gurnet Point contacted Dr. Loh, the Company’s Chief Executive Officer, noting that Gurnet Point was actively searching for a new investment opportunity. On January 24, 2022, Dr. Loh and Chris Bostrom, the Company’s Vice President, Finance, met with representatives of Gurnet Point to discuss the Company’s business generally. On February 3, 2022, Dr. Loh, Mr. Bostrom and Adam Woodrow, the Company’s President and Chief Commercial Officer, had a follow-up call with representatives of Gurnet Point, as well as representatives of a portfolio company of Gurnet Point, to explore a potential strategic relationship with the portfolio company.

On March 26, 2022, Party C contacted Dr. Loh and expressed an interest in learning more about the Company.

On April 1, 2022, the Company executed a non-disclosure agreement with Party C, which did not contain a standstill provision, and Dr. Loh and Party C had a call to discuss the Company’s business. Throughout April 2022 and early May 2022, the Company and Party C conducted a series of discussions relating to a potential business combination involving the Company and Party C.

On May 4, 2022, the Company received a non-binding proposal (subject to due diligence) from Party C to combine with the Company based on an exchange ratio that would be calculated by reference to a range of $2.75-$3.75 per Share, payable in Party C stock, and indicated that a portion of the consideration may include a contingent value right payable upon achievement of an unspecified milestone.

On May 5, 2022, the Company Board held a meeting to discuss a potential business combination with Party C. At that meeting, representatives of Moelis reviewed Party C’s proposal with the Company Board and discussed Party C’s share price performance and possible representative exchange ratio calculations based on the relative stock prices of Party C and the Company. Also at that meeting, following discussion regarding the desirability of establishing a transaction committee of the Company Board (the “Transaction Committee”) to facilitate the Company Board’s oversight of the Company’s evaluation of potential business combination transactions, the Company Board unanimously resolved to establish the Transaction Committee and for Dr. Stein, Ms. Peterson and Dr. Dietz to serve on the committee. The Transaction Committee was authorized to (1) direct, oversee and monitor the Company’s evaluation of potential business combination transactions; (2) approve new or amended engagement letters with financial advisors and compensation arrangements with such financial advisors relating to potential business combination transactions; (3) determine potential counterparties that the Company or its financial advisors should contact regarding potential interest in a business combination transaction with the Company; (4) approve entering into confidentiality agreements or other preliminary agreements with any such potential counterparties and the terms of such agreements; and (5) take such other actions or approve such other matters reasonably related thereto as determined by such committee; provided that the Company Board retained authority over final approval of any business combination transaction.

On May 11, 2022, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and the Company’s counsel, Ropes & Gray LLP (“R&G”), in attendance to discuss and align on the financial projections that would form the basis for preliminary financial advice regarding a potential business combination with Party C. At that meeting, the representatives of Moelis reviewed with the Company Board its preliminary financial analyses of the Company, and the Company Board resolved to respond to the proposal from Party C, with the Transaction Committee to develop a specific counterproposal.

On May 12, 2022, the Transaction Committee met to consider and discuss a response to Party C’s non-binding proposal and aligned on the proposal described in the following paragraph.

 

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On May 12, 2022, the Company made a counterproposal to Party C for a business combination at an exchange ratio that would value the Shares at $4.00 per Share in upfront consideration, payable in Party C stock, plus a contingent value right entitling the holder to a potential maximum payment of $4.50 per Share based on a combination of (1) achievement of commercial NUZYRA gross revenue equal to or in excess of $50 million during any calendar quarter, (2) receipt of the third procurement from BARDA and (3) cumulative revenue from governmental entities (other than the existing BARDA procurement) equal to or in excess of $100 million (the “May 12 Proposal”).

On May 13, 2022, the CEO of Party C spoke with Dr. Loh and Mr. Bigham regarding the May 12 Proposal and discussed the apparent gap in valuation and how the parties might seek to narrow that gap.

On May 16, 2022, Dr. Loh, Mr. Woodrow, Randy Brenner, the Company’s Chief Development and Regulatory Officer, Mr. Bostrom and Steve St. Onge, the Company’s Senior Director of Business Development, met virtually with management of Party C to conduct a due diligence session and consider potential synergies for a combined company consisting of the Company and Party C.

On May 18, 2022, Party C delivered to the Company an updated proposal that re-confirmed its previously proposed range of consideration to be paid at closing, provided a list of additional due diligence information it would require to value the Company at the top end of the indicated range and proposed a CVR that would pay up to an aggregate of an additional $1.00 per share upon a combination of (1) receipt of the third BARDA procurement prior to March 31, 2024, (2) completion of a phase 2/3 study of NUZYRA in the nontuberculous mycobacterial (“NTM”) indication with favorable results by June 30, 2024 and (3) receipt of annual net revenue from government procurements that equals or exceeds $100 million in any calendar year from 2024 to 2026 (the “May 18 Proposal”).

On May 20, 2022, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis in attendance. The meeting participants discussed the May 18 Proposal. Following that discussion, the Transaction Committee approved responding to Party C with the proposal described in the following paragraph. The Transaction Committee also discussed with representatives of Moelis a market check of other potential bidders, requested that Moelis begin preparing to conduct market check outreach and authorized Dr. Loh to contact a party with whom he had a pre-existing relationship to explore strategic possibilities.

Later on May 20, 2022, the Company delivered a counterproposal to Party C, in which it proposed a business combination at an exchange ratio that would value the Shares at $4.00 per Share in upfront consideration, payable in Party C stock, plus a contingent value right entitling the holder to a potential maximum payment of $3.25 per Share based on a combination of (1) achievement of commercial NUZYRA gross revenue in a fiscal quarter in excess of $50 million, (2) receipt of the third procurement from BARDA prior to December 31, 2025 and (3) cumulative revenue from governmental entities (other than the existing BARDA procurement) in excess of $100 million prior to December 31, 2029.

On May 22, 2022, representatives from Moelis met with representatives from Party C’s financial advisor to discuss the proposals exchanged by the Company and Party C.

On May 24, 2022, the CEO of Party C communicated to Dr. Loh that the parties were far apart on valuation and shared his perspectives on Party C and the Company.

On May 26, 2022, the Company sent a letter to the CEO of Party C, sharing with Party C its rationale behind its May 20 counterproposal.

On May 28, 2022, Party C provided a counteroffer of $3.00 per Share, payable in stock of Party C, plus a contingent value right entitling the holder to a potential maximum payment of $1.00 per Share based on achievement of (1) core commercial NUZYRA revenue in excess of $75 million for a fiscal quarter prior to or

 

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including the fourth quarter of 2024, (2) receipt of the third BARDA procurement on or prior to December 31, 2025 and (3) advancement in the NTM indication to be further discussed. The letter indicated that the proposal was being made to bring the negotiation to resolution.

On June 1, 2022, the Transaction Committee met to discuss and consider a response to the latest proposal from Party C. After discussion, the Transaction Committee determined that Rolf Hoffmann, a director of the Company who has a professional relationship with a board member of Party C, should provide the Company’s next response. The Transaction Committee also authorized and directed the Company’s management team and Moelis to explore other potential strategic transaction partners.

On June 2, 2022, Mr. Hoffmann spoke with the director of Party C with whom he had a professional relationship. During the discussion, Mr. Hoffmann shared his perspective with the Party C director that the Company was delivering value commensurate with the Company’s May 20 proposal, and the Party C director shared with Mr. Hoffmann Party C’s belief that Party C’s May 28 proposal appropriately valued the Company. Mr. Hoffmann conveyed that the Company would not send a further counteroffer because the spread between the parties’ respective proposals was too large to constructively bridge. Mr. Hoffmann noted that the Company would not agree to a transaction at a price lower than $6.00 per share, including a CVR.

On June 2, 2022, in accordance with the direction of the Transaction Committee, Moelis contacted Party A and Party B to provide an update on the Company. Party B reiterated that they would not provide an offer to acquire the Company. Party A communicated its potential interest and throughout the end of June and July 2022 conducted due diligence on the Company.

On June 5, 2022, Party C provided what it characterized as its “best and final” offer of $3.75 per Share, payable in stock of Party C, plus a CVR entitling the holder to a potential maximum payment of $0.75 per Share based on (1) achievement of core commercial NUZYRA revenue in excess of $75 million for a fiscal quarter prior to or including the fourth quarter of 2024, (2) receipt of the third BARDA procurement and (3) advancement in the NTM indication to be further discussed (the “June 5 Proposal”).

On June 7, 2022, the Transaction Committee met to discuss Party C’s June 5 Proposal and recent contacts with other potential transaction parties. After discussion, the Transaction Committee directed Moelis to communicate to Party C’s financial advisors that any business combination with the Company would need to include total value of $5.50 per share, including CVRs. On June 7, 2022, representatives of Moelis delivered that message to Party C’s financial advisors.

On June 8, 2022, the Company Board convened a meeting by videoconference with members of the Company’s management in attendance. Dr. St. Onge updated the Company Board on the June 5 Proposal and discussed potential partners for business development opportunities. Mr. Hoffmann updated the Company Board on his discussion with Party C.

On June 9, 2022, Party C informed the Company that it would discontinue negotiations regarding a potential business combination with the Company.

On June 23, 2022, the Transaction Committee met and discussed recent contacts with potential counterparties to a strategic transaction with the Company.

During the remainder of June and July 2022, Company management and representatives of Party A conducted a series of due diligence discussions.

On July 20, 2022, Party A provided a non-binding indication of interest to acquire the Company for $3.70-$4.45 per Share, payable in cash, and requested a 45-day exclusivity period to conduct a due diligence investigation and to negotiate definitive documentation (the “July 20 Proposal”).

