Filed Pursuant to Rule 424(b)(3)
Registration No. 333-235683

 

 

PROPOSED MERGER

YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Organovo Holdings, Inc. and Tarveda Therapeutics, Inc.:

Organovo Holdings, Inc. (“Organovo”) and Tarveda Therapeutics, Inc. (“Tarveda”) have entered into an Agreement and Plan of Merger and Reorganization, dated as of December 13, 2019, as amended by the First Amendment to Merger Agreement (the “Amendment to Merger Agreement”), dated January 26, 2020, and as may be amended from time to time (the “Merger Agreement”), pursuant to which a wholly owned subsidiary of Organovo will merge with and into Tarveda, with Tarveda surviving as a wholly owned subsidiary of Organovo (the “Merger”). Organovo and Tarveda believe that the Merger will result in a clinical stage biopharmaceutical company discovering and developing a new class of potent and selective precision oncology medicines for the treatment of patients with a wide range of solid tumor malignancies.

At the effective time of the Merger (the “Effective Time”), each share of Tarveda common stock outstanding immediately prior to the Effective Time (excluding certain shares of Tarveda common stock that may be cancelled pursuant to the Merger Agreement and shares held by stockholders who have exercised and perfected appraisal rights or dissenters’ rights as more fully described in the section titled “The Merger — Appraisal Rights and Dissenters’ Rights” in this proxy statement/prospectus/information statement) will be converted into the right to receive a number of shares of Organovo common stock. The final exchange ratio (the “Exchange Ratio”) will be determined pursuant to a formula described in more detail in the Merger Agreement and in this proxy statement/prospectus/information statement. Immediately after the consummation of the Merger, based solely on the estimated Exchange Ratio as described in this proxy statement/prospectus/information statement, Tarveda securityholders would own approximately 75% of the Organovo common stock on a fully diluted basis as defined in the Merger Agreement, and Organovo securityholders would own approximately 25% of the Organovo common stock on a fully diluted basis as defined in the Merger Agreement, subject to adjustment of the Exchange Ratio as set forth in the Merger Agreement.

Shares of Organovo common stock are currently listed on The Nasdaq Capital Market under the symbol “ONVO.” After completion of the Merger, Organovo will be renamed “Tarveda Therapeutics, Inc.” and is expected to trade on The Nasdaq Capital Market under the symbol “TVDA”. On February 21, 2020, the last trading day before the date of this proxy statement/prospectus/information statement, the closing sale price of Organovo common stock was $0.35 per share.

Organovo is holding a special meeting of stockholders in order to obtain the stockholder approvals necessary to complete the Merger and related matters. At the Organovo special meeting, which will be held at 10:00 a.m., Pacific Time, on March 26, 2020 at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 3570 Carmel Mountain Road, Suite 200, San Diego, California 92130, unless postponed or adjourned to a later date, Organovo will ask its stockholders to:

 

1.

approve the issuance of shares of Organovo common stock in the Merger to the Tarveda securityholders in accordance with the terms of the Merger Agreement;

 

2.

approve an amendment to the Organovo certificate of incorporation effecting a reverse stock split of Organovo common stock, at a ratio of one (1) new share for every 20 to 40 shares of outstanding Organovo common stock (the “Organovo Reverse Stock Split”);

 

3.

approve, on a non-binding advisory vote basis, compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger, each as described in the accompanying proxy statement/prospectus/information statement;

 

4

approve the adoption of the Combined Organization 2020 Equity Incentive Plan (the “2020 Plan”);

 

5.

authorize the adjournment of the Organovo special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Organovo Proposal Nos. 1, 2, 3, and 4; and

6.

transact such other business as may properly come before the Organovo special meeting or any adjournment or postponement thereof.

Tarveda stockholders are being asked to approve the Merger Agreement, and vote in favor of any other matter necessary to consummate the transactions contemplated by the Merger Agreement.

As described in the accompanying proxy statement/prospectus/information statement, certain Tarveda stockholders, including certain directors and executive officers of Tarveda, and 5% or greater stockholders, who in the aggregate own approximately 95% of the outstanding shares of Tarveda common stock on an as-converted to common stock basis are parties to support agreements with Organovo and Tarveda. Following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission and pursuant to the conditions of the Merger Agreement, the Tarveda stockholders who are party to the support agreements have each agreed to execute an action by written consent of the Tarveda stockholders, referred to as the written consent, (a) in favor of (i) adoption of the Merger Agreement and approval of the transactions contemplated by the Merger Agreement, (ii) approval of any proposal to adjourn or postpone a meeting of the holders of Tarveda capital stock to a later date, if there are not sufficient votes for the adoption of the Merger Agreement and the transactions contemplated thereby on the date such meeting is held, and (iii) any other matter necessary to consummate the transactions contemplated by the Merger Agreement that are considered and voted upon by Tarveda stockholders and (b) against any “acquisition proposal,” as defined in the Merger Agreement. Therefore, absent termination of the Merger Agreement, holders of a sufficient number of shares of Tarveda capital stock required to adopt the Merger Agreement have agreed to adopt the Merger Agreement, and no meeting of Tarveda stockholders to adopt the Merger Agreement and approve the Merger will be held. Nevertheless, all Tarveda stockholders will have the opportunity to elect to adopt the Merger Agreement, thereby approving the Merger and related transactions, by signing and returning to Tarveda a written consent.

After careful consideration, the Organovo and Tarveda boards of directors have approved the Merger Agreement and the Merger and the respective proposals referred to above, and each of the Organovo and Tarveda boards of directors has determined that it is advisable to enter into the Merger Agreement and related transactions. The Organovo board of directors recommends that its stockholders vote “FOR” the proposals described in the accompanying proxy statement/prospectus/information statement, and the board of directors of Tarveda recommends that its stockholders sign and return the written consent indicating their approval of the Merger and adoption of the Merger Agreement and related transactions to Tarveda described in the accompanying proxy statement/prospectus/information statement.

More information about Organovo, Tarveda and the proposed transaction is contained in this proxy statement/prospectus/information statement. Organovo and Tarveda urge you to read the accompanying proxy statement/prospectus/information statement, including the documents incorporated by reference herein, carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 30.

Organovo and Tarveda are excited about the opportunities the Merger brings to both Organovo and Tarveda stockholders, and thank you for your consideration and continued support.

 

Taylor Crouch Chief Executive Officer Organovo Holdings, Inc.		Andrew J. Fromkin Chief Executive Officer Tarveda Therapeutics, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus/information statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus/information statement is dated February 24, 2020, and is first being mailed to Organovo and Tarveda stockholders on or about February 26, 2020.

ORGANOVO HOLDINGS, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MARCH 26, 2020

Dear Stockholders of Organovo:

On behalf of the board of directors of Organovo Holdings, Inc., a Delaware corporation (“Organovo”), we are pleased to deliver this proxy statement/prospectus/information statement for the proposed Merger between Organovo and Tarveda Therapeutics, Inc., a Delaware corporation (“Tarveda”), pursuant to which Opal Merger Sub, Inc., a wholly owned subsidiary of Organovo (“Merger Sub”), will merge with and into Tarveda, with Tarveda surviving as a wholly owned subsidiary of Organovo (the “Merger”). The special meeting of stockholders of Organovo will be held on March 26, 2020 at 10:00 a.m., Pacific Time, at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 3570 Carmel Mountain Road, Suite 200, San Diego, California 92130, for the following purposes:

 

1.

To consider and vote upon a proposal to approve the issuance of Organovo common stock in the Merger in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of December 13, 2019, as amended by the First Amendment to Merger Agreement, dated January 26, 2020, by and among Organovo, Merger Sub and Tarveda, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus/information statement (the “Merger Agreement”) and the resulting change of control of Organovo resulting from the Merger.

 

2.

To approve the amendment to the certificate of incorporation of Organovo to effect a reverse stock split of Organovo common stock, at a ratio of one (1) new share for every 20 to 40 shares of outstanding Organovo common stock, with the exact ratio and effective time of the reverse stock split of Organovo common stock to be determined by the Organovo board of directors and agreed upon by Tarveda and publicly announced by press release (the “Organovo Reverse Stock Split”), in the form attached as Annex D to the accompanying proxy statement/prospectus/information statement.

 

3.

To consider and vote upon a proposal to approve, on a non-binding advisory vote basis, compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger.

 

4.

To consider and vote upon a proposal to approve the Combined Organization 2020 Equity Incentive Plan (the “2020 Plan”) attached as Annex E to the accompanying proxy statement/prospectus/information statement.

 

5.

To consider and vote upon an adjournment of the Organovo special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Organovo Proposal Nos. 1, 2, 3 and 4.

 

6.

To transact such other business as may properly come before the Organovo special meeting or any adjournment or postponement thereof.

The Organovo board of directors has fixed February 14, 2020 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Organovo special meeting and any adjournment or postponement thereof. Only holders of record of shares of Organovo common stock at the close of business on the record date are entitled to notice of, and to vote at, the Organovo special meeting. At the close of business on the record date, Organovo had 130,497,563 shares of common stock outstanding and entitled to vote.

Your vote is important. The affirmative vote of a majority of the voting power of the votes cast at the Organovo special meeting, whether present in person or represented by proxy at the Organovo special meeting, is required for approval of Organovo Proposal Nos. 1, 3, 4 and 5. The affirmative vote of the holders of a majority of shares of Organovo common stock having voting power outstanding on the record

date for the Organovo special meeting is required for approval of Organovo Proposal No. 2. Proposal No. 1 is conditioned upon Proposal No. 2. Therefore, the Merger cannot be consummated without the approval of Proposal Nos. 1 and 2.

Even if you plan to attend the Organovo special meeting in person, Organovo requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Organovo special meeting if you are unable to attend.

By Order of the Organovo Board of Directors,

Taylor Crouch

Chief Executive Officer

Solana Beach, California

February 24, 2020

THE ORGANOVO BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, ORGANOVO AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE ORGANOVO BOARD OF DIRECTORS RECOMMENDS THAT ORGANOVO STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus/information statement incorporates important business and financial information about Organovo that is not included in or delivered with this document. You may obtain this information without charge through the SEC’s website (http://www.sec.gov) or upon your written or oral request by contacting the Secretary of Organovo Holdings, Inc., 440 Stevens Avenue, Suite 200, Solana Beach, California 92075 or by calling (858) 224-1000.

To ensure timely delivery of these documents, any request should be made no later than March 16, 2020 to receive them before the Organovo special meeting.

For additional details about where you can find information about Organovo, please see the sections entitled “Where You Can Find More Information” and “Incorporation of Certain Documents By Reference” in this proxy statement/prospectus/information statement.

TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER			1
PROSPECTUS SUMMARY			11
The Companies			11
The Merger			12
Reasons for the Merger			13
Opinion of Organovo’s Special Committee’s Financial Advisor			14
Overview of the Merger Agreement			15
Support Agreements			18
Lock-Up Agreements			19
Management Following the Merger			19
Interests of Certain Directors, Officers and Affiliates of Organovo and Tarveda			19
Certain Material U.S. Federal Income Tax Consequences of the Merger			20
Risk Factors			21
Regulatory Approvals			22
Nasdaq Stock Market Listing			22
Anticipated Accounting Treatment			22
Appraisal Rights and Dissenters’ Rights			22
Comparison of Stockholder Rights			22
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA			23
Selected Historical Financial Data of Organovo			23
Selected Historical Financial Data of Tarveda			24
Selected Unaudited Pro Forma Combined Financial Data of Organovo and Tarveda			25
Comparative Historical and Unaudited Pro Forma Per Share Data			27
MARKET PRICE AND DIVIDEND INFORMATION			29
RISK FACTORS			30
FORWARD-LOOKING STATEMENTS			89
THE SPECIAL MEETING OF ORGANOVO STOCKHOLDERS			91
Date, Time and Place			91
Purposes of the Organovo Special Meeting			91
Recommendation of the Organovo Board of Directors			91
Record Date and Voting Power			92
Voting and Revocation of Proxies			92
Vote Required			93
Solicitation of Proxies			94
Other Matters			94
THE MERGER			95
Background of the Merger			95
Organovo Reasons for the Merger			122
Tarveda Reasons for the Merger			126
Opinion of the Organovo’s Special Committee’s Financial Advisor			128
Historical Background for Amendment to Merger Agreement			135
Interests of the Organovo Directors and Executive Officers in the Merger			136
Interests of the Tarveda Directors and Executive Officers in the Merger			139
Limitations of Liability and Indemnification			142
Stock Options and Warrants			142
Form of the Merger			142
Merger Consideration and Adjustment			142

 

i

		Page
Effective Time of the Merger			144
Regulatory Approvals			144
Tax Treatment of the Merger			145
Certain Material U.S. Federal Income Tax Consequences of the Merger			145
The Nasdaq Stock Market Listing			148
Anticipated Accounting Treatment			148
Appraisal Rights and Dissenters’ Rights			149
THE MERGER AGREEMENT			152
General			152
Merger Consideration			152
Treatment of Tarveda Stock Options and Warrants			154
Directors and Officers of Organovo Following the Merger			155
Amendment to the Certificate of Incorporation of Organovo			156
Conditions to the Completion of the Merger			156
Representations and Warranties			159
No Solicitation			160
Meetings of Stockholders			162
Covenants; Conduct of Business Pending the Merger			163
Regulatory Approvals			165
Other Agreements			165
Termination			166
Termination Fee			169
Amendment			171
AGREEMENTS RELATED TO THE MERGER			172
Support Agreements and Written Consent			172
Lock-Up Agreements			172
MATTERS BEING SUBMITTED TO A VOTE OF ORGANOVO STOCKHOLDERS			173
Organovo Proposal No.  1: Approval of the Issuance of Common Stock in the Merger to the Tarveda Securityholders in Accordance with the Terms of the Merger Agreement			173
Organovo Proposal No.  2: Approval of the Amendment to the Certificate of Incorporation of Organovo Effecting the Organovo Reverse Stock Split			174
Organovo Proposal No.  3: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements			180
Organovo Proposal No.  4: Approval of the Combined Organization 2020 Equity Incentive Plan			182
Organovo Proposal No.  5: Approval of Possible Adjournment of the Special Meeting			189
ORGANOVO BUSINESS			190
Overview			190
Organovo’s Platform Technology			191
The NovoGen Bioprinter Platform			191
Organovo’s Research Collaborations			191
Intellectual Property			192
Employees			193
Corporate Information			193
Available Information			193
TARVEDA BUSINESS			194
Overview			194
Tarveda’s Pentarin Miniature Drug Conjugate Platform			194

 

ii

		Page
Tarveda’s Strategy			202
Tarveda’s Collaboration Agreements			203
Manufacturing			204
Competition			204
Inellectual Property			205
Government Regulation			207
Employees			219
Facilities			219
Legal Proceedings			219
TARVEDA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			220
Overview			220
Financial Operations Overview			222
Results of Operations			227
Liquidity and Capital Resources			230
Contractual Obligations			234
Critical Accounting Policies and Estimates			235
Off-Balance Sheet Arrangements			238
Recently Issued Accounting Pronouncements			238
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE MARKET RISK OF TARVEDA			239
MANAGEMENT FOLLOWING THE MERGER			240
Executive Officers and Directors			240
Composition of the Board of Directors			244
Committees of the Board of Directors			246
Tarveda Director Compensation			247
Tarveda Executive Compensation			248
Employment Benefits Plans			253
Compensation Committee Interlocks and Insider Participation			253
RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED ORGANIZATION			254
Organovo Transactions			254
Tarveda Transactions			255
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS			259
Unaudited Pro Forma Condensed Combined Balance Sheet			262
Unaudited Pro Forma Condensed Combined Statements of Operations			263
Unaudited Pro Forma Condensed Combined Statements of Operations			264
Notes to Unaudited Pro Forma Condensed Combined Financial Information			265
COMPARISON OF RIGHTS OF HOLDERS OF ORGANOVO STOCK AND TARVEDA STOCK			270
PRINCIPAL STOCKHOLDERS OF ORGANOVO			281
PRINCIPAL STOCKHOLDERS OF TARVEDA			284
PRINCIPAL STOCKHOLDERS OF COMBINED ORGANIZATION			287
LEGAL MATTERS			290
EXPERTS			290
WHERE YOU CAN FIND MORE INFORMATION			290

 

iii

		Page
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			292
TRADEMARK NOTICE			293
OTHER MATTERS			293
Stockholder Proposals			293
Stockholder Communications with the Organovo Board of Directors			293
Householding of Proxy Materials			294
INDEX TO TARVEDA FINANCIAL STATEMENTS			F-1
ANNEX A—AGREEMENT AND PLAN OF MERGER AND REORGANIZATION AND FIRST AMENDMENT TO MERGER AGREEMENT			A-1
ANNEX B—OPINION LETTER OF ROTH CAPITAL PARTNERS, LLC			B-1
ANNEX C—SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW			C-1
ANNEX D—CERTIFICATE OF SECOND AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF ORGANOVO HOLDINGS, INC.			D-1
ANNEX E—COMBINED ORGANIZATION 2020 EQUITY INCENTIVE PLAN			E-1

 

iv

QUESTIONS AND ANSWERS ABOUT THE MERGER

Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus/information statement or incorporated by reference herein does not give effect to the proposed reverse stock split at a ratio of one (1) new share for every 20 to 40 shares of outstanding Organovo common stock described in Organovo Proposal No. 2 (the “Organovo Reverse Stock Split”) in this proxy statement/prospectus/information statement. If the Merger and the Organovo Reverse Stock Split are approved, the Organovo Reverse Stock Split will be effected immediately prior to the closing of the Merger (the “Closing”).

The following section provides answers to frequently asked questions about the Merger (as defined below). This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

 

Q:	What is the Merger?

 

A:

Organovo Holdings, Inc. (“Organovo”) and Tarveda Therapeutics, Inc. (“Tarveda”) have entered into an Agreement and Plan of Merger and Reorganization dated as of December 13, 2019, as amended by the First Amendment to Merger Agreement, dated January 26, 2020, and as may be amended from time to time (the “Merger Agreement”). The Merger Agreement contains the terms and conditions of the proposed business combination of Organovo and Tarveda. Under the Merger Agreement, Opal Merger Sub, Inc., a wholly-owned subsidiary of Organovo (the “Merger Sub”) will merge with and into Tarveda, with Tarveda surviving as a wholly-owned subsidiary of Organovo (the “Merger”).

At the effective time of the Merger (the “Effective Time”), the shares of Tarveda common stock outstanding immediately prior to the Effective Time (excluding certain shares of Tarveda common stock that may be cancelled pursuant to the Merger Agreement and shares held by stockholders who have exercised and perfected appraisal rights or dissenters’ rights as more fully described in “The Merger — Appraisal Rights and Dissenters’ Rights” below) will be converted into the right to receive an estimated aggregate 432.0 million shares of Organovo common stock, without taking into account the proposed Organovo Reverse Stock Split but including shares of Organovo common stock reserved for issuance upon exercise of Tarveda options and warrants assumed in the Merger, to be implemented prior to the consummation of the Merger and which is the subject of Proposal No. 2. The estimated exchange ratio contained herein (the “Exchange Ratio”) is based upon Organovo’s and Tarveda’s capitalization immediately prior to the date of this proxy statement/prospectus/information statement, and will be adjusted based on the amount of Organovo net cash, Organovo and Tarveda debt and changes in the capitalization of Organovo and Tarveda prior to the consummation of the Merger. As a result of the Merger, holders of Tarveda stock, options and warrants are expected to own in the aggregate approximately 75% of Organovo and the Organovo stockholders, optionholders, holders of restricted stock units (“RSUs”) and warrantholders are expected to own in the aggregate approximately 25% of Organovo on a fully-diluted basis as defined in the Merger Agreement and subject to adjustment as described herein. Simultaneously with the completion of the Merger, Organovo will change its corporate name to “Tarveda Therapeutics, Inc.” as required by the Merger Agreement.

 

Q:	What will happen to Organovo if, for any reason, the Merger does not close?

 

A:

If, for any reason, the Merger does not close and the Merger Agreement is terminated, the Organovo board of directors may elect to, among other things, attempt to complete another strategic transaction including a transaction similar to the Merger, continue to operate the business of Organovo or to dissolve and liquidate the assets of Organovo, and may still elect to implement the Organovo Reverse Stock Split. If Organovo decides to dissolve and liquidate its assets, Organovo would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. As of December 31, 2019, Organovo had cash and cash equivalents totaling approximately $30.5 million. However, there can be no assurances as to the amount or timing of available cash, if any, left to distribute to stockholders after paying the debts and other obligations of Organovo and setting aside funds for potential future claims.