 

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On July 21, 2022, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance to discuss the July 20 Proposal and recent engagement with other potential strategic transaction counterparties. Based on that discussion, the Committee and management agreed to provide Party A with additional access to diligence materials via a virtual data room (“VDR”) and management presentations over the next two weeks and to request a proposal or revised proposal from potentially interested parties no later than August 5, 2022. At the meeting, Mr. Bigham also provided an update on potential financings that the Company had been exploring that would raise sufficient cash for the Company to address the near-term maturity of its convertible notes (the “Convertible Notes”), which mature on May 1, 2024 unless earlier repurchased, redeemed or converted.

On August 1, 2022, at the direction of the Transaction Committee, representatives of Moelis delivered a bid instruction letter to Party A to submit a revised non-binding offer for a transaction involving the Company and indicated that, following receipt of revised offers, the Company may elect to advance selected parties to the final phase of the process. The deadline set forth in the bid instruction letter for submission of offers was August 5, 2022 at 5:00 pm. On August 4, 2022, Party A informed the representatives of Moelis that it would need additional time to submit a proposal.

On August 4, 2022, following the release of the Company’s second quarter 2022 earnings report, the CEO of Party C contacted Dr. Loh to express interest in receiving an update on the Company’s business.

On August 5, 2022, the CEO of Party C and Dr. Loh met and discussed the Company’s business.

On August 11, 2022, Dr. Loh, Mr. Woodrow, Mr. Brenner, Dr. St. Onge and Mr. Bostrom conducted a discussion with Gurnet Point in response to outreach by Gurnet Point following the Company’s second quarter 2022 earnings report. On the call, Gurnet Point expressed interest in learning more about the Company’s business, and on August 15, 2022, the Company entered into a mutual non-disclosure agreement with Gurnet Point, which contained a standstill provision with a one-year term, in order to discuss a potential strategic transaction involving the parties.

Also on August 11, 2022, Company management met with Party C management to conduct a review the Company’s quarterly performance and to provide updates on the Company’s business.

On August 15, 2022, Party A notified the Company that, while it remained interested in an acquisition of the Company, it would not proceed in the process at that time due to challenges it was facing with its own business.

On August 29, 2022, the Company provided initial VDR access to Gurnet Point. Throughout August and September 2022, representatives from Gurnet Point and the Company met on several occasions to further discuss the Company’s business, financial metrics and projections.

On September 8, 2022, the Company Board convened a meeting by videoconference with members of the Company’s management in attendance. At the meeting, Dr. Stein provided an update on recent meetings of the Transaction Committee and the current status of strategic discussions involving the Company.

Over the course of the autumn of 2022, the Company engaged with its convertible note holders and other potential financing sources in furtherance of potentially executing a transaction that would refinance and/or repay the Company’s Convertible Notes. However, the Company ultimately was unable to negotiate a financing package that would raise sufficient cash for the Company to address the near-term maturity of its Convertible Notes.

On September 28, 2022, Mr. Steckler indicated during a discussion with Dr. St. Onge that Gurnet Point may be interested in an acquisition of the Company.

 

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On September 29, 2022, the Company informed Gurnet Point that the Company was focusing on executing ongoing strategic priorities in the immediate future, and the parties agreed to continue discussions on a potential transaction. Throughout October and early November 2022, Gurnet Point and the Company conducted periodic check-ins regarding a potential transaction.

Following market close on November 3, 2022, the Company announced its results for the fiscal third quarter of 2022, which indicated that, despite the third quarter typically reflecting the Company’s largest quarter-on-quarter growth, in this instance the Company’s quarter-on-quarter growth was only approximately 1%. Following release of these results, the Company’s Shares traded down from a closing price of $3.42 per Share on November 3, 2022 to a closing price of $2.53 per Share on November 4, 2022.

On November 14, 2022, following the Company’s third quarter earnings update, the Chief Executive Officer of Party C contacted Dr. Loh to express renewed interest in a business combination transaction.

On November 16, 2022, the Company Board met. At the meeting, Mr. Bostrom provided the Company Board with an update on the Company’s refinancing initiatives.

On November 17, 2022, Dr. Loh participated in a call with the CEO of Party C and its financial advisor, during which Dr. Loh expressed the Company’s continued interest in a potential transaction and emphasized the importance of an efficient negotiation given the parties’ prior discussions and ongoing considerations relating to a potential refinancing of the Company’s Convertible Notes. On November 18, 2022, Mr. Brenner met with the CEO of Party C to discuss the Company’s research and regulatory developments. Also on November 18, 2022, the CEO of Party C informed Dr. Loh that Party C was working on an updated proposal for a business combination that he anticipated would be delivered the following week.

On November 21, 2022, Dr. Loh contacted Gurnet Point to offer a business update on the Company. Over the ensuing month, Gurnet Point met with Company management on several occasions to learn more about the Company’s business.

On November 26, 2022, Party C provided a non-binding indication of interest to combine with the Company for $2.75 per Share, payable in stock of Party C, plus a CVR entitling the holder to a potential maximum payment of $1.00 per Share, payable in cash or stock of Party C, payable upon a milestone to be negotiated (the “November 26 Proposal”). The November 26 Proposal noted that market conditions had become more challenging and that the Company’s debt remained a considerable overhang that needed to be addressed. In the context of delivering the November 26 Proposal, representatives of Party C’s financial advisor indicated to representatives of Moelis that a condition to the November 26 Proposal was that the Company’s management team agree to accept a reduction of the amount they would otherwise be owed pursuant to the Company’s Revenue Performance Incentive Plan (the “RPIP”), in connection with a change-in-control transaction. ¹

On November 28, 2022, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Dr. Loh reviewed the Company’s recent engagement with Party C, including the November 26 Proposal, as well as the Company’s efforts over the preceding months in furtherance of a transaction that would effect an amendment and extension of the Company’s Convertible Notes. Dr. Loh noted that representatives of Party C’s financial advisor had indicated to representatives of Moelis that it may be important for the Company’s management team to accept adjustments to the RPIP to facilitate a potential business combination between Party C and the Company.

 

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The Compensation Committee of Company Board had adopted the RPIP in 2018 prior to the commercial launch of NUZYRA to provide the Company’s management team with a long-term retention-based financial incentive tied to the commercial revenue of NUZYRA. Assuming commercial milestones are achieved, the RPIP awards are payable in 2026 and 2027. The RPIP payments accelerate, in whole or in part, upon a change of control of the Company. The Company does not have the unilateral authority to amend the terms of the RPIP or the individual agreements between each participant and the Company made pursuant to the terms of the RPIP.

 

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In light of the foregoing, it was determined that Company management would interact with Party C only at the direction of the Transaction Committee and would begin to consider what, if any, adjustments to the RPIP it would be willing to accept. Mr. Bigham also informed the Transaction Committee that the Company had held initial meetings with an additional potential party and noted that, after a follow-up discussion with such potential party, if it had interest in participating in the Transaction Committee’s consideration of a potential business combination with the Company, he would update the Transaction Committee and refer such potential party to Moelis. The additional potential party was Gurnet Point.

Between November 30, 2022, and December 1, 2022, at the direction of the Transaction Committee, representatives of Moelis contacted representatives of Party A, Party B, four parties that had been previously contacted who had preliminary discussions with the Company, and four additional parties as part of a broader market check following receipt of the November 26 Proposal. Of those parties, only Party A and Party B held subsequent discussions with Moelis and/or the Company.

During December 2022 and January 2023, the Company held two subsequent discussions with Party A, but Party A did not indicate any interest in a near-term acquisition of the Company.

On December 5, 2022, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Company management reviewed the Company’s preliminary revised long-range plan, which had been updated by the Company’s management team since the Company’s most recently released quarterly results. The meeting participants discussed the updated long-range plan as well as not-yet-released results from a rabbit study of NUZYRA that the Company’s management team expected would lead to the second procurement from BARDA.

On December 7, 2022, the Transaction Committee reconvened a meeting by videoconference with members of the Company’s management and representatives from R&G. At the meeting, further discussion of the long-range plan took place, along with the possibility of selling Shares under the Company’s at-the-market (ATM) sales program and whether the potential transaction with Party C constituted material non-public information that would prevent the Company from selling Shares at that time.

On December 8, 2022, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis in attendance during which representatives of Moelis provided an update on current outreach to potential transaction counterparties.

On December 9, 2022, representatives of Moelis communicated to representatives of Party C’s financial advisor that the Company had what it believed could be undisclosed material non-public information, and desired to delay engagement with Party C on the November 26 Proposal until the information was publicly released. The material non-public information was released on December 19, 2022 when the Company announced positive top line data from a pilot rabbit efficacy study evaluating NUZYRA’s effectiveness in the treatment of pulmonary anthrax, which triggered the second procurement under the Company’s contract with BARDA.

On December 14, 2022, Dr. Loh, Mr. Woodrow, Mr. Brenner, Dr. St. Onge and Mr. Bostrom met with Gurnet Point to discuss the Company’s recent financial performance and near-term strategy, including as it relates to NUZYRA.

On December 15, 2022, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Mr. Bostrom led a discussion of the December 2022 Risk-adjusted Long-Range Plan, described in further detail below under “ —Certain Company Management Forecasts”, that assumed a 10% reduction in previously forecasted revenue, along with other assumptions related to required financing transactions and cost savings.

On December 19, 2022, the Company formally engaged Moelis to act as its financial advisor in its strategic alternatives process.

 

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Also on December 19, 2022, the Company provided Party B with a general update of NUZYRA’s commercial performance, NTM regulatory status in regions outside the United States, and BARDA. Following this discussion, Party B informed representatives of Moelis that they would like to have an in-person follow-up discussion with the Company at the J.P. Morgan Healthcare Conference, which was scheduled to occur on January 9-12, 2023.