 

1

Q:	Why are the two companies proposing to merge?

 

A:

Tarveda and Organovo believe that the Merger will result in a clinical stage biopharmaceutical company discovering and developing a new class of potent and selective precision oncology medicines for the treatment of patients with a wide range of solid tumor malignancies. For a discussion of Organovo and Tarveda reasons for the Merger, please see the sections titled “The Merger — Organovo Reasons for the Merger” and “The Merger — Tarveda Reasons for the Merger” in this proxy statement/prospectus/information statement.

 

Q:	Why am I receiving this proxy statement/prospectus/information statement?

 

A:

You are receiving this proxy statement/prospectus/information statement because you have been identified as a stockholder of Organovo or Tarveda as of the applicable record date, and you are entitled, as applicable, to (i) vote at the Organovo special meeting of stockholders to approve the issuance of shares of Organovo common stock in the Merger in accordance with the terms of the Merger Agreement, the proposed Organovo Reverse Stock Split, the approval on a non-binding, advisory basis of the compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger, approve the 2020 Plan and to approve the adjournment of the special meeting, if necessary, to solicit additional proxies or (ii) sign and return the Tarveda written consent to approve the Merger and adopt the Merger Agreement and related transactions. This document serves as:

 

•

a proxy statement of Organovo used to solicit proxies for its special meeting;

 

•

a prospectus of Organovo used to offer shares of Organovo common stock in exchange for shares of Tarveda common stock in the Merger and issuable upon exercise of Tarveda warrants and options being assumed by Organovo in the Merger, as applicable; and

 

•

an information statement of Tarveda used to solicit the written consent of its stockholders for the approval of the Merger and the adoption of the Merger Agreement and related transactions.

 

Q:	What is required to consummate the Merger?

 

A:

To consummate the Merger, Organovo stockholders must approve the issuance of shares of Organovo common stock in the Merger in accordance with the terms of the Merger Agreement and the amendment to the certificate of incorporation of Organovo effecting the Organovo Reverse Stock Split, and Tarveda stockholders must approve the Merger and adopt the Merger Agreement and related transactions.

The approval by the stockholders of the issuance of Organovo common stock in the Merger in accordance with the terms of the Merger Agreement requires the affirmative vote of a majority of the voting power of the votes cast at the Organovo special meeting. The approval of the Organovo Reverse Stock Split requires the affirmative vote of the holders of a majority of the outstanding shares of Organovo common stock having voting power on the record date for the Organovo special meeting. The approval of the Organovo Reverse Stock Split is required in order to authorize Organovo’s issuance of the shares of its common stock pursuant to the Merger Agreement and/or to avoid a delisting of Organovo common stock from The Nasdaq Stock Market. Therefore, if the requisite stockholders of Organovo approve the issuance of Organovo common stock in the Merger to the Tarveda securityholders in accordance with the terms of the Merger Agreement but do not approve the Organovo Reverse Stock Split, the Merger will not be consummated.

The approval of the Merger and the adoption of the Merger Agreement and related transactions by the stockholders of Tarveda requires the affirmative vote of the holders of at least a majority of the outstanding shares of Tarveda’s Series 1 redeemable convertible preferred stock (the “Series 1 Preferred Stock”) and the holders of at least a majority of the outstanding capital stock of Tarveda (voting on an as-converted-to-common stock basis). In addition to the requirement of obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.

 

2

Certain Tarveda stockholders, including certain directors and executive officers of Tarveda and 5% or greater stockholders, who in the aggregate own approximately 95% of the outstanding shares of Tarveda common stock on an as-converted to common stock basis, and certain Organovo stockholders, including certain directors and executive officers, of Organovo who in the aggregate own approximately less than 1% of the outstanding shares of Organovo common stock, are parties to support agreements with Organovo and Tarveda. The Organovo stockholders who are party to such support agreements have agreed to vote (a) in favor of (i) the Organovo Stockholder Proposals and (ii) any other matter necessary to consummate the transactions contemplated by the Merger Agreement, and (b) against any “acquisition proposal,” as defined in the Merger Agreement. Following the registration statement on Form S-4, of which this proxy statement/prospectus/information statement is a part, being declared effective by the U.S. Securities and Exchange Commission and pursuant to the conditions of the Merger Agreement, the Tarveda stockholders who are party to the support agreements have each agreed to execute an action by written consent of the Tarveda stockholders, referred to as the written consent, (a) in favor of (i) adoption of the Merger Agreement and approval of the transactions contemplated by the Merger Agreement, (ii) approval of any proposal to adjourn or postpone a meeting of the holders of Tarveda capital stock to a later date, if there are not sufficient votes for the adoption of the Merger Agreement and the transactions contemplated thereby on the date such meeting is held, and (iii) any other matter necessary to consummate the transactions contemplated by the Merger Agreement that are considered and voted upon by Tarveda stockholders and (b) against any “acquisition proposal,” as defined in the Merger Agreement. Therefore, holders of a sufficient number of shares of Tarveda capital stock required to adopt the Merger Agreement, thereby approving the Merger, have agreed to adopt the Merger Agreement via written consent. Stockholders of Tarveda, including those who are parties to support agreements, will be requested to execute written consents providing such approvals.

For a more complete description of the closing conditions under the Merger Agreement, Organovo and Tarveda urge you to read the section titled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.

 

Q:	What will Tarveda stockholders, warrantholders and optionholders receive in the Merger?

 

A:

As a result of the Merger, Tarveda stockholders, warrantholders and optionholders will become entitled to receive shares of Organovo common stock equal to approximately 75% of the outstanding common stock of Organovo on a fully diluted basis as defined in the Merger Agreement, subject to adjustment based upon whether Organovo’s net cash at the Closing increases or decreases, Organovo’s and Tarveda’s debt at the Closing and changes in the capitalization of Organovo and Tarveda prior to the Closing. At the Effective Time of the Merger, outstanding and unexercised Tarveda warrants and options will be assumed by Organovo and converted into warrants and options to purchase Organovo common stock, as applicable, with the number of shares and exercise price being appropriately adjusted to reflect the final Exchange Ratio as determined in accordance with the Merger Agreement.

For a more complete description of what Tarveda stockholders, warrantholders and optionholders will receive in the Merger, please see the sections titled “Market Price and Dividend Information” and “The Merger Agreement — Merger Consideration” in this proxy statement/prospectus/information statement.

 

3

Q:	Who will be the directors of Organovo following the Merger?

 

A:	Following the Merger, the board of directors of Organovo will be as follows:

 

Name		Current Principal Affiliation
Andrew J. Fromkin		Tarveda President, Chief Executive Officer and Chairman
Dennis Ausiello, M.D.		Tarveda Director
Nilesh Kumar, Ph.D.		Tarveda Director
Guido Magni, M.D., Ph.D.		Tarveda Director
Michael Metzger		Tarveda Director
Aymeric Sallin, M.S.		Tarveda Director
Carolyn Beaver		Organovo Director
Mark Kessel		Organovo Director

 

Q:	Who will be the executive officers of Organovo immediately following the Merger?

 

A:	Immediately following the Merger, the executive management team of Organovo is expected to be composed solely of the members of the Tarveda executive management team prior to the Merger as set forth below:

 

Name		Position(s)
Andrew J. Fromkin		President, Chief Executive Officer and Chairman
Jeffrey D. Bloss, M.D.		Chief Medical Officer
Brian K. Roberts		Chief Financial Officer, Treasurer and Secretary
Mark T. Bilodeau, Ph.D.		Chief Scientific Officer
Sudhakar Kadiyala, Ph.D.		Executive Vice President, Strategy

 

Q:	What are the material U.S. federal income tax consequences of the Merger to Tarveda stockholders?

 

A:

Each of Organovo and Tarveda intends the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). It is a condition to Organovo’s obligation to complete the Merger that Organovo receive a written opinion of its counsel, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP (“Gunderson Dettmer”) (or if Gunderson Dettmer is unable to issue such an opinion, of another nationally recognized law firm proposed by Tarveda that is reasonably acceptable to Organovo (“Organovo’s Replacement Counsel”)), to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Tarveda’s obligation to complete the Merger that Tarveda receive an opinion of its counsel, Cooley LLP (“Cooley”) (or if Cooley is unable to issue such an opinion, of another nationally recognized law firm proposed by Organovo that is reasonably acceptable to Tarveda (“Tarveda’s Replacement Counsel”)), to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In general and subject to the qualifications and limitations set forth in the section titled “The Merger — Certain Material U. S. Federal Income Tax Consequences of the Merger” if the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the material tax consequences to U.S. Holders (as defined in the section titled “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger”) of Tarveda common stock should be as follows:

 

•

a Tarveda stockholder generally will not recognize gain or loss upon the exchange of Tarveda common stock for Organovo common stock pursuant to the Merger, except to the extent of cash received in lieu of a fractional share of Organovo common stock as described below;

 

•

a Tarveda stockholder who receives cash in lieu of a fractional share of Organovo common stock in the Merger generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash received instead of a fractional share and the stockholder’s tax basis allocable to such fractional share;

 

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•

a Tarveda stockholder’s aggregate tax basis for the shares of Organovo common stock received in the Merger (including any fractional share interest for which cash is received) generally will equal the stockholder’s aggregate tax basis in the shares of Tarveda common stock surrendered in the Merger; and

 

•

the holding period of the shares of Organovo common stock received by a Tarveda stockholder in the Merger generally will include the holding period of the shares of Tarveda common stock surrendered in exchange therefor.

Tax matters are very complicated, and the tax consequences of the Merger to a particular Tarveda stockholder will depend on such stockholder’s circumstances. Accordingly, each Tarveda stockholder is strongly urged to consult with his, her or its tax advisor for a full understanding of the tax consequences of the Merger to that stockholder, including the applicability and effect of federal, state, local and non-U.S. income and other tax laws. For more information, please see the section titled “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger” in this proxy statement/prospectus/information statement.

 

Q:	Do persons involved in the Merger have interests that may conflict with mine as an Organovo stockholder?

 

A:

Yes. In considering the recommendation of the Organovo special committee with respect to issuing shares of Organovo common stock pursuant to the Merger Agreement and the other matters to be acted upon by Organovo stockholders at the Organovo special meeting, Organovo stockholders should be aware that certain members of the Organovo board of directors and executive officers of Organovo have interests in the Merger that may be different from, or in addition to, interests they have as Organovo stockholders.

For example, Organovo is party to Severance and Change in Control Plan Participation Agreements with each of its executive officers pursuant to Organovo’s Severance and Change in Control Plan (the “Organovo Severance Plan”) approved by Organovo’s compensation committee. The Organovo Severance Plan establishes the amount of severance payments and benefits available in the event of a (i) termination of employment by Organovo for reasons other than cause, death or disability or by the participant for good reason and (ii) termination of employment by Organovo for reasons other than cause, death or disability or by the participant for good reason within six months before or within 12 months after a change in control. Organovo’s executive officers, including Taylor Crouch, Organovo’s Chief Executive Officer, who also serves on Organovo’s board of directors, Craig Kussman, Organovo’s Chief Financial Officer and Jennifer Bush, Organovo’s general counsel and corporate secretary, are each parties to a participation agreement under the Organovo Severance Plan and are contractually entitled to severance payments, including a cash severance payment equal to a multiple of each person’s base salary (2.0 times the base salary for Messrs. Crouch and Kussman and 1.0 times the base salary for Ms. Bush) paid in a lump sum, plus a target bonus for the fiscal year in which the termination occurs, health benefit continuation (up to 18 months for Messrs. Crouch and Kussman, and 12 months for Ms. Bush), and outplacement assistance. In addition, Organovo’s executive officers are also entitled to full accelerated vesting of all outstanding equity grants and a one-year time period to exercise any stock options or stock appreciation rights.

Based on the terms of their respective participation agreements, Organovo’s current executive officers will be entitled to receive a total value of approximately $3.06 million (collectively, not individually) in connection with the consummation of the Merger and the associated termination of their employment from Organovo, not including the value associated with the acceleration of their outstanding equity awards. Such compensation is the subject of Proposal No. 3.

Additionally, pursuant to the terms of the Merger Agreement, Carolyn Beaver and Mark Kessel, who are currently directors of Organovo, will continue as directors of the combined organization after the Closing and will be due certain compensation as non-employee directors.

As of December 31, 2019, the directors and executive officers of Organovo owned, in the aggregate, less than 1% of the outstanding voting shares of Organovo common stock. Each of Organovo’s officers and

 

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directors have entered into support agreements and lock-up agreements in connection with the Merger. The support agreements and lock-up agreements are discussed in greater detail in the section titled “Agreements Related to the Merger” in this proxy statement/prospectus/information statement.

The Organovo board of directors and special committee were aware of these interests and considered them, among other matters, in the decision to approve the Merger Agreement. For more information, please see the section titled “The Merger — Interests of the Organovo Directors and Executive Officers in the Merger” in this proxy statement/prospectus/information statement.

 

Q:	Do persons involved in the Merger have interests that may conflict with mine as a Tarveda stockholder?

 

A:

Yes. In considering the recommendation of the board of directors of Tarveda with respect to approving the Merger and related transactions by written consent, Tarveda stockholders should be aware that certain members of the board of directors and executive officers of Tarveda have interests in the Merger that may be different from, or in addition to, interests they have as Tarveda stockholders. All of Tarveda’s executive officers and certain of its directors have options, subject to vesting, to purchase shares of Tarveda common stock that will convert into options to purchase a number of shares of Organovo common stock determined by the Exchange Ratio; certain of Tarveda’s directors and all its executive officers are expected to become directors and executive officers of Organovo upon the consummation of the Merger; and all of Tarveda’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. In addition, certain of Tarveda’s executive officers and directors and affiliates of Tarveda’s directors currently hold shares of Tarveda’s common stock and preferred stock. The shares of preferred stock will be converted into shares of Tarveda common stock prior to the consummation of the Merger. The Tarveda board of directors was aware of these interests and considered them, among other matters, in its decision to approve the Merger Agreement. For more information, please see the section titled “The Merger — Interests of the Tarveda Directors and Executive Officers in the Merger” of this proxy statement/prospectus/information statement.

 

Q:	As an Organovo stockholder, how does the Organovo board of directors recommend that I vote?

 

A:	After careful consideration, the Organovo board of directors recommends that Organovo stockholders vote:

 

•

“FOR” Proposal No. 1 to approve the issuance of shares of common stock of Organovo in the Merger to the Tarveda securityholders in accordance with the terms of the Merger Agreement;

 

•

“FOR” Proposal No. 2 to approve the amendment to the certificate of incorporation of Organovo to effect the Organovo Reverse Stock Split, at a ratio of one (1) new share for every 20 to 40 shares outstanding;

 

•

“FOR” Proposal No. 3 to consider and vote upon a proposal to approve, on a non-binding advisory vote basis, compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger;

 

•

“FOR” Proposal No. 4 to approve the 2020 Plan; and

 

•

“FOR” Proposal No. 5 to adjourn the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposal Nos. 1, 2, 3 and 4.

 

Q:	Why am I being asked to cast a non-binding, advisory vote regarding compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger?

 

A:	Securities and Exchange Commission (the “SEC”) rules require Organovo to seek a non-binding, advisory vote regarding compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger.

 

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Q:	What is the compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger for purposes of this advisory vote?

 

A:	The compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger includes cash severance payments, reimbursement of health coverage costs,

outplacement service benefits and accelerated vesting of outstanding equity awards pursuant to the Organovo Severance and Change in Control Plan as a result of the planned termination of the named executive officers in connection with the consummation of the Merger Organovo’s named executive officers will be entitled to receive a total value of approximately $3.06 million (collectively, not individually) in connection with the consummation of the Merger and the associated termination of their employment from Organovo, not including the value associated with the acceleration of their outstanding equity awards. For further detail, see the section titled “Organovo Proposal No. 3: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements” in this proxy statement/prospectus/information statement.

 

Q:	What will happen if stockholders do not approve the compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger at the Organovo special meeting?

 

A:

Approval of the compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger (and their associated termination from Organovo) is not a condition to completion of the Merger. The vote with respect to the compensation that will or may become payable by Organovo to its named executive officers in connection with the Merger is an advisory vote and will not be binding on Organovo. Accordingly, regardless of the outcome of the advisory vote, if the Merger Agreement is adopted by the stockholders and the Merger is completed, Organovo’s named executive officers will be eligible to receive the compensation that is based on or otherwise relates to the Merger and their associated termination from Organovo in accordance with the Organovo Severance and Change in Control Plan and participation agreements that each named executive officer has entered into in connection therewith.

 

Q:	Why am I being asked to approve the Organovo Reverse Stock Split?

 

A:

The Organovo board of directors approved the proposal approving the amendment to the Organovo certificate of incorporation effecting the Organovo Reverse Stock Split for the following reasons: the Organovo Reverse Stock Split is required in order to make sufficient shares of Organovo common stock available for issuance to Tarveda stockholders pursuant to the Merger Agreement; the Organovo board of directors believes effecting the Organovo Reverse Stock Split may be an effective means of avoiding a delisting of Organovo common stock from The Nasdaq Stock Market; the Organovo board of directors believes an investment in Organovo common stock may not appeal to brokerage firms that are reluctant to recommend lower priced securities to their clients and investors may also be dissuaded from purchasing lower priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks; the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks; and the Organovo board of directors believes that most investment funds are reluctant to invest in lower priced stocks. If the Proposal No. 1 is not approved at the Organovo special meeting the Organovo board of directors may still elect to effect the Organovo Reverse Stock Split. For further detail, see the section titled “Organovo Proposal No. 2: Approval of the Amendment to the Certificate of Incorporation of Organovo Effecting the Organovo Reverse Stock Split.”

 

Q:	As a Tarveda stockholder, how does the Tarveda board of directors recommend that I vote?

 

A:	After careful consideration, the Tarveda board of directors recommends that Tarveda stockholders execute the written consent indicating their vote in favor of the approval of the Merger and the adoption of the Merger Agreement and the transactions contemplated thereby.

 

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Q:	What risks should I consider in deciding whether to vote in favor of the approval of the issuance of shares of Organovo common stock in the Merger to the Tarveda securityholders in accordance with the terms of the Merger Agreement or to execute and return the written consent, as applicable?

 

A:

You should carefully review the section of this proxy statement/prospectus/information statement, including any information incorporated into such section, titled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the combined organization’s business will be subject and risks and uncertainties to which each of Organovo and Tarveda, as an independent company, is subject.

 

Q:	What is the quorum requirement?

 

A:

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority in voting power of the shares of Organovo common stock issued and outstanding and entitled to vote at the Organovo special meeting, present in person or represented by proxy, are present at the Organovo special meeting. On February 14, 2020, there were 130,497,563 shares of Organovo common stock issued and outstanding and entitled to vote. Accordingly, holders of at least 65,248,782 shares of Organovo common stock must be present at the Organovo special meeting for a quorum to exist. Your shares of Organovo common stock will be counted toward the quorum at the Organovo special meeting only if you attend the Organovo special meeting in person or are represented at the Organovo special meeting by proxy.

Abstentions and broker non-votes (as described below) will be counted towards the quorum requirement. If there is no quorum, the chair of the meeting or the holders of a majority of shares present and entitled to vote at the meeting in person or represented by proxy may adjourn the Organovo special meeting to another date.

 

Q:	If my Organovo shares are held in “street name” by my broker, will my broker vote my shares for me?

 

A:

If you hold shares beneficially in street name and do not provide your broker or other agent with voting instructions, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when banks, brokers and other nominees are not permitted to vote on certain non-discretionary matters without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-discretionary” matters. Organovo Proposal Nos. 2 and 5 are discretionary matters and Organovo Proposal Nos. 1, 3 and 4 are non-discretionary matters. As a result, banks, brokers and other nominees will have discretion to vote on Organovo Proposal Nos. 2 and 5, but will not have discretion to vote on Organovo Proposal Nos. 1, 3 and 4.

Broker non-votes will not be considered as votes cast by the holders of Organovo common stock present in person or represented by proxy at the Organovo special meeting, and will therefore not have any effect with respect to Proposal Nos. 1, 3 or 4.

 

Q:	When do you expect the Merger to be consummated?

 

A:

Organovo and Tarveda anticipate that the Merger will occur sometime soon after the Organovo special meeting to be held on March 26, 2020, but cannot predict the exact timing. For more information, please see the section titled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement.

 

Q:	What do I need to do now?

 

A:	Organovo and Tarveda urge you to read this proxy statement/prospectus/information statement and the documents incorporated by reference carefully, including its annexes, and to consider how the Merger affects you.