On December 21, 2022, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Company management discussed the Company’s anticipated revenue results for fiscal year 2022 and the challenging environment for raising capital. Representatives of Moelis then reviewed the Company’s recent engagement with Party C and various considerations associated with Party C’s stock, and discussed with the Transaction Committee Moelis’ preliminary financial analysis and how a CVR might be part of a transaction with Party C. Company management informed the Transaction Committee that they had shared the NUZYRA rabbit data with Party C. After discussion, the Transaction Committee directed Moelis to inform Party C that its offer undervalued the Company, encourage Party C to increase its proposal and to provide feedback on potentially acceptable CVR milestones.

Between December 2022 and early January 2023, representatives of Moelis contacted two additional potential parties regarding a potential acquisition of the Company, who did not express interest in doing so.

On December 27, 2022, representatives of Moelis and representatives of Party C’s financial advisor had a discussion during which representatives of Moelis provided feedback on the November 26 Proposal, informing Party C that its proposal offered inadequate value for the Company to engage in negotiations with Party C and providing Party C’s financial advisor with potentially acceptable CVR milestones. Party C’s financial advisor requested a written description of the guidance Moelis provided, including the potential CVR construct, which was based on a contemplated Phase 2b NTM, NTM development in Asia, and a third BARDA procurement, a breakdown of anticipated cash costs that would be incurred with respect to the RPIP in a change of control transaction, and an updated estimate of the Company’s fourth quarter of 2022 revenue. Later that day, representatives of Moelis provided such written information to representatives of Party C’s financial advisor.

On January 3, 2023, with the authorization of Dr. Stein, chair of the Transaction Committee, Dr. Loh contacted the Chief Executive Officer of Party C via e-mail to inform him that the Transaction Committee was leading all strategic discussions with Party C and as such Dr. Loh was not otherwise authorized to have direct contact with him.

On January 4, 2023, Gurnet Point informed Dr. St. Onge that it had identified Novo Holdings as a potential equity partner in a proposed acquisition of the Company.

On January 6, 2023, Party C submitted a revised non-binding proposal to acquire the Company for $2.75 per Share payable in stock of Party C, plus a contingent value right, entitling the holder to a potential maximum payment of $1.00 per share based upon (1) achievement of quarterly core commercial NUZYRA net revenue equaling or exceeding $75 million in any quarter before January 1, 2025 and (2) in the event of the consummation of a license deal with a partner for the distribution rights for NUZYRA in the Japan/Asia market, half of the amount of any upfront and milestone payments paid to CVR holders when fully received, up to $0.50 per Share (the “January 6 Proposal”).

On January 6, 2023, Gurnet Point and an affiliate of Novo Holdings entered into a mutual non-disclosure agreement with the Company, which did not contain a standstill. During the ensuing three weeks, the Company continued to conduct due diligence meetings with Gurnet Point with respect to a potential transaction and answer its questions about the business.

On January 8, 2023, the Transaction Committee convened, with representatives of R&G and Moelis in attendance. The representatives of Moelis reviewed the January 6 Proposal, noting that Party C’s financial

 

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advisor had informed Moelis that Party C did not want to increase its proposal without first receiving a counterproposal from the Company. The representatives of Moelis also provided an update on where other parties actively considering a potential transaction were in their respective processes, noting in particular that the Company’s management team had scheduled meetings with potential counterparties at the upcoming JP Morgan Healthcare Conference.

On January 10, 2023, Dr. Loh met with Gurnet Point at the JP Morgan Healthcare Conference as a follow-up to their discussion held in December 2022. Gurnet Point confirmed that Novo Holdings’ diligence activities were ongoing and informed Dr. Loh that the timeline for the parties to submit a non-binding offer to the Company would be the second half of February 2023.

Also on January 10, 2023, members of Company management and Party B held an in-person diligence meeting, after which the Company provided VDR access to Party B.

On January 13, 2023, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Dr. Loh provided a summary of the meetings that the Company had held at the JP Morgan Healthcare conference, including with potential partners for NUZYRA in Japan and with a potential co-promote partner for NUZYRA, as well as any recent engagement with Gurnet Point, Party A, Party B and Party C, and shared the management team’s assessment of the Company’s prospects as an independent public company.

On January 16, 2023, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from R&G in attendance. Mr. Bigham shared his view with the Transaction Committee that Company management would not be willing to agree to amend their individual RPIP awards to reduce RPIP payments that had been proposed by Party C in its previous offer. After discussion, the Transaction Committee determined to inform Party C that further discussions between the companies were unlikely to be fruitful unless Party C meaningfully improved its offer. Later that day, Dr. Stein delivered this message in a letter to Party C.

On January 19, 2023, Party C responded that it would not make an improved offer until the Company provided a specific counterproposal.

On January 20, 2023, representatives of Moelis and representatives of Party B had a discussion regarding Party B’s diligence process and the timing of a potential bid from Party B.

On January 27, 2023, Dr. Loh, Mr. Woodrow, Mr. Brenner, Dr. St. Onge and Mr. Brenner met with Gurnet Point and its advisors to discuss the Company’s business, during which the representatives from Gurnet Point indicated its intent to submit a non-binding offer with Novo Holdings during the week of February 7, 2023.

On January 30, 2023, Party B notified the Company that its management committee had elected not to pursue a potential acquisition of the Company.

On February 9, 2023, representatives of Moelis and representatives of another potential counterparty (“Party E”) had a general discussion on business development opportunities, during which Party E expressed potential interest in an acquisition of the Company.

On February 10, 2023, the Company received a non-binding proposal from Gurnet Point and Novo Holdings to acquire all of the outstanding Shares for $2.55 per Share, payable in cash (the “February 10 Offer”). The February 10 Offer specified that, while Gurnet Point was interested in discussing a potential “rollover” of management’s equity and the RPIP, such a rollover was not a condition to the proposal.

On February 13, 2023, representatives of Moelis and representatives of a potential counterparty had a general discussion on business development opportunities, during which time the potential party expressed potential

 

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interest in an acquisition of the Company. On February 17, 2023, representatives of this potential transaction party informed representatives of Moelis that it was not interested pursuing a transaction with the Company.

On February 14, 2023, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, the representatives of Moelis provided a general update on Moelis’ discussions with potential transaction counterparties and reviewed its preliminary financial analysis that was previously presented to the Company’s Board of Directors on December 21, 2022. Following this discussion, the Transaction Committee determined to propose a transaction at $3.15 per Share to Gurnet Point in response to the February 10 Offer.

On February 15, 2023, Dr. Loh and Dr. St. Onge met with Gurnet Point and delivered the Company’s counterproposal, both orally and in a following confirmatory letter.

On February 17, 2023, as directed by the Transaction Committee, representatives of Moelis notified Party C’s advisors that the Company had received a non-binding proposal to acquire the Company for cash.

On February 21, 2023, Gurnet Point conveyed to Dr. Loh and Dr. St. Onge a revised proposal for Gurnet Point and Novo Holdings to acquire the Company for $2.85 per Share, payable in cash, subject to due diligence (the “February 21 Proposal”). Later in the day, Gurnet Point and Novo Holdings submitted a revised written non-binding proposal reflecting that proposal.

Subsequent to receipt of the February 21 Proposal, on February 21, 2023, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance to discuss the February 21 Proposal. The Transaction Committee also discussed potential timing challenges presented by the Company’s annual earnings call and its potential plans to announce a reduction-in-force at such earnings call unless the Company was able to come to agreement with Gurnet Point on valuation and announce a transaction with Gurnet Point. Based on that discussion, the Transaction Committee authorized Company management to engage in further diligence activities with Gurnet Point.

On February 22, 2023, Mr. Woodrow, Mr. Brenner and Dr. St. Onge spoke with Party C to review NUZYRA sales during fiscal year 2022, NUZYRA’s outlook for 2023 and to provide certain updates with respect to BARDA and opportunities with respect to NTM and Japan.

Also on February 22, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. Dr. Loh noted for the Company Board that the Transaction Committee had authorized the Company to engage in due diligence with Gurnet Point and summarized the consideration offered in the January 6 Proposal and the February 21 Proposal. Representatives of Moelis also provided an update on Moelis’ discussions with two other potential bidders who were in the early stages of evaluating a potential strategic transaction with the Company.

On February 23, 2023, Gurnet Point discussed the February 21 Proposal with Dr. Loh and Dr. St. Onge. In the discussion, Gurnet Point informed Dr. Loh and Dr. St. Onge that it would not be in a position to execute a transaction until early to mid-April, but was prepared to proceed with its due diligence investigation without an exclusivity commitment from the Company. In a follow-up discussion on the same day, Dr. St. Onge, with the Transaction Committee’s authorization, verbally proposed a price per share of $3.00 in cash and a target signing date of early to mid-April, with that proposal to be confirmed in writing.

On February 24, 2023, the Company delivered a written counterproposal to Gurnet Point and Novo Holdings in which the Company agreed to provide confirmatory due diligence materials and initiate the negotiation of definitive transaction documentation with Gurnet Point and Novo Holdings if Gurnet Point and Novo Holdings agreed to (1) a price of $3.00 per Share, to be paid in cash, (2) deliver equity commitments sufficient to cover the entire purchase price, required debt repayments and transaction expenses, with the transaction not subject to any

 

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financing conditions, and (3) work toward executing definitive transaction documents and announcing a transaction by April 10, 2023 (or, if mutually agreed, April 17, 2023). Each of the Company, Gurnet Point and Novo Holdings executed this written counterproposal.

On February 27, 2023, the Company provided additional members of the Gurnet Point and Novo Holdings team and their advisors with access to Company diligence materials. Over the ensuing several weeks, the Company and Gurnet Point held a series of due diligence discussions.

On February 28, 2023, as directed by the Transaction Committee, representatives of Moelis contacted three parties it had previously contacted regarding their potential interest in a strategic transaction with the Company, as well as an additional party that was not previously contacted. None of those parties indicated an interest in pursuing a transaction with the Company at that time.

On March 3, 2023, Party C’s financial advisors responded that Party C would not pursue further an acquisition of the Company at that time.

On March 9, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Moelis provided an update on Gurnet Point’s diligence activities and the importance to Gurnet Point of retaining key employees of the Company after the closing of a transaction between it and the Company. Moelis also provided an update on its outreach to other potential counterparties to a transaction with the Company.

During the week of March 13, 2023, Gurnet Point’s legal counsel at Latham & Watkins, LLP (“L&W”) contacted R&G to express Gurnet Point’s interest in engaging in discussions with the management team regarding post-closing employment terms. R&G informed L&W that the Company Board would not permit that engagement until such time as Gurnet Point had completed its due diligence investigation and confirmed that it remained willing to proceed with the transaction at the proposed $3.00 per share.

On March 16, 2023, the Company released its Annual Report on Form 10-K for fiscal year 2022 (the “2022 Form 10-K”). In the 2022 Form 10-K, the Company disclosed that the Company’s then-current level of cash and cash equivalents was not sufficient to fund operations for the next twelve months following the issuance of the financial statements included in the 2022 10-K and, as a result, there was substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of the financial statements included in the 2022 Form 10-K. Following release of the 2022 Form 10-K, the Company’s Shares traded down from a closing price of $1.91 per Share on March 15, 2023 to a closing price of $1.48 per Share

on March 16, 2023.

On March 17, 2023, the Company and Party E executed an NDA, which did not contain a standstill.

On March 20, 2023, the Company and Party E had a discussion, during which the Company provided an update of NUZYRA’s commercial performance and an overview of the Company’s BARDA contract.

Also on March 20, 2023, representatives of Party C’s financial advisor notified representatives of Moelis that Party C was potentially interested in re-engaging with the Company on a strategic transaction.

On March 21, 2023, R&G sent an initial draft of the Merger Agreement to L&W, which contemplated a two-step merger transaction structure and provided for fully committed equity financing covering the entire purchase price, including debt repayment and transaction expenses, a “hell or high water” regulatory efforts covenant, and a customary non-solicit provision with a fiduciary out for the Company Board and a Company termination fee of 2.5% of the Company equity value (the “March 21 Merger Agreement Draft”).

Also on March 21, 2023, Betaville Intelligence reported that the Company was in takeover discussions and that an unnamed private equity firm was the leading candidate to acquire the Company.

 

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On March 21, 2023, the Shares closed on Nasdaq at $1.86 per share, 35.8% above the closing price of the Shares on Nasdaq on March 20, 2023. Between March 24 and March 31, 2023, representatives of the Company, Moelis, Gurnet Point and its financial advisor discussed Gurnet Point’s diligence progress, as well as the story published by Betaville Intelligence and resulting volatility in the trading of the Shares.

On March 23, 2023, NexPoint Real Estate Opportunities, LLC (together with its affiliates and related parties, “NexPoint”) contacted the Company to ask questions following the Company’s recent earnings report and indicated that it would like the Company to add a director nominated by NexPoint to the Company Board. According to its most recent Schedule 13G filed January 20, 2023, NexPoint held 3,870,197 Shares, constituting 6.97% of the outstanding Shares.

On March 27, 2023, NexPoint filed a Schedule 13D disclosing its intent to engage in discussions with the Company and its management and the Company Board. The Schedule 13D reported that NexPoint had increased its ownership in the Company to 6,692,447 Shares, constituting 11.69% of the Company’s outstanding Shares.

Also on March 27, 2023, Party E informed representatives of Moelis that the Company’s near-term cash needs posed a significant challenge to an acquisition. Ultimately, Party E did not proceed further.

On March 31, 2023, Dr. Loh and Mr. Bigham had a call with Gurnet Point to share concerns about the story published by Betaville Intelligence.

On April 3, 2023, the Company and NexPoint entered into a non-disclosure agreement, expiring on June 1, 2023, which included a standstill provision and an obligation on the Company to cleanse NexPoint of any material non-public information that the Company had communicated to NexPoint upon the expiry of the non-disclosure agreement. Following execution of the non-disclosure agreement with NexPoint, the Company shared with NexPoint details of its operational initiatives, including its plans for a potential reduction in force if the Company did not enter into a strategic transaction and instead pursued a standalone strategy.

On April 6, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. At the meeting, Dr. Loh provided an update on the discussions and non-disclosure agreement with NexPoint as well as the discussions with Gurnet Point. Dr. Loh informed the Company Board that Gurnet Point had indicated that it intended to perform additional due diligence, such that it would be unlikely to be in a position to execute definitive agreements in connection with a potential transaction in mid-April, and that based on the work it had done to date, Gurnet Point was unlikely to proceed with a transaction at $3.00 per Share.

On April 11, 2023, the Transaction Committee convened a meeting by videoconference with members of the Company’s management and representatives from Moelis and R&G in attendance. The meeting participants discussed Gurnet Point’s ongoing due diligence process, as well as when, whether and how the Company should seek to affirmatively re-engage with Party C.

On April 14, 2023, Dr. Loh, Mr. Bigham, Dr. Stein, Dr. St. Onge met with Gurnet Point. Dr. Loh expressed concern with the pace of Gurnet Point’s progress on due diligence and definitive documentation for a transaction, given that the initial target date for an execution of definitive transactional documents had arrived. Gurnet Point informed Dr. Loh that it had completed its material due diligence but was seeking an additional equity financing partner to participate in the transaction and was unwilling to proceed with the transaction in the absence of an additional equity financing partner.

On April 20, 2023, representatives of Party C’s financial advisor contacted representatives of Moelis to inform them that Party C had been further considering a business combination with the Company and was considering a potential revised proposal.

 

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On April 21, 2023, Dr. Loh, Dr. Stein, Dr. St. Onge, and Mr. Bigham provided Gurnet Point with an update on the Company’s financial performance in April, which included a modest increase in sales of NUZYRA. On this call, Gurnet Point informed the Company representatives that it had approached additional potential equity investors. Ultimately, none of these investors was willing to participate in the Transaction on the terms outlined in the February 24 counterproposal agreed to by Gurnet Point and Novo Holdings and on the required timeline.

On April 28, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management and representatives of Moelis and R&G in attendance. At the meeting, Dr. Loh informed the Company Board that Gurnet Point had concluded its due diligence of the Company, but was still seeking an additional equity financing partner for the transaction and was unwilling to proceed without one. The discussion then turned to the Company’s initiatives to reduce operational expenses, primarily through a reduction-in-force. Dr. Loh shared his view that the Company needed to execute on these initiatives by the end of May if a more favorable alternative had not been identified by that point. The representatives of Moelis then provided an update on discussions with Party C, which was continuing to evaluate a potential business combination with the Company but had outstanding questions regarding the Company’s intellectual property and the financial implications of the RPIP. Given that Party C had indicated in recent discussions that changes would need to be made to the RPIP in order for a transaction with the Company to occur, Dr. Stein noted that it would be important that discussions with Party C occur through the Transaction Committee, and, after discussion, the Company Board resolved that Dr. Stein and the Transaction Committee should seek to engage with Party C regarding a potential business combination with the Company. At the meeting, Mr. Woodrow and Mr. Bostrom also provided an update on first quarter results, including that the Company had fallen short of its revenue projections, but beat consensus on SG&A, net loss and earnings per share.

On May 3, 2023, Party C and the Company extended the term of their existing non-disclosure agreement, which had expired.

Between May 5, 2023 and May 15, 2023, Party C and the Company held additional due diligence discussions, and the Company provided Party C the Company’s 2023 Operating Budget (identical to the May 2023 Long-Range Plan, with the exception of the contemplated financings and the assumed proceeds from a Japan out-licensing transaction), as well as an illustrative 2023 Operating Budget based on a scenario on which the Company did not implement any headcount reductions.

On May 9, 2023, the Company held its first quarter of 2023 earnings call, which was attended by representatives of Party D’s and Party A’s respective business development teams. Later on May 9, 2023, Company management instructed Moelis to contact representatives of Party D to gauge Party D’s interest in a management presentation and to contact representatives of Party A to gauge interest in a potential transaction. Also on May 9, 2023, the CEO of Party C contacted Dr. Loh to ask for an update on the Company’s business.

On May 10, 2023, Mr. Brenner, Mr. Woodrow, Mr. Bostrom and Dr. St. Onge met with members of Party C management in follow-up to the request between Dr. Loh and the CEO of Party C. Company management discussed recent progress with ex-U.S. parties related to the out-licensing of NUZYRA, including a high-level review of the financial terms that parties had proposed in term sheets. Additionally, Company management answered questions related to the operational efficiencies referenced on the earnings call and provided details on areas that would be most impacted if the reduction-in-force had to be implemented in a standalone environment. Party C asked Company management how a potential revised offer could be considered competitive versus the all cash offer currently being contemplated by the Company Board. Company management reminded Party C that, at the direction of the Transaction Committee, Company management was not authorized to engage in negotiations but suggested that Party C’s advisors connect with Moelis for further discussion related to a potential revised proposal.

As directed, representatives of Moelis contacted representatives of Party A on May 15, 2023 and representatives of Party D on May 22, 2023, in each case to determine their respective potential interest in a strategic transaction involving the Company.

 

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On May 18, 2023, Dr. Loh and Gurnet Point had a telephonic discussion during which Dr. Loh provided an update on the Company’s commercial business and BARDA-related progress. Gurnet Point re-affirmed that its due diligence activities were complete but that efforts to syndicate its equity financing requirements were unlikely to succeed prior to the potential transaction. Gurnet Point also noted that they were going to convene an internal meeting on May 19, 2023 with their senior partners to review open diligence concerns and to agree on terms for a revised proposal, if any. Later on May 18, 2023, Dr. Loh, Mr. Bigham and Gurnet Point convened a meeting during which Dr. Loh and Mr. Bigham informed Gurnet Point that timing and total deal consideration of $3.00 per share remained priorities of the Company and suggested that a contingent value right could be considered as part of the total deal consideration.