If you are an Organovo stockholder, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. You may also provide your proxy instructions via the Internet by following the instructions on your proxy card or voting instruction

 

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form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the special meeting of Organovo stockholders.

If you are a Tarveda stockholder, you may execute and return your written consent to Tarveda in accordance with the instructions provided.

 

Q:	What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?

 

A:

Organovo Proposal Nos. 2 and 5 are discretionary matters and Organovo Proposal Nos. 1, 3 and 4 are non-discretionary matters. As a result, banks, brokers and other nominees will have discretion to vote on Organovo Proposal Nos. 2 and 5, but will not have discretion to vote on Organovo Proposal Nos. 1, 3 and 4.

 

Q:	May I vote in person at the special meeting of stockholders of Organovo?

 

A:

If your shares of Organovo common stock are registered directly in your name with the Organovo transfer agent, you are considered to be the stockholder of record with respect to those shares, and the proxy materials and proxy card are being sent directly to you by Organovo. If you are an Organovo stockholder of record, you may attend the Organovo special meeting and vote your shares in person. Even if you plan to attend the Organovo special meeting in person, Organovo requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Organovo special meeting if you are unable to attend.

If your shares of Organovo common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Organovo special meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Organovo special meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

 

Q:	When and where is the special meeting of Organovo stockholders?

 

A:

The special meeting of Organovo stockholders will be held at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 3570 Carmel Mountain Road, Suite 200, San Diego, California 92130, at 10:00 a.m., Pacific Time, on March 26, 2020. Subject to space availability, all Organovo stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 9:00 a.m., Pacific Time.

 

Q:	May I change my vote after I have submitted a proxy or provided proxy instructions?

 

A:

Organovo stockholders of record, other than those Organovo stockholders who are parties to support agreements, may change their vote at any time before their proxy is voted at the Organovo special meeting in one of three ways. First, a stockholder of record of Organovo can send a written notice to the Secretary of Organovo stating that it would like to revoke its proxy. Second, a stockholder of record of Organovo can submit new proxy instructions either on a new proxy card or via the Internet. Third, a stockholder of record of Organovo can attend the Organovo special meeting and vote in person. Attendance alone will not revoke a proxy. If an Organovo stockholder of record or a stockholder who owns Organovo shares in “street name” has instructed a broker to vote its shares of Organovo common stock, the stockholder must follow directions received from its broker to change those instructions.

 

Q:	Who is paying for this proxy solicitation?

 

A:	Organovo and Tarveda will share equally the cost of printing and filing of this proxy statement/prospectus/information statement and the proxy card. Arrangements will also be made with brokerage firms and other

 

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custodians, nominees and fiduciaries who are record holders of Organovo common stock for the forwarding of solicitation materials to the beneficial owners of Organovo common stock. Organovo will reimburse these brokers, custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses they incur in connection with the forwarding of solicitation materials.

Organovo has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $0.2 million in total.

 

Q:	Who can help answer my questions?

 

A:	If you are an Organovo stockholder and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact:

 

Organovo Holdings, Inc. 440 Stevens Avenue, Suite 200 Solana Beach, California 92075 (858) 224-1000 Attn: Secretary Legal@organovo.com		D.F. King & Co., Inc. 48 Wall Street New York, NY 10005 Telephone: (800) 431-9646 (toll-free) (212) 269-5550 (collect) Email: ONVO@dfking.com

If you are a Tarveda stockholder, and would like additional copies, without charge, of this proxy statement/prospectus/information statement or if you have questions about the Merger, including the procedures for voting your shares, you should contact:

Tarveda Therapeutics, Inc.

134 Coolidge Avenue

Watertown, MA 02472

Tel: (617) 923-4100

Fax: (617) 923-4101

Attn: Secretary

Secretary@tarvedatx.com

 

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA

COMBINED FINANCIAL DATA

The following tables present summary historical financial data for Organovo and Tarveda, summary unaudited pro forma combined financial data for Organovo and Tarveda, and comparative historical and unaudited pro forma per share data for Organovo and Tarveda. The following information does not give effect to the proposed Organovo Reverse Stock Split. See “Incorporation of Certain Information by Reference” for instructions on how to obtain the information that has been incorporated by reference.

Selected Historical Consolidated Financial Data of Organovo

The following tables summarize Organovo’s consolidated financial data. The information set forth below is only a summary that you should read together with the historical audited consolidated statements of Organovo for the fiscal years ended March 31, 2019 and 2018 and the unaudited interim condensed consolidated financial statements for the nine months period ended December 31, 2019 and 2018 and the related notes, as well as the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Organovo’s annual report on Form 10-K for the year ended March 31, 2019 and quarterly report on Form 10-Q for the nine months ended December 31, 2019 that Organovo previously filed with the SEC and that are incorporated by reference into this proxy statement/prospectus/information statement. In the opinion of Organovo’s management, the unaudited consolidated interim financial data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial information in those statements. Organovo’s historical results are not necessarily indicative of results that should be expected in any future period.

 

		For the Year Ended March 31, 2019				For the Nine Months Ended December 31, 2019
		(in thousands, except share and per share data)
Revenues
Products and services		$	2,333			$	2,055
Collaborations and licenses			171				89
Grants			587				52
Total revenues			3,091				2,196
Cost of revenues			482				328
Research and development expenses			14,752				5,413
Selling, general, and administrative expense			15,131				15,037
Total costs and expenses			30,365				20,450
Loss from operations			(27,274	)			(18,582	)
Other income (expense)
Gain (loss) on fixed asset disposals			(63	)			111
Interest income			705				507
Gain on lease termination			—				525
Other income			—				1,454
Total other income			642				2,597
Income tax expense			(3	)			(2	)
Net loss		$	(26,635	)		$	(15,987	)
Net loss per common share — basic and diluted		$	(0.23	)		$	(0.12	)
Weighted average shares used in computing net loss per common shares — basic and diluted			115,379,902				129,234,731

 

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		As of December 31, 2019
		(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents			$	30,467
Restricted cash				79
Working capital (1)				28,748
Total assets				31,312
Total stockholders’ equity				28,954

 

(1)	Working capital is defined as current assets less current liabilities.

Selected Historical Financial Data of Tarveda

The following tables summarize Tarveda’s financial data. The statements of operations and comprehensive loss data for the year ended March 31, 2019 and the balance sheet data as of March 31, 2019 have been derived from Tarveda’s audited financial statements appearing elsewhere in this proxy statement/prospectus/information statement. The statement of operations and comprehensive loss data for the nine months ended December 31, 2019 and the balance sheet data as of December 31, 2019 have been derived from Tarveda’s unaudited financial statements appearing elsewhere in this proxy statement/prospectus/information statement. The unaudited financial statements of Tarveda have been prepared on the same basis as the audited financial statements of Tarveda. In the opinion of Tarveda’s management, the unaudited interim financial data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial information in those statements. The following selected financial data should be read together with “Tarveda Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Tarveda’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus/information statement. Tarveda’s historical results are not necessarily indicative of results that should be expected in any future period.

 

		For the Year Ended March 31, 2019				For the Nine Months Ended December 31, 2019
		(in thousands, except share and per share data)
Operating expenses:
Research and development		$	16,685			$	11,124
General and administrative			4,847				4,709
Total operating expenses			21,532				15,833
Loss from operations			(21,532	)			(15,833	)
Other income (expense):
Interest expense, net			(447	)			(664	)
Loss on extinguishment of debt			(403	)			—
Change in fair value of warrant liability			21				16
Other income, net			267				187
Total other expense			(562	)			(461	)
Loss before income taxes			(22,094	)			(16,294	)
Net loss			(22,094	)			(16,294	)
Net loss attributable to common stockholders — basic and diluted		$	(26,937	)		$	(3,379	)
Net loss attributable to Series CS preferred stockholders — basic and diluted		$	—			$	(36,451	)
Weighted average common shares outstanding — basic and diluted			4,105,757				17,789,978
Weighted average Series CS preferred shares outstanding — basic and diluted			—				3,838,902
Net loss per share attributable to common stockholders — basic and diluted		$	(6.56	)		$	(0.19	)
Net loss per share attributable to Series CS stockholders — basic and diluted		$	—			$	(9.50	)

 

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		As of December 31, 2019
		(in thousands)
Balance Sheet Data:
Cash and cash equivalents			$	15,463
Restricted cash				184
Working capital (1)				12,286
Total assets				21,159
Long-term debt, including accretion				9,877
Redeemable convertible preferred stock classified outside of stockholders’ deficit				13,677
Total stockholders’ deficit				(10,249	)

 

(1)	Working capital is defined as current assets less current liabilities.

Selected Unaudited Pro Forma Combined Financial Data of Organovo and Tarveda

The following unaudited pro forma combined financial information gives effect to the Merger but does not give effect to the proposed Organovo Reverse Stock Split because the proposed reverse stock split is a range and is not final.

In the unaudited pro forma combined financial statements, the Merger has been accounted for as a reverse recapitalization under U.S. GAAP because the primary assets of Organovo at the Effective Date are expected to be primarily cash and short-term investments. Tarveda was determined to be the accounting acquirer based upon the terms of the Merger and other factors including: (1) Tarveda stockholders will own a substantial majority of the voting rights of the combined organization; (2) Tarveda will designate a majority (six of eight) of the initial members of the board of directors of the combined organization; and (3) Tarveda’s senior management will hold all key positions in senior management of the combined organization.

The unaudited pro forma combined balance sheet data as of December 31, 2019 gives effect to the Merger as if it took place on December 31, 2019. The unaudited pro forma combined statements of operations and comprehensive loss data for the year ended March 31, 2019 and the nine months ended December 31, 2019 gives effect to the Merger as if it took place on April 1, 2018. The historical financial statements of Organovo and Tarveda have been adjusted to give pro forma effect to events that are (1) directly attributable to the Merger, (2) factually supportable, and (3) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results of operations of the combined organization. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined organization upon consummation of the Merger.

The unaudited pro forma condensed combined financial information is based on assumptions and adjustments that are described in the accompanying notes. The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. The unaudited pro forma condensed combined financial information should not be relied upon as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined organization will experience. The actual amounts recorded as of the completion of the Merger may differ materially from the information presented in these unaudited pro forma combined financial statements as a result of the amount of cash used by Organovo’s operations between the signing of the Merger Agreement and the Closing, the timing of Closing of the Merger, and other changes in Organovo’s assets and liabilities that occur prior to the completion of the Merger.

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the separate historical consolidated financial statements of Organovo and Tarveda and the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the

 

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documents that are incorporated by reference in this proxy statement/prospectus/information statement and the section of this proxy statement/prospectus/information statement titled “Tarveda Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Organovo’s historical audited consolidated financial statements for the year ended March 31, 2019 and unaudited condensed consolidated financial statements for the nine months ended December 31, 2019 are incorporated by reference in this proxy statement/prospectus/information statement. Tarveda’s historical audited financial statements for the year ended March 31, 2019 and unaudited financial statements for the nine months ended December 31, 2019 appear elsewhere in this proxy statement/prospectus/information statement.

 

		Pro Forma
		Year Ended     March 31, 2019				Nine Months Ended     December 31, 2019
		(in thousands, except share and per share data)
Combined Statement of Operations Data:
Revenues:
Products and services		$	2,333			$	2,055
Collaborations and licenses			171				89
Grants			587				52
Total revenues			3,091				2,196
Cost of revenues			482				328
Operating expenses:
Research and development			31,437				16,537
General and administrative			19,978				19,746
Total operating expenses			51,415				36,283
Loss from operations			(48,806	)			(34,415	)
Other income (expense):
Interest income (expense)			258				(157	)
Gain (loss) on fixed asset disposal			(63	)			111
Gain on termination of lease			—				525
Loss on extinguishment of debt			(403	)			—
Other income, net			267				1,641
Total other income, net			59				2,120
Loss before income taxes			(48,747	)			(32,295	)
Income tax provision			(3	)			(2	)
Net loss		$	(48,750	)		$	(32,297	)
Net loss attributable to common stockholders		$	(48,750	)		$	12,129
Net loss per share attributable to common stockholders—basic and diluted		$	(0.09	)		$	(0.00	)
Weighted average common shares outstanding—basic and diluted			540,887,981				555,658,231

 

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		Pro Forma As of December 31, 2019
		(in thousands)
Combined Balance Sheet Data:
Cash and cash equivalents		$	45,930
Restricted cash			263
Working capital (1)			30,364
Total assets			52,471
Loans payable, including current portion			9,877
Total stockholders’ equity			21,879

 

(1)	Working capital is defined as current assets less current liabilities.

Comparative Historical and Unaudited Pro Forma Per Share Data

The information below reflects the historical per share information for Organovo and Tarveda and the unaudited pro forma per share information of the combined organization as if Organovo and Tarveda had been combined as of or for the periods presented.

The pro forma amounts in the tables below have been derived from the unaudited pro forma combined financial information included in the section titled “Unaudited Pro Forma Combined Financial Statements” of this proxy statement/prospectus/information statement. The pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of what the financial position, results of operations or per share information of the combined organization would have been had Organovo and Tarveda been combined as of or for the periods presented.

The tables below should be read in conjunction with the consolidated financial statements and the related notes of Organovo incorporated by reference in this proxy statement/prospectus/information statement and the financial statements and the related notes of Tarveda appearing elsewhere in this proxy statement/prospectus/information statement.

 

		Year Ended March 31, 2019				Nine Months Ended December 31, 2019
Organovo
Book value per share — historical (1)		$	0.29			$	0.22
Basic and diluted net loss per share — historical		$	(0.23	)		$	(0.12	)
Tarveda
Book value per share — historical (1)		$	(7.75	)		$	(0.00	)
Basic and diluted net loss per share — historical		$	(6.56	)		$	(1.08	)
Unaudited Pro Forma Combined
Book value per share — pro forma (2)			N/A			$	0.04
Basic and diluted net loss per share — pro forma		$	(0.09	)		$	(0.00	)
Tarveda Unaudited Pro Forma Equivalent Data per Share (3)
Book value per share — pro forma			N/A			$	0.00
Basic and diluted net loss per share — pro forma		$	(0.01	)		$	(0.00	)

 

(1)	Historical book value per share is calculated by dividing total stockholders’ deficit by total outstanding shares of common stock.

(2)	Combined pro forma book value per share is calculated by dividing pro forma combined total stockholders’ deficit by pro forma combined total outstanding shares of common stock.

 

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(3)

Tarveda Unaudited Pro Forma Equivalent Data per share is calculated by applying the assumed Exchange Ratio of 0.1331 to the unaudited pro forma combined per share data. The assumed Exchange Ratio calculated for purposes of determining the Tarveda Unaudited Pro Forma Equivalent Data per share is based on the definition in the Merger Agreement using the companies’ fully-diluted outstanding shares as of December 31, 2019 and will differ from the actual Exchange Ratio based on shares, warrants and equity awards outstanding on the Closing and Organovo’s net cash and Organovo’s and Tarveda’s debt at the Closing.

 

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MARKET PRICE AND DIVIDEND INFORMATION

Organovo Common Stock

Organovo common stock is listed on The Nasdaq Capital Market under the symbol “ONVO.” The closing price of Organovo common stock on February 21, 2020, as reported on The Nasdaq Capital Market, was $0.35 per share.

Because the market price of Organovo common stock is subject to fluctuation, the market value of the shares of Organovo common stock that Tarveda stockholders will be entitled to receive in the Merger may increase or decrease.

Assuming approval of Organovo Proposal Nos. 1 and 2 and successful application for initial listing with The Nasdaq Capital Market, following the consummation of the Merger, Organovo common stock will be listed on The Nasdaq Capital Market and will trade under Organovo’s new name, “Tarveda Therapeutics, Inc.” and new trading symbol, “TVDA.”                

As of February 14, 2020, the record date for the Organovo special meeting, Organovo had approximately 89 holders of record of its common stock. As of February 14, 2020, Tarveda had 56 holders of record of its common stock and preferred stock. For detailed information regarding the beneficial ownership of certain stockholders of Organovo upon consummation of the Merger, see the section titled “Principal Stockholders of Combined Organization” in this proxy statement/prospectus/information statement.

Dividends

Organovo

Organovo has never declared or paid any cash dividends on its capital stock, and it does not currently anticipate declaring or paying cash dividends on its capital stock in the foreseeable future. Organovo intends to retain all future earnings, if any, to finance the operation and expansion of Organovo’s business. Any future determination relating to Organovo’s dividend policy will be made at the discretion of Organovo’s board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that Organovo’s board of directors may deem relevant.

Tarveda

Tarveda has never paid or declared any cash dividends on its common stock. Regardless of whether the Merger occurs or does not occur, Tarveda does not anticipate paying any cash dividends on its common stock in the foreseeable future, and Tarveda intends to retain all available funds and any future earnings to fund the development and expansion of its business. In addition, Tarveda’s ability to pay dividends is limited by covenants in Tarveda’s loan agreement. Following the Merger, Tarveda will be a holding company, and its ability to pay dividends will be dependent upon its subsidiaries’ ability to make distributions, which may be restricted by covenants in Tarveda’s loan agreement or any future contractual obligations. Any future determination to pay dividends will be at the discretion of Tarveda board of directors and will depend upon a number of factors, including its results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors the board of directors of Tarveda deems relevant.

Holders of Tarveda’s outstanding Series 1 Preferred Stock are entitled to receive cumulative, non-compounding dividends from the date of issuance thereof at an annual rate of $0.06606 per share of Series 1 Preferred Stock. Such dividends, as accrued and accumulated, increase the ratio into which shares of Tarveda’s preferred stock convert into Tarveda common stock upon conversion immediately prior to the Merger. Dividends payable to holders of Tarveda’s Series 1 Preferred Stock will continue to accrue until the Series 1 Preferred Stock is converted into Tarveda common stock immediately prior to the Merger.

 

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RISK FACTORS

The combined organization will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus/information statement, you should carefully consider the material risks described below and those described in the section of this proxy statement/prospectus/information statement titled “Forward-Looking Statements” before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with the business of Organovo because these risks may also affect the combined organization — these risks can be found in Organovo’s Annual Report on Form 10-K, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus/information statement. You should also read and consider the other information in this proxy statement/prospectus/information statement and the other documents incorporated by reference into this proxy statement/prospectus/information statement. Please see the sections titled “Where You Can Find More Information” and “Incorporation of Certain Documents By Reference” in this proxy statement/prospectus/information statement.

Risks Related to the Merger

The Exchange Ratio is not adjustable based on the market price of Organovo common stock so the Merger consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed.

The estimated Exchange Ratio calculation contained herein is based upon Organovo’s and Tarveda’s capitalization immediately prior to the date of this proxy statement/prospectus/information statement, and will be adjusted based on the amount of Organovo net cash, Organovo and Tarveda debt and changes in the capitalization of Organovo or Tarveda prior to the Closing, not taking into account the Organovo Reverse Stock Split, as described in the section titled “The Merger — Merger Consideration and Adjustment” of this proxy statement/prospectus/information statement. Any changes in the market price of Organovo common stock before the completion of the Merger will not affect the number of shares Tarveda securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Organovo common stock declines from the market price on the date of the Merger Agreement, then Tarveda securityholders could receive merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Organovo common stock increases from the market price on the date of the Merger Agreement, then, Tarveda securityholders could receive merger consideration with considerably more value for their shares of Tarveda capital stock than the parties had negotiated for in the establishment of the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Because the Exchange Ratio does not adjust as a result of changes in the value of Organovo common stock, for each one percentage point that the market value of Organovo common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Tarveda securityholders.

Failure to complete the Merger may result in Organovo or Tarveda paying a termination fee or reimbursing expenses to the other party and could harm the common stock price of Organovo and future business and operations of each company.

If the Merger is not completed, Organovo and Tarveda are subject to the following risks:

 

•

if the Merger Agreement is terminated under certain circumstances, Organovo or Tarveda will be required to pay certain transaction expenses incurred by other party, up to a maximum of $0.3 million (or $0.5 million in certain circumstances);

 

•

if the Merger Agreement is terminated under certain circumstances, Organovo or Tarveda will be required to pay the other party a termination fee equal to $1.0 million (or $2.0 million in certain circumstances) and the third-party expenses incurred by the other party up to a maximum of $0.3 million (or $0.5 million in certain circumstances);

 

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•

the price of Organovo stock may decline and remain volatile; and

 

•

costs related to the Merger, such as legal and accounting fees which Organovo and Tarveda estimate will total approximately $4.2 million and $3.3 million, respectively, some of which must be paid even if the Merger is not completed.

In addition, if the Merger Agreement is terminated and the Organovo board of directors or the Tarveda board of directors determines to seek another business combination, there can be no assurance that either Organovo or Tarveda will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger on a timely basis, or at all.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.