On May 19, 2023, Gurnet Point and Novo Holdings submitted a revised non-binding proposal to acquire the Company for $2.10 per Share, payable in cash and a contingent value right entitling the holders to $0.90 per Share, contingent upon achieving U.S. NUZYRA net sales of $350 million in any calendar year by year-end 2026 (the “May 19 Proposal”). In connection with the delivery of the May 19 Proposal, Gurnet Point indicated to Dr. Loh that it did not have material flexibility to increase this offer.

On May 21, 2023, the Transaction Committee convened, with members of management and representatives of R&G and Moelis present for some or all of the meeting, to discuss and evaluate the May 19 Proposal. The Transaction Committee determined to provide Gurnet Point with a verbal counterproposal for an upfront offer of $2.50 per Share in cash with a contingent value right entitling the holders to up to (1) $0.25 per Share contingent upon achievement of $240 million of annual net NUZYRA sales by year end 2025 and (2) $0.25 per Share contingent upon achievement of $320 million of annual net NUZRYA sales by year-end 2026. Later that day, Dr. Stein communicated the counterproposal to Gurnet Point. At the meeting, Mr. Bostrom also discussed Company management’s potential plan for financing the Company as a standalone company based on certain assumptions.

On May 22, 2023, Gurnet Point and Novo Holdings provided a verbal counterproposal to Dr. Stein of $2.15 per Share in upfront cash and a contingent value right entitling its holder to $0.85 per Share payable upon achievement of $320 million of U.S. sales of NUZYRA in any calendar year by December 31, 2026, which proposal was subsequently confirmed in writing on May 23, 2023 (the “May 22 Proposal”). Gurnet Point indicated that the May 22 Proposal was its “best and final” offer.

Later on May 22, 2023, the Transaction Committee convened, with members of management and representatives of R&G and Moelis present, to discuss the May 22 Proposal as well as the potential dilutive impact of the Company’s alternative financing plans if the Company were to remain a standalone company. After discussion, the Transaction Committee resolved to commence negotiations of definitive transaction documentation with Gurnet Point and Novo Holdings on the basis of the May 22 Proposal.

Also on May 22, 2023, representatives of Moelis contacted representatives of Party D to discuss a potential acquisition of the Company. Party D expressed interest in the Company and indicated a preference for an all-stock merger with the Company but raised concerns regarding the Company’s cash and debt positions.

On May 23, 2023, the Company contacted NexPoint to request a three-week extension on the term of its non-disclosure agreement. Dr. Loh also contacted Party A on May 23, 2023 to inquire about its potential interest in a strategic transaction involving the Company but did not receive a response.

On May 24, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management, and with Moelis and R&G in attendance. Mr. Bostrom reviewed the management team’s latest perspectives regarding financial projections and financing requirements as a stand-alone organization with the Company Board (the “May 24 Projections”). These projections were based on a number of assumptions, including that the Company could (1) successfully extend the maturity of $130 million worth of its Convertible Notes, which would leave $35 million of notes requiring repayment in 2024 and (2) raise an aggregate of

 

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$30 million of additional financing. Mr. Bostrom further noted that a $50 million equity raise would be preferable, given potential variability in the Company’s revenue projections and the Company’s projected low cash position with a $30 million equity raise. The Company Board discussed the financing assumptions and noted that the financing would result in substantial dilution to the Company’s existing shareholders.

On May 24, 2023, the Company executed a non-disclosure agreement with Party D, which did not contain a standstill provision. Between May 25 and June 4, 2023, the Company and Party D held discussions to progress Party D’s diligence of the Company.

Also on May 25, 2023, Dr. Loh and Gurnet Point discussed the status of the transaction process. On this call, Gurnet Point provided its requirements for management’s re-investment in its buyer entity and with respect to management’s go-forward employment agreements, which Gurnet Point indicated were conditions to its willingness to sign the Merger Agreement. Prior to this discussion, Gurnet Point had not discussed the terms of the Company management team’s potential re-investment in its buyer entity or their go-forward employment agreement. The re-investment proposal provided by Gurnet Point included, among other things, a requirement that all recipients of the RPIP re-invest 47.5% of the pre-tax Tranche 1 RPIP proceeds for each participant (with the exception of the two former employee participants, who would re-invest zero, and Michael Bigham, who would re-invest 25%), the continuation of all PRSUs and RSUs held by RPIP participants on its current terms and vesting schedule, and the continuation of 65% of PRSUs and RSUs held by VP level, non-RPIP participants on its current terms and vesting schedule. Further, the proposal required that the re-invested equity be subject to a two-year vesting schedule, in equal 25% tranches every six months from the closing date.

On May 25, 2023, Party C communicated an updated proposal to Dr. Stein to acquire the Company for $2.75 per Share upfront, payable in stock of Party C. The proposal contained a condition that the Company’s management team accept an aggregate of $25 million under the RPIP, payable in Party C shares, which would constitute an approximately 50% reduction in the amount due under the RPIP pursuant to its terms in connection with a change-in-control transaction. Party C also requested a 45-day exclusivity period.

On May 26, 2023, L&W sent R&G a revised draft merger agreement, which provided, among other things, that a portion of the transaction consideration would be financed with debt, the requirement for delivery of voting and support agreements, a limitation on the efforts it would be required to devote to obtain regulatory approval of the transaction, an increase in the amount of the Company termination fee to be an amount equal to 5% of the Company’s equity value, that a full termination fee was payable by the Company in the event that shareholder approval of the transaction was not obtained and that a termination fee was payable by Parent in the event the Merger Agreement was terminated due to a breach by Parent or a failure of Parent to close when all conditions to the Company’s obligations to close were satisfied (other than those conditions that by their terms were to be satisfied by the delivery of documents or the taking of actions at the accepted time of the then-contemplated tender offer and the closing).

Also on May 26, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management, and with representatives of Moelis and R&G in attendance. At the meeting, the representatives of Moelis shared with the Company Board an update on the discussions that Moelis had conducted with various parties relating to a potential strategic transaction. After this presentation, members of the Company’s management reviewed the May 24 Projections with the Company Board and the representatives of Moelis led a discussion of Moelis’ preliminary financial analysis and analysis of the May 22 Proposal. The meeting participants also discussed the risks and substantial dilution of the Company’s shareholders if the Company were to proceed with a standalone strategy. Dr. Stein then shared with the Company Board updates from his conversation with Party C and the terms of the offer Party C made on May 25, 2023.

The Transaction Committee met immediately following the Company Board meeting with members of management present, along with representatives from R&G and Moelis. The Transaction Committee members and others discussed the risks to and substantial dilution of the Company’s shareholders if the Company were to

 

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proceed with a standalone strategy, the need to cleanse NexPoint of material non-public information by the end of May, which would require disclosure of the potential reduction in force prior to the time Gurnet Point had indicated they would be in a position to sign definitive documents and announce a transaction, Gurnet Point’s indication that announcement of a reduction in force could potentially reduce its interest in proceeding with the potential acquisition of the Company, and the challenges associated with proceeding with Party C given the extended due diligence period Party C indicated it would require, Party C’s condition regarding the RPIP and the additional lack of certainty that the degree of due diligence Party C had left to complete introduced to its proposal. Representatives from R&G and Moelis then provided their perspective regarding the practicality of utilizing the one-step merger structure and the proposed Company Termination Fee and their impact on the opportunity for a superior proposal even if the Company and Gurnet Point were to execute a Merger Agreement. The attendees then discussed the response to Party C’s CEO and revisions to the terms of the offer required to make the offer actionable by the Company. Later that day, Dr. Stein and Party C discussed Party C’s offer, including the condition that the management team accept a reduction in the RPIP payments and the 45-day diligence requirement. Dr. Stein encouraged Party C’s CEO to consider whether Party C would be willing to submit a proposal that assumed full payment of the RPIP in stock, which the management team had indicated a willingness to accept, and to consider a shorter diligence period. Dr. Stein also suggested that Party C consider a $0.25 per share CVR tied to achievement of $320 million of commercial revenue from NUZYRA in 2026.

Between May 28 and June 6, 2023, Dr. Loh and his counsel, McDonald Hopkins LLC, Mr. Bigham and other members of management conducted a series of discussions with Gurnet Point to negotiate the terms on which each of them would be willing to re-invest in Gurnet Point’s buyer entity. The negotiations resulted in, among other things, a reduction in the amount certain executives would be required to re-invest, including those who would not continue with the Company after the closing.

On May 30, 2023, R&G delivered a revised draft of the Merger Agreement, which reflected, among other things, the transaction being structured as a one-step merger, the reimbursement of Gurnet Point fees and expenses in the event of a failure of a shareholder vote up to a cap of $1,000,000. It also provided for a termination fee equal to $4,300,000 and a parent termination fee equal to $8,600,000. Between May 30 and June 6, 2023, Company management, Gurnet Point, R&G and L&W negotiated the remaining open points in the Merger Agreement, including that the Company Termination Fee would be $4,900,000 and that the Parent Termination Fee would be $6,750,000 along with the CVR Agreement and other Transaction Documents.

Also on May 30, 2023, Party C delivered a revised verbal proposal to acquire all of the Company’s outstanding Shares for $2.50 per Share, payable in stock, and included in its proposal that it would pay out the full value of the RPIP (excluding accrued interest) in Party C stock.

On May 31, 2023, NexPoint informed the Company that it was willing to provide an extension on the cleansing obligation of the non-disclosure agreement to 9:00am ET on June 9, 2023, provided, that the Company agree to cleanse it on that date and to appoint a director nominated by NexPoint if the Company did not announce a strategic transaction on or prior to such date. The Company and NexPoint ultimately agreed to an extension to 9:00am on June 12, 2023 and otherwise on the terms proposed by NexPoint.

On May 31, 2023, the Transaction Committee convened a meeting with representatives from R&G and Moelis in attendance. The attendees discussed the risks and challenges of the offers from Gurnet Point, Party C and the potential reduction in force. The Transaction Committee determined that in light of the “best and final” offer from Gurnet Point and the timeline of the Gurnet Point transaction, the Company would inform Party C that the Company would engage in final diligence and negotiations of definitive transaction documents with Party C if it increased its offer to $2.75 per Share in stock and was able to provide a binding offer by June 9, 2023. Later that day, Dr. Stein communicated the Company’s position to Party C. That evening, the Company provided an anonymized version of the May 30 draft merger agreement previously delivered to Gurnet Point to Party C and provided an index of VDR contents to Party C.

 

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On June 1, 2023, Party C informed Dr. Stein that it would not be able to meet the required timeline to provide a binding offer.

Also, on June 1, 2023, representatives of Party D’s financial advisor contacted representatives of Moelis and indicated that Party D was aware of the Company’s short timeline with a potential acquirer.

On June 2, 2023, Betaville Intelligence reported that Gurnet Point was one of the private equity firms that had been considering a takeover of the Company. Following the news reports, Dr. Loh spoke with Gurnet Point several times to review outstanding Merger Agreement items and to encourage Gurnet Point to position itself to finalize and execute the Merger Agreement.

On June 4, 2023, Party D indicated to the Company that it could be in a position to submit a non-binding offer on June 6 or June 7, 2023, subject to further diligence, which Party D estimated would take 45 days.

Also on June 4, 2023, Dr. Loh had a telephone call with Gurnet Point to discuss the status of outstanding Merger Agreement issues. Dr. Loh also informed Gurnet Point that a competing strategic party had meaningfully accelerated its diligence work and engagement with the Company’s management team over the course of the prior week.

On the evening of June 5, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management, and representatives from Moelis and R&G in attendance. Representatives from R&G shared the status of negotiations of the definitive documentation and its view that remaining open topics were resolvable over the course of the subsequent 24 hours. Discussion ensued among the directors with respect to certain points on the draft transaction documents, including the non-solicitation provision, the size of the company termination fee and the “commercially reasonable efforts” obligation in the draft CVR Agreement, including the lack of any specific obligation by Gurnet Point to deploy additional sales representatives on any timetable, which Gurnet Point had refused to accept. Mr. Woodrow then reviewed with the Company Board the management team’s revenue projections, assuming that Gurnet Point deployed an additional 40 field representatives by the end of 2023 and an additional 40 representatives in July 2024, which Mr. Woodrow indicated were likely, based his understanding of Gurnet Point’s intentions. The revenue projections shared by Mr. Woodrow indicated that based on those assumptions, the Company’s revenue was projected to exceed $320 million, the milestone threshold in the draft CVR Agreement. Representatives of Moelis then reviewed with the Company Board Moelis’ preliminary financial analysis of the proposed merger consideration. As part of this review, the representatives of Moelis updated the Company Board on Party C’s indication that it would not be able to meet the proposed timeline and its discussions with Party D, including its current progress in diligence and that Moelis had reminded Party D multiple times that it would not likely have as long as its expected timeline to make a binding proposal to the Company.

Later in the evening of June 5, 2023, Company management, Gurnet Point, R&G and L&W negotiated and resolved the final open points on the definitive documentation.

On the morning of June 6, 2023, the Company Board convened a meeting by videoconference with members of the Company’s management, and with Moelis and R&G in attendance. Representatives of R&G led a discussion of the Company Board’s fiduciary duties in the context of considering approval of a sale of the Company and summarized the key terms of the proposed transaction documents, which had previously been distributed to the Company Board. Moelis then delivered an oral opinion, which was confirmed by delivery of a written opinion dated June 6, 2023, addressed to the Company Board to the effect that, as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth therein, the Merger Consideration to be received by the holders of Shares in the Merger was fair from a financial point of view to such holders. See the section entitled “Special Factors — Opinion of the Company’s Financial Advisor” for further information on the Moelis opinion and analyses. Following additional discussion and consideration of the Merger Agreement and the Merger and the other

 

39

Contemplated Transactions, the Company Board unanimously (i) determined that the Merger Agreement and the Contemplated Transactions are fair to, and in the best interests of, the Company and the holders of Shares, and that it was advisable to enter into the Merger Agreement, (ii) approved the Merger Agreement and (iii) resolved to recommend that the holders of the Shares adopt the Merger Agreement.

Prior to the opening of market hours on NASDAQ on June 6, 2023, Parent, Merger Sub and the Company executed the Merger Agreement, the Subscribers and TopCo executed the Subscription Agreement, and the Management Stockholders, including Dr. Loh, and Parent executed the Voting Agreement. On the morning of June 6, 2023, the Company issued a press release announcing the transaction.

Considerations of the Company Board and Procedural Safeguards with respect to the Contemplated Transactions

 

•

Value to Stockholders on Both a Relative and Absolute Basis. The Company Board considered the aggregate value and form of the consideration to be received in the Merger by the Company’s stockholders, including:

 

•

the upfront payment of $2.15 per Share in cash to be received upon consummation of the Merger, the current and historical market prices of the Shares, and the fact that the Cash Consideration represents a substantial premium to recent market prices of the Shares, including representing a 20.4% premium to the trailing 30-day volume weighted-average price for the Shares as of June 2, 2023 and 56.9% premium to the last reported sale price for the Shares as of March 20, 2023, the day prior to press reports regarding a potential transaction;

 

•

that the Cash Consideration provides the Company’s stockholders with immediate and certain value in respect of their Shares, especially when viewed against the risks, uncertainties and potential substantial dilution associated with the Company’s stand-alone strategy, including the substantial doubt regarding the Company’s ability to continue as a going concern and the potential impact of such risks and uncertainties and of potential financing transactions on the trading price of the Shares and the ownership percentage of the Company represented by the Shares;

 

•

that in addition to the Cash Consideration, the Company’s stockholders will receive one CVR per Share, which provides the Company’s stockholders with an opportunity to realize additional value if the milestone is achieved, as described in the CVR Agreement, is achieved; and

 

•

that the Company Board believes, based on management’s assumptions regarding the probability and timing of achievement of the conditions with respect to the CVR set forth in the CVR Agreement, that the CVR milestone is achievable, taking into account the latest forecasts with respect to NUZRYA revenue and the fact that Parent has agreed to use commercially reasonable efforts to achieve the milestone;

 

•

Full and Fair Value. The Company Board believed that the Cash Consideration plus the CVR represented the full and fair value for the Shares, taking into account the Company Board’s familiarity with the Company’s business strategy, assets, prospects, and projected financial performance and financing requirements, and the relative certainty of the Cash Consideration for the Merger as compared to forecasted financial results and the risks associated with the Company’s financing strategy;

 

•

Moelis Analysis and Fairness Opinion. The Company Board considered the financial analyses of Moelis, as reviewed and discussed with the Company Board, as well as the opinion of Moelis to the effect that, as of June 6, 2023, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as set forth in Moelis’ written opinion, the Merger Consideration to be received by the holders of Company Common Stock in the Merger was fair from a financial point of view to such holders;

 

40

•

Potentially Limited Period of Opportunity The timing of the Contemplated Transactions and the risk that if the Company did not accept Gurnet Point’s and Novo Holdings’ (together with Gurnet Point, the “Buyers”) offer when it executed the Merger Agreement, it may not have another opportunity to do so, and the belief of the Company Board that the Buyers are only willing to enter into the Contemplated Transactions for a limited period of time;

 

•

Best Offer. The Company Board’s belief that (i) as a result of the negotiating process, the Company has obtained the Buyers’ best offer and (ii) there was substantial risk of losing the Buyers’ offer of $2.15 in cash and one (1) CVR per Share in the Buyers’ May 23, 2023 proposal if the Company determined that it should pursue a higher price or delay execution of the Merger Agreement;

 

•

Results of Market Check Process. The fact that the Company conducted a robust market check, with the assistance of the Company’s outside legal counsel and financial advisor, including outreach and discussions with potential parties that were, in the view of the Company Board with input from the Company’s management and financial advisor, reasonably likely to have interest in a potential strategic transaction involving the Company; and that none of those potential parties have offered a transaction that the Company Board considers more advantageous to stockholders than the Contemplated Transactions, taking into account certainty of value in light of due diligence requirements, timeline and likelihood of completion;

 

•

Prospects of the Company on a Standalone Basis. The Company Board, in assessing the Company’s business, operations, prospects, strategic and short- and long-term operating plans, assets, liabilities, financial condition, believed there is a high risk of insolvency of the Company if it continued to operate independently and pursue its business on a standalone basis. With the Company’s convertible notes coming due on May 1, 2024, the Company believes it will need to successfully execute one or more financing transactions prior to that date or otherwise risk bankruptcy. The Company anticipates that any such financing transactions, if they could be completed, would likely be substantially dilutive to current Company stockholders. For illustrative purposes, if the Company were to negotiate an extension of its convertible notes and raise $50 million in an equity financing round, the Company estimates that approximately 260 million of shares of Company Common Stock would be outstanding or reserved for issuance upon the conversion of the amended notes or exercise of warrants issued in connection with the equity financing transaction after those transactions, assuming the equity financing was consummated at a 30% discount to a $1.37 per share trading price of the Company Common Stock, which is the last reported sale of the Company Common Stock on March 20, 2023, the day prior to press reports regarding a potential transaction, and included 100% warrant coverage. For reference, there are approximately 53 million shares issued and outstanding presently. Using the same assumptions, but a different trading price per share at the time of the financing, the approximate number of shares outstanding or reserved for issuance following the transactions would be as follows: (i) 330 million shares at a $1.00 per share trading price, (ii) 415 million shares at a $0.75 per share trading price and (iii) 535 million shares at a $0.55 per share trading price. These assumptions are merely intended to be illustrative and to demonstrate the potential substantial dilution that could occur from financing transactions. Different assumptions regarding the discount for the equity issuance, the amount of warrant coverage and other factors would create different outcomes. In addition to financing transactions that, if they could be completed, would likely be substantially dilutive to current Company stockholders, the Company’s plans would require it to reduce its workforce by at least 30%, including substantial reductions among the sales force, without materially negatively impacting the Company’s ability to generate sales of NYZURA or to otherwise successfully operate its business. The Company also anticipates that an amendment to the convertible notes would require the grant of a security interest, thereby restricting the Company’s ability to raise debt financing in the future;