In general, either Organovo or Tarveda can refuse to complete the Merger if there is a material adverse change affecting the other party between December 13, 2019, the date of the Merger Agreement, and the Closing. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Organovo or Tarveda, including:

 

•

any effect resulting from the execution, delivery, announcement or performance of obligations under the Merger Agreement or the announcement or pendency or anticipated consummation of the Merger or any related transactions;

 

•

any natural disaster or any act of terrorism, sabotage, military action or war (whether or not declared) or escalation or any worsening thereof;

 

•

any change in United States generally accepted accounting principles (“GAAP”) or any change in applicable laws, rules or regulations or the interpretation thereof;

 

•

any conditions generally affecting the industries in which Tarveda and Organovo and their respective subsidiaries participate or the United States or global economy or capital markets as a whole to the extent such conditions do not have a disproportionate impact on Tarveda or Organovo and their respective subsidiaries, as applicable;

 

•

any failure by Tarveda or Organovo to meet internal projections or forecasts or third-party revenue or earnings predictions for any period ending on or after the date of the Merger Agreement; or

 

•

the resignation or termination of any director or officer of Tarveda or Organovo.

If adverse changes occur and Organovo and Tarveda still complete the Merger, the combined organization stock price may suffer. This in turn may reduce the value of the Merger to the stockholders of Organovo, Tarveda or both.

Some Organovo and Tarveda officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.

Certain officers and directors of Organovo and Tarveda participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the combined organization, severance benefits, the acceleration of stock option vesting, continued indemnification and the potential ability to sell an increased number of shares of common stock of the combined organization in accordance with Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). For example, in November 2015 Organovo entered into a Severance and Change in Control Plan Participation Agreement with each of its executive officers and certain key employees pursuant to the Organovo Severance Plan, which was approved by Organovo’s compensation committee. The Organovo Severance Plan establishes the amount of severance payments and benefits available in the event of a (i) termination of employment by

 

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Organovo for reasons other than cause, death or disability or by the participant for good reason and (ii) termination of employment by Organovo for reasons other than cause, death or disability or by the participant for good reason within six months before or within 12 months after a change in control. Organovo’s executive officers, including Taylor Crouch, Organovo’s Chief Executive Officer, who also serves on Organovo’s board of directors, are each parties to a participation agreement under the Organovo Severance Plan and are contractually entitled to severance payments, including a cash severance payment equal to a multiple of the employee’s base salary, paid in a lump sum, plus a target bonus for the fiscal year in which the termination occurs, health benefit continuation for up to 18 months, and outplacement assistance. In addition, Organovo’s executive officers are also entitled to full accelerated vesting of all outstanding equity grants and a one-year time period to exercise any stock options or stock appreciation rights.

Based on the terms of their respective participation agreements, Organovo’s executive officers will be entitled to receive a total value of approximately $3.06 million (collectively, not individually) in connection with the consummation of the Merger and the associated termination of their employment from Organovo, not including the value associated with the acceleration of their outstanding equity awards.

Additionally, the directors and officers of Organovo are parties to the Organovo support agreements and lock-up agreements with Organovo and Tarveda.

The Organovo board of directors and special committee was aware of these interests and considered them, among other matters, in the decision to approve the Merger Agreement. For more information, please see the section titled “The Merger — Interests of the Organovo Directors and Executive Officers in the Merger” of this proxy statement/prospectus/information statement.

All of Tarveda’s executive officers and certain of its directors have options, subject to vesting, to purchase shares of Tarveda common stock which shall be converted into and become options to purchase shares of Organovo common stock, Tarveda’s directors and executive officers are expected to become directors and executive officers of Organovo upon the consummation of the Merger and all of Tarveda’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. In addition, certain of Tarveda’s executive officers and directors and affiliates of Tarveda’s directors currently hold shares of Tarveda common stock and preferred stock. The shares of Tarveda preferred stock will be converted into shares of Tarveda common stock prior to the consummation of the Merger. In addition and for example, certain of Tarveda’s officers received grants of shares of Tarveda common stock prior to the execution of the Merger Agreement, certain of Tarveda’s directors and executive officers have options, subject to vesting, to purchase shares of Tarveda common stock, which shall be converted into and become options to purchase shares of Organovo common stock, certain of Tarveda’s directors and executive officers are expected to become directors and executive officers of Organovo upon the closing of the merger and all of Tarveda’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement.

These interests, among others, may influence the officers and directors of Organovo and Tarveda to support or approve the Merger. For more information concerning the interests of Organovo and Tarveda executive officers and directors, see the sections titled “The Merger — Interests of the Organovo Directors and Executive Officers in the Merger” and “The Merger — Interests of the Tarveda Directors and Executive Officers in the Merger” in this proxy statement/prospectus/information statement.

The market price of the combined organization’s common stock following the Merger may decline as a result of the Merger.

The market price of Organovo common stock may decline as a result of the Merger for a number of reasons including if:

 

•

investors react negatively to the prospects of the combined organization’s business and prospects from the Merger;

 

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•

the effect of the Merger on the combined organization’s business and prospects is not consistent with the expectations of financial or industry analysts; or

 

•

the combined organization does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.

Organovo and Tarveda stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined organization is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Organovo and Tarveda stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined organization is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

During the pendency of the Merger, Organovo and Tarveda may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Organovo and Tarveda to make acquisitions, subject to certain exceptions relating to fiduciaries duties, as set forth below, or complete other transactions that are not in the ordinary course of business, subject to certain exceptions, pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from, among other things, soliciting, initiating, knowingly encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third party. Any such transactions could be favorable to such party’s stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Organovo and Tarveda from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when, among other things, such party’s board of directors determines in good faith that an unsolicited alternative takeover proposal is or is reasonably likely to result in a superior takeover proposal and that failure to cooperate with the proponent of the proposal is a breach of the board’s fiduciary duties. In addition, if Organovo or Tarveda terminate the Merger Agreement under certain circumstances, including terminating because of a decision of a board of directors to recommend a superior proposal, Organovo or Tarveda would be required to pay to the other party a termination fee equal to $1.0 million (or $2.0 million in certain circumstances) and the third-party expenses incurred by the other party, up to a maximum of $0.3 million (or $0.5 million in certain circumstances). This termination fee may discourage third parties from submitting alternative takeover proposals to Organovo or Tarveda or their stockholders, and may cause the respective boards of directors to be less inclined to recommend an alternative proposal.

Because the lack of a public market for Tarveda shares makes it difficult to evaluate the fairness of the Merger, the stockholders of Tarveda may receive consideration in the Merger that is less than the fair market value of the Tarveda shares.

The outstanding capital stock of Tarveda is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Tarveda. Because the percentage of Organovo equity to be issued to Tarveda stockholders was determined based on negotiations

 

33

between the parties, it is possible that the value of the Organovo common stock to be received by Tarveda stockholders will be less than the fair market value of Tarveda, or Organovo may pay more than the aggregate fair market value for Tarveda.

Because the lack of a public market for Tarveda shares makes it difficult to evaluate the fairness of the Merger, the stockholders of Tarveda may receive consideration in the Merger that is less than the fair market value of the Tarveda shares.

The outstanding capital stock of Tarveda is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Tarveda. Because the percentage of Organovo equity to be issued to Tarveda stockholders was determined based on negotiations between the parties, it is possible that the value of the Organovo common stock to be received by Tarveda stockholders will be less than the fair market value of Tarveda, or Organovo may pay more than the aggregate fair market value for Tarveda.

If the conditions to the Merger are not met, the Merger will not occur.

Even if the Merger is approved by the stockholders of Organovo and Tarveda, specified conditions must be satisfied or waived to complete the Merger. These conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus/information statement. Organovo and Tarveda cannot assure you that all of the conditions will be satisfied. If the conditions are not satisfied or waived, the Merger will not occur or will be delayed, and Organovo and Tarveda each may lose some or all of the intended benefits of the Merger.

If the Merger does not qualify as a “reorganization” for U.S. federal income tax purposes, U.S. Holders of Tarveda common stock will be required to recognize gain or loss for U.S. federal income tax purposes upon the exchange of their Tarveda common stock for Organovo common stock in the Merger.

The U.S. federal income tax consequences of the Merger to U.S. Holders (as defined in the section titled “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger”) will depend on whether the Merger qualifies as a “reorganization” for U.S. federal income tax purposes. Organovo’s and Tarveda’s obligations to effect the Merger are subject to the satisfaction, or waiver, at or prior to the effective time of the Merger, of the condition that each company receive an opinion of counsel (or Organovo’s Replacement Counsel or Tarveda’s Replacement Counsel, in each case, if applicable), dated as of the closing date of the Merger, to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. If, contrary to the opinions from counsel, the Merger fails to qualify as a reorganization within the meaning of Section 368(a) of the Code, a U.S. Holder of Tarveda common stock would recognize gain or loss for U.S. federal income tax purposes on each share of Tarveda common stock surrendered in the Merger for Organovo common stock and any cash received in lieu of a fractional share. For a more complete discussion of the material U.S. federal income tax consequences of the Merger, please carefully review the information set forth in the section titled “The Merger —Certain Material U.S. Federal Income Tax Consequences of the Merger” in this proxy statement/prospectus/information statement.

Risks Related to the Proposed Organovo Reverse Stock Split

The proposed Organovo Reverse Stock Split may not increase the combined organization’s stock price over the long-term.

The principal purpose of the proposed Organovo Reverse Stock Split is to increase the per-share market price of Organovo common stock and provide for sufficient authorized shares of Organovo common stock to issue shares of Organovo common stock in the Merger. It cannot be assured, however, that the proposed Organovo Reverse Stock Split will accomplish the objective of increasing the per-share market price of Organovo common stock for any meaningful period of time. While it is expected that the reduction in the number

 

34

of outstanding shares of Organovo common stock will proportionally increase the market price of Organovo common stock, it cannot be assured that the proposed Organovo Reverse Stock Split will increase the market price of Organovo common stock by a multiple of the proposed Organovo Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of Organovo common stock, which is dependent upon many factors, including the combined organization’s business and financial performance, general market conditions and prospects for future success. Therefore, while the stock price of the combined organization might meet the continued listing requirements for The Nasdaq Capital Market initially, it cannot be assured that it will continue to do so.

The proposed Organovo Reverse Stock Split may decrease the liquidity of the combined organization’s common stock.