 

•

Liquidity Risks of the Company. The Company’s current level of cash and cash equivalents may not be sufficient to fund operations for the next twelve months from the last of the last Quarterly Report on Form 10-Q, leading to the Company’s expression of substantial doubt as to its ability to continue operations as a going concern;

 

41

•

The Company’s Need for Additional Capital. The need for the Company to raise additional capital primarily through a combination of public or private equity offerings, debt or other structured financings, strategic collaborations, grant funding and government funding, which may not be available to the Company on favorable terms or at all;

 

•

Likelihood of Closing. The belief of the Company Board that the likelihood of completing the Merger is high, particularly in light of the terms of the Merger Agreement, including (i) the conditions to the Merger being specific and limited, (ii) the exceptions contained within the “Company Material Adverse Effect” definition, which generally defines the standard for closing risk, and (iii) the likelihood of obtaining required regulatory approvals, including the commitment of Parent to use its reasonable best efforts to obtain the required regulatory approvals;

 

•

Opportunity to Accept a Superior Proposal. The fact that the terms of the Merger Agreement permit the Company to respond to unsolicited proposals, that the provisions of the Merger Agreement permit the Company Board in certain circumstances to terminate the Merger Agreement in order to enter into a definitive agreement with respect to an unsolicited superior proposal, subject to the payment of a termination fee of $4,900,000 (approximately $0.08 per Share) which amount the directors believed to be unlikely to serve as a meaningful deterrent to other acquisition proposals, and that the anticipated time period until the Special Meeting to consider approval of the proposed transaction would afford both of the parties with whom the Company was engaged close in time to the execution of the Merger Agreement or any other parties with potential interest sufficient time for such potential parties to complete their due diligence and make a binding proposal should they be willing to offer a Superior Proposal;

 

•

Termination of Voting Agreements. The fact that the Voting Agreements terminate in the event that the Merger Agreement is validly terminated in accordance with its terms, as more fully described in the section titled “Special Factors — Voting Agreements”;

 

•

Reverse Termination Fee. The fact that, in the event the Contemplated Transactions are not consummated due to the unavailability of the Debt Financing or Parent breach, Parent will be required to pay the Parent Termination Fee of $6,750,000 to the Company; and

 

•

Appraisal Rights. That stockholders who do not believe that the Merger Consideration represents fair consideration for their Shares will have an opportunity to pursue appraisal rights under Section 262 of the DGCL.

In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above, the transaction committee formed by the Company Board (the “Transaction Committee”) and the Company Board considered, among other things, a number of procedural safeguards that they believed were and are present to ensure the fairness of the Merger Agreement and the Contemplated Transactions, including the Merger. These procedural safeguards include, among other things, the following, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

•

Consideration of Alternative Transactions

 

•

that prior to entering into the Merger Agreement, the Company Board and the Transaction Committee, which was comprised of solely independent directors, was authorized to solicit, initiate, propose or introduce the making, submission or announcement of, or encourage, facilitate or assist, any proposal or offer that could constitute a potential transaction with respect to the Company from any person;

 

•

that the Company Board, in consultation with its independent financial and legal advisors and including through the Transaction Committee, conducted an extensive process, involving frequent and extensive deliberations and negotiations over a period of time, to consider:

 

42

•

potential transactions and alternatives thereto, including engaging with potential counterparties; and

 

•

the Merger Agreement and the transactions contemplated thereby, including the Merger, and, in each case, each member of the Transaction Committee was actively engaged in that process on a regular basis and was provided with full access to the Company’s management and its advisors in connection with the evaluation process (as more fully described under “Special Factors — Background of the Merger”);

 

•

Independent Counsel. That the Company Board retained and was advised by independent legal counsel and financial advisor, and that the Management Stockholders, including Dr. Loh, were represented by a different counsel than the Company;

 

•

Stockholder Approval Required. The consummation of the transactions contemplated by the Merger Agreement is subject to the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the Shares outstanding as of the close of business on the Record Date;

 

•

Negotiation Process. That the terms of the Merger Agreement, including the Merger Consideration, were the product of extensive negotiations between the Transaction Committee in consultation with its legal and financial advisors, on the one hand, and Parent and its affiliates and advisors, on the other hand, that resulted in the improvement, from the perspective of the Company, of other terms of the Merger and the Merger Agreement, including the amount and circumstances payable of the Company Termination Fee, Parent Termination Fee and Reimbursement Payment, relative to Parent’s initial proposed terms, and that the Transaction Committee completed its negotiation with the Buyers on behalf of the Company stockholders, obtaining what it determined to be the Buyers’ “best and final” offer, prior to permitting the Company’s management team to engage with the Buyers on their future equity and employment relationships with the Buyers;

 

•

Merger Agreement Terms.

 

•

The various terms of the Merger Agreement that are intended to help ensure that the Company’s stockholders receive the highest price per Share reasonably available, including:

 

•

that the Merger Agreement may be terminated, in certain circumstances, including, among others, by the Company to accept and enter into a definitive agreement with respect to a Superior Proposal (as more fully described under “The Merger Agreement”), provided that the Company pay Parent the Company Termination Fee;

 

•

that the Company Board or a committee thereof, in certain circumstances, may make a Change of Board Recommendation, including in response to (i) an Intervening Event, or (ii) a bona fide written Acquisition Proposal that the Company Board or a committee thereof determines constitutes a Superior Proposal, in each case, subject to and in accordance with the terms and conditions of the Merger Agreement; and

 

•

that the Company Board made its evaluation of the Merger Agreement and the transactions contemplated thereby, including the Merger, based upon the factors discussed in this proxy statement and with the full knowledge of the interests of Dr. Loh’s and management’s interests in the Merger.

In evaluating the Merger Agreement and the Contemplated Transactions, including the Merger, and making the decisions, determinations and recommendations described above, the Company Board also considered, among other things, certain countervailing reasons, including the following uncertainties, risks and other potentially negative reasons, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

•

Opportunity Costs. The fact that the Company will no longer exist as an independent public company and the Company’s stockholders will forego any future increase in its value as an independent public

 

43

company that might result from its possible growth, other than in connection with the CVR, and the fact that the Company may have been able to negotiate a more favorable binding offer from one of the parties with whom the Company was engaged close in time to the time at which the Merger Agreement was executed;

 

•

Potential Negative Impact of Announcement on the Company’s Business. The possible negative effect of the Merger and public announcement of the Merger on the Company’s financial performance, operating results and stock price and the Company’s relationships with customers, suppliers, other business partners, management and employees;

 

•

Risk of Not Closing. The risk that the transactions contemplated by the Merger Agreement, including the Merger, may not be consummated in a timely manner or at all, and the consequences thereof, including (i) the potential loss of value to the Company’s stockholders, (ii) the potential negative impact on the operations and prospects of the Company, including the risk of loss of key personnel, and (iii) that the market’s perception of the Company’s prospects could be adversely affected if such transactions were delayed or were not consummated;

 

•

Risk of Debt Financing Failure. The possibility that, at the Closing the available amount of the Debt Financing is less than the amount required to consummate the Merger, in which event the Company would not be able to specifically enforce Parent’s obligation to complete the Merger and instead would have the sole and exclusive remedy of terminating the Merger Agreement and causing Parent to pay the Parent Termination Fee;

 

•

Prohibition Against Solicitations. The fact that the Merger Agreement precludes the Company from actively soliciting competing Acquisition Proposals;

 

•

Business Operation Restrictions. The fact that the Merger Agreement imposes restrictions on the conduct of the Company’s business in the pre-closing period, which may adversely affect the Company’s business, including by delaying or preventing the Company from raising financing or pursuing non-ordinary course opportunities that may arise or precluding actions that would be advisable if the Company were to remain an independent company, such as executing the workforce reduction it would have executed as part of its stand-alone strategy;

 

•

Resources Required. That the Company’s directors, officers and employees have expended and will expend extensive efforts attempting to complete the transactions contemplated by the Merger Agreement and such persons have experienced and will experience significant distractions from their work during the pendency of such transactions;

 

•

Transaction Expenses. The substantial transaction expenses to be incurred in connection with the Contemplated Transactions and the negative impact of such expenses on the Company’s cash reserves and operating results should the Merger not be completed;

 

•

Risk of Litigation. The risk of litigation in connection with the transactions contemplated by the Merger Agreement; and

 

•

Interests of Insiders. The interests that some of the Company’s management may have with respect to the Contemplated Transactions that may be different from, or in addition to, their interests as stockholders of the Company or the interests of the Company’s other stockholders generally, including with respect to the RPIP (as defined below).

Certain Company Management Forecasts

Important Information Concerning the Company Management Forecasts

Except for annual guidance, the Company does not publicly disclose long-term forecasts or internal projections as to future revenues, earnings or other results, due to, among other reasons, the unpredictability of the underlying assumptions and estimates and the inherent difficulty of accurately predicting financial performance for future periods.

 

44

In connection with its evaluation of the Company’s stand-alone prospects and potential strategic transactions available to the Company, including the Contemplated Transactions, the Company’s management prepared unaudited non-public prospective financial projections for the Company on a stand-alone basis, without giving effect to the Contemplated Transactions. These prospective financial projections were prepared and updated by the Company’s management and reviewed and discussed with the Company Board in May 2022, December 2022, March 2023 and May 2023. Specifically, the Company Board reviewed the May 2022 Baseline Long-Range Plan, the May 2022 High Case Long-Range Plan, the May 2022 Low Case Long-Range Plan (together with the May 2022 Baseline Long-Range Plan and the May 2022 High Case Long-Range Plan, the “May 2022 Long-Range Plan”), the Preliminary December 2022 Long-Range Plan, the Preliminary December 2022 Low Case Long-Range Plan (together with the Preliminary December 2022 Long-Range Plan, the “Preliminary December 2022 Long-Range Plans”), the December 2022 Long-Range Plan, the December 2022 Risk-adjusted Long-Range Plan, the March 2023 Long-Range Plan and the May 2023 Long-Range Plan (collectively, the “Long-Range Plans”) projections in connection with their evaluation of strategic alternatives. The Company Board used the May 2023 Long-Range Plan to assist in its decision-making process in determining to approve and adopt the Merger Agreement and to recommend the Merger, and directed Moelis to use and rely on the May 2023 Long-Range Plan for purposes of its financial analyses and opinion described in under the heading “— Opinion of the Company’s Financial Advisor” which is filed as Annex D to this proxy statement and incorporated herein by reference. We refer to these Long-Range Plans in this section generally as the “Forecasts.”

The Forecasts were prepared by the Company’s management based on assumptions they believed at the time to be achievable. The Forecasts reflect numerous assumptions including (i) expectations regarding the likely trajectory of sales for NUZRYA for acute skin and skin structure infections (“ABSSSI”), community-acquired bacterial pneumonia (“CABP”), off-label revenue from other indications and government procurement revenue, grant revenue and royalties from Zai, Tetraphase and Seysara; (ii) expectations regarding commercial, research & development, and other operating expenses; and (iii) other relevant factors relating to the Company’s strategic plan, as well as how certain of these assumptions may change over time. The foregoing is a summary of certain key assumptions and estimates and does not purport to be a comprehensive overview of all assumptions and estimates reflected in the projections prepared by Company management.

The Forecasts are summarized below:

May 2022 Long-Range Plan

In May 2022, Company management prepared the May 2022 Long-Range Plan, reflecting management’s view of the trajectory of the Company’s business through the end of the fiscal year ending December 31, 2032. Company management assumed no capital expenditures, amortization, and de minimis depreciation. These Forecasts were endorsed by the Company Board as the basis for the preliminary financial analysis that Moelis provided to the Company Board at a meeting on May 11, 2022.

May 2022 Baseline Long-Range Plan

 

		Q1 2022E				Q2 2022E				Q3 2022E				Q4 2022E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E
($ in millions)
Total Revenue (net)(1)		$	28.4			$	32.3			$	38.7			$	78.7			$	178.2			$	190.1			$	291.7			$	330.2			$	426.3			$	431.2			$	477.0			$	536.0			$	594.9			$	590.1			$	245.9
Gross Profit		$	24.5			$	28.0			$	33.3			$	67.5			$	153.3			$	160.6			$	257.8			$	285.8			$	371.7			$	367.7			$	405.4			$	454.9			$	504.9			$	500.8			$	208.7
Total Operating Expenses		$	38.0			$	42.2			$	45.4			$	47.1			$	172.7			$	207.2			$	217.7			$	230.8			$	259.7			$	263.9			$	277.5			$	288.0			$	301.2			$	299.1			$	124.6
EBIT(2)		($	13.5	)		($	14.2	)		($	12.3	)		$	20.4			($	19.7	)		($	46.8	)		$	39.9			$	54.9			$	111.9			$	103.7			$	127.9			$	166.8			$	203.6			$	201.6			$	83.9
EBITDA(3)		($	13.4	)		($	14.2	)		($	12.2	)		$	20.4			($	19.4	)		($	46.6	)		$	40.1			$	55.0			$	112.0			$	103.8			$	128.0			$	166.9			$	203.7			$	201.6			$	84.0
Net Income		($	17.6	)		($	19.1	)		($	18.0	)		$	14.6			($	39.3	)		($	70.0	)		$	18.2			$	24.4			$	84.9			$	76.8			$	100.3			$	138.3			$	175.5			$	175.4			$	78.2

 

(1)	Total Revenue (net) comprised of net NUZYRA revenue (including BARDA procurement revenue), contract service and grant revenue and collaboration and royalty revenue.

(2)	EBIT is earnings before interest and taxes. For purposes of calculating EBIT, stock-based compensation was treated as a cash expense.

(3)	EBITDA is earnings before interest, taxes, depreciation, and amortization. For purposes of calculating EBITDA, stock-based compensation was treated as a cash expense.

 

45

May 2022 High Case Long-Range Plan

Company management also prepared the May 2022 High Case Long-Range Plan, reflecting expanded uptake for NUZYRA in ABSSSI and CABP and incremental BARDA procurement revenue while maintaining planned operating cost.

 

		Q1 2022E				Q2 2022E				Q3 2022E				Q4 2022E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E
($ in millions)
Total Revenue (net)(1)		$	29.0			$	33.0			$	39.5			$	79.4			$	180.8			$	198.9			$	312.6			$	373.5			$	508.2			$	701.8			$	778.3			$	852.7			$	926.3			$	957.2			$	386.3
Gross Profit		$	25.0			$	28.5			$	33.8			$	68.1			$	155.5			$	167.8			$	276.1			$	322.8			$	442.5			$	597.3			$	660.2			$	722.4			$	784.8			$	810.9			$	327.3
Total Operating Expenses		$	38.0			$	42.2			$	45.4			$	47.1			$	172.7			$	207.2			$	217.7			$	230.8			$	259.7			$	263.9			$	277.5			$	288.0			$	301.2			$	299.1			$	124.6
EBIT(2)		($	13.1	)		($	13.7	)		($	11.7	)		$	21.0			($	17.5	)		($	39.6	)		$	58.1			$	91.9			$	182.7			$	333.3			$	382.6			$	434.3			$	483.5			$	511.6			$	202.6
EBITDA(3)		($	13.0	)		($	13.7	)		($	11.6	)		$	21.0			($	17.2	)		($	39.4	)		$	58.3			$	92.0			$	182.8			$	333.4			$	382.7			$	434.4			$	483.6			$	511.7			$	202.7
Net Income		($	17.1	)		($	18.6	)		($	17.4	)		$	15.2			($	37.1	)		($	62.8	)		$	36.5			$	54.6			$	142.2			$	261.4			$	312.0			$	366.4			$	419.3			$	447.1			$	190.9

 

(1)	Total Revenue (net) comprised of net NUZYRA revenue (including BARDA procurement revenue), contract service and grant revenue and collaboration and royalty revenue.

(2)	EBIT is earnings before interest and taxes. For purposes of calculating EBIT, stock-based compensation was treated as a cash expense.

(3)	EBITDA is earnings before interest, taxes, depreciation, and amortization. For purposes of calculating EBITDA, stock-based compensation was treated as a cash expense.

May 2022 Low Case Long-Range Plan

Company management also prepared the May 2022 Low Case Long-Range Plan, reflecting lower-than-anticipated uptake for NUZYRA in existing indications and no incremental BARDA procurements beyond the May 2022 Baseline Long-Range Plan. In addition, operating costs are decreased by 50% of the prior year decline in revenue.

 

		Q1 2022E				Q2 2022E				Q3 2022E				Q4 2022E				2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E
($ in millions)
Total Revenue (net)(1)		$	27.0			$	30.7			$	36.8			$	76.6			$	171.2			$	171.1			$	253.9			$	264.1			$	329.3			$	301.9			$	333.9			$	375.2			$	416.5			$	413.0			$	172.1
Gross Profit		$	23.3			$	26.6			$	31.6			$	65.7			$	147.2			$	144.5			$	224.4			$	228.7			$	287.0			$	257.4			$	283.8			$	318.4			$	353.4			$	350.5			$	146.1
Total Operating Expenses		$	38.0			$	41.5			$	44.7			$	46.3			$	169.8			$	203.1			$	209.3			$	216.8			$	240.0			$	238.3			$	245.4			$	254.9			$	266.8			$	265.0			$	110.4
EBIT(2)		($	14.8	)		($	14.9	)		($	13.2	)		$	19.3			($	22.9	)		($	58.8	)		$	14.8			$	11.7			$	46.9			$	19.1			$	38.3			$	63.5			$	86.6			$	85.5			$	35.6
EBITDA(3)		($	14.7	)		($	14.8	)		($	13.1	)		$	19.4			($	22.6	)		($	58.6	)		$	15.1			$	11.8			$	47.0			$	19.1			$	38.4			$	63.6			$	86.7			$	85.6			$	35.6
Net Income		($	18.8	)		($	19.8	)		($	18.9	)		$	13.6			($	42.5	)		($	82.0	)		($	7.0	)		($	11.3	)		$	31.7			$	9.1			$	25.0			$	49.4			$	72.8			$	71.9			$	31.9

 

(1)	Total Revenue (net) comprised of net NUZYRA revenue (including BARDA procurement revenue), contract service and grant revenue and collaboration and royalty revenue.

(2)	EBIT is earnings before interest and taxes. For purposes of calculating EBIT, stock-based compensation was treated as a cash expense.

(3)	EBITDA is earnings before interest, taxes, depreciation, and amortization. For purposes of calculating EBITDA, stock-based compensation was treated as a cash expense.

In addition, at the direction of Company management, Moelis calculated, from the May 2022 Long-Range Plan Forecasts and based on information and assumptions provided by Company management, unlevered after-tax free cash flow as set forth below.

Baseline

 

		2H 2022E				2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E
($ in millions)
Unlevered Free Cash Flow(1)		$	8			($	60	)		$	14			$	26			$	49			$	47			$	93			$	120			$	149			$	160			$	138

 

(1)	Unlevered Free Cash Flow is defined as EBIT less (a) (i) taxes, (ii) payments in satisfaction of the RPIP and (iii) changes in net working capital, plus (b) depreciation.

 

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