Although the Organovo board of directors believes that the anticipated increase in the market price of the combined organization’s common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the proposed Organovo Reverse Stock Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Organovo common stock.

The proposed Organovo Reverse Stock Split may lead to a decrease in the combined organization’s overall market capitalization.

Should the market price of the combined organization’s common stock decline after the proposed Organovo Reverse Stock Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the proposed Organovo Reverse Stock Split. A reverse stock split may be viewed negatively by the market and, consequently, can lead to a decrease in the combined organization’s overall market capitalization. If the per share market price does not increase in proportion to the proposed Organovo Reverse Stock Split ratio, then the value of the combined organization, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Organovo common stock will remain the same after the proposed Organovo Reverse Stock Split is effected, or that the proposed Organovo Reverse Stock Split will not have an adverse effect on the stock price of Organovo common stock due to the reduced number of shares outstanding after the proposed Organovo Reverse Stock Split.

Risks Related to Organovo’s Capital Requirements, Finances and Operations if the Merger is not Completed

There is no assurance that the proposed Merger between Organovo and Tarveda will be completed in a timely manner or at all. If the Merger with Tarveda is not consummated, Organovo’s business could suffer materially and its stock price could decline.

The consummation of the Merger between Organovo and Tarveda is subject to a number of closing conditions, including approval by Organovo’s and Tarveda’s respective stockholders and other customary closing conditions. The parties are targeting a Closing of the transaction in the first calendar quarter of 2020, however, there can be no assurance that the Merger will be consummated within this desired timeframe, or at all.

If the Merger between Organovo and Tarveda is not consummated, Organovo may be subject to a number of material risks, and its business and stock price could be adversely affected, as follows:

 

•

Organovo has incurred and expects to continue to incur significant expenses related to the Merger with Tarveda, even if the Merger is not consummated;

 

•

Organovo could be obligated to pay Tarveda a $1.0 million (or $2.0 million in certain circumstances) termination fee and expense reimbursements in connection with the termination of the Merger Agreement, depending on the reason for the termination;

 

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•

The market price of Organovo’s common stock may decline to the extent that the current market price reflects a market assumption that the Merger will be completed; and

 

•

Nasdaq could determine to delist Organovo’s common stock which could have an adverse effect on the value of Organovo’s common stock and any future ability to raise capital.

If the Merger is not completed, Organovo may be unsuccessful in completing an alternative strategic transaction on terms that are as favorable as the terms of the proposed transaction with Tarveda, or at all, and Organovo may be unable to reestablish a viable operating business.

To date, Organovo has not generated significant revenue from product sales, and its assets currently consist primarily of cash, cash equivalents and marketable securities, its intellectual property portfolio, license and collaboration agreements, its remaining assets, its listing on The Nasdaq Capital Market and the Merger Agreement with Tarveda. While Organovo has entered into the Merger Agreement with Tarveda, the consummation of the Merger with Tarveda may be delayed or may not occur at all. If the Merger is not completed, the Organovo board of directors may elect to pursue an alternative strategic transaction similar to the proposed Merger with Tarveda. Attempting to complete an alternative transaction will be costly and time consuming. If the Merger with Tarveda is not completed and the Organovo board of directors determines to pursue an alternative transaction, the terms of any such alternative transaction may not be as favorable to Organovo and its stockholders as the terms of the Merger with Tarveda, and Organovo can make no assurances that such an alternative transaction would occur at all. Further, if the Merger with Tarveda is not completed, given the level of investment and time that would be required to redesign its liver tissue product or pursue the development of products and services pursuant to its collaboration agreements, it is unlikely that Organovo would be able to obtain the funding required to recommence its product development activities on terms favorable to its stockholders, or at all.

If the Merger is not completed, Organovo’s board of directors may decide to pursue a dissolution and liquidation of Organovo. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the Merger will be completed. If the Merger is not completed, the Organovo board of directors may decide to pursue a dissolution and liquidation of Organovo. In such an event, the amount of cash available for distribution to its stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as Organovo continues to fund its operations. In addition, if Organovo’s board of directors were to approve and recommend, and its stockholders were to approve, a dissolution and liquidation of Organovo, Organovo would be required under Delaware corporate law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to its stockholders. As a result of this requirement, a portion of Organovo’s remaining cash assets may need to be reserved pending the resolution of such obligations. In addition, Organovo may be subject to litigation or other claims related to a dissolution and liquidation of Organovo. If a dissolution and liquidation were pursued, Organovo’s board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Organovo common stock could lose all or a significant portion of their investment in the event of Organovo’s liquidation, dissolution or winding up.

Organovo may be unable to continue as a going concern if the Merger is not completed.

Organovo has had recurring losses from operations since inception and will likely not generate meaningful revenue for the foreseeable future. Organovo believes that its existing cash, cash equivalents and marketable securities and interest thereon will be sufficient to fund its projected operating requirements under its current operating plan. However, if the Merger is not completed and Organovo’s operating plans change and its

 

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projected operating requirements increase, Organovo may be unable to continue as a going concern. In this event, the perception that Organovo may not be able to continue as a going concern may have an adverse impact on its business due to concerns about its ability to meet its future contractual obligations or pursue additional strategic transactions. Further, if Organovo is unable to continue as a going concern, Organovo may have to liquidate its assets, and the values it receives for its assets in liquidation and dissolution could be significantly lower than the values reflected in its financial statements and an investor could lose all or part of its investment in Organovo.

If Organovo were to continue to advance its research and development activities and pursue development of any of its pipeline products, it would require substantial additional funding. Raising additional capital would cause dilution to its existing stockholders, and may restrict its operations or require it to relinquish rights to its technologies or to a product candidate.

Organovo currently does not have any committed external source of funds and does not expect to generate any meaningful revenue in the foreseeable future. Organovo believes that its existing cash, cash equivalents and marketable securities and interest thereon will be sufficient to fund its projected operating requirements under its current operating plan. Organovo has based its estimates on assumptions that may prove to be wrong, and it may use its available capital resources sooner than it currently expects if its operating plans change. If the Merger is not completed and Organovo’s current operating plans change and it determines to pursue further research and development activities, it will require substantial additional funding to operate, and would expect to finance these cash needs through a combination of equity offerings, debt financings, government or other third-party funding and licensing or collaboration arrangements.

To the extent that Organovo raises additional capital through the sale of equity or convertible debt, the ownership interests of its stockholders will be diluted. In addition, the terms of any equity or convertible debt it agrees to issue may include liquidation or other preferences that adversely affect the rights of Organovo’s stockholders. Convertible debt financing, if available, may involve agreements that include covenants limiting or restricting Organovo’s ability to take specific actions, such as incurring additional debt, making capital expenditures, and declaring dividends, and may impose limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business.

Additional funds may not be available when Organovo needs them on terms that are acceptable to Organovo, or at all. If adequate funds are not available to Organovo on a timely basis, it may be required to curtail or cease its operations.

If the Merger is not completed, raising additional funding through debt or equity financing would be difficult or not successful at all, would be dilutive and may cause the market price of Orgnanovo’s common stock to decline further.

If the Merger is not completed, raising additional funding through debt or equity financing is likely to be difficult or unavailable altogether given the early stage of Organovo’s therapeutic candidates. To the extent that Organovo raises additional capital through the sale of equity or convertible debt securities, the issuance of those securities would result in substantial dilution for Organovo’s current stockholders and the terms may include liquidation or other preferences that adversely affect the rights of its current stockholders. Furthermore, the issuance of additional securities, whether equity or debt, by Organovo, or the possibility of such issuance, may cause the market price of its common stock to decline further and existing stockholders may not agree with its financing plans or the terms of such financings.

The issuance of shares of Organovo’s common stock to Tarveda’s stockholders in the Merger will dilute substantially the voting power of Organovo’s current stockholders.

If the Merger is completed, each outstanding share of Tarveda capital stock will be converted into the right to receive approximately 0.1311 shares of Organovo common stock, subject to adjustment to account for the

 

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proposed Organovo Reverse Stock Split. Immediately following the Merger, Organovo’s stockholders and optionholders are expected to own, or hold rights to acquire, approximately 25% of the common stock of Organovo on a fully diluted basis as defined in the Merger Agreement, and Tarveda’s stockholders, optionholders and warrantholders are expected to own, or hold rights to acquire, approximately 75% of the common stock of Organovo on a fully diluted basis as defined in the Merger Agreement. Accordingly, the issuance of shares of Organovo’s common stock to Tarveda’s stockholders in the Merger will reduce significantly the relative voting power of each share of Organovo’s common stock held by its current stockholders. Consequently, Organovo’s stockholders as a group will have significantly less influence over the management and polices of the combined organization after the Merger than prior to the Merger.

Organovo has incurred and will continue to incur significant transaction costs in connection with the Merger.

Organovo has incurred and will continue to incur significant transaction costs in connection with the Merger. Organovo estimates that it will incur aggregate direct transaction costs of approximately $3.9 million associated with the Merger and approximately $0.3 million for its portion of shared transaction expenses, as well as additional costs associated with the commencement of the combined organization’s operation as a public company, which cannot be estimated accurately at this time.

Organovo’s ability to use net operating loss (“NOL”) carryforwards and other tax attributes may be limited in connection with the Merger and other ownership changes.

Organovo has incurred substantial losses during its history and does not expect to become profitable in the near future, and Organovo may never achieve profitability. To the extent that Organovo continues to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all). At March 31, 2019, Organovo had federal and state NOL carryforwards of approximately $170.3 million and $49.2 million, respectively. Such federal and state NOL carryforwards will begin to expire in 2028, unless previously utilized. At March 31, 2019, Organovo had federal and state research and development credit carryforwards of approximately $4.0 million and $3.6 million, respectively. The federal research and development credit carryforwards will begin expiring in 2028, unless previously utilized.

Under the Tax Act, federal NOLs generated in taxable years ending after December 31, 2017, may be carried forward indefinitely but federal NOLs generated in taxable years beginning after December 31, 2017 may only be used to offset 80% of Organovo’s taxable income annually. Organovo’s NOL carryforwards are subject to review and possible adjustment by the U.S. Internal Revenue Service (the “IRS”), and state tax authorities. Under Sections 382 and 383 of the Code, Organovo’s federal NOL and research and development tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points. Organovo’s ability to utilize its NOL carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including in connection with the Merger. Similar rules may apply under state tax laws. Organovo has not yet determined the amount of the cumulative change in its ownership resulting from the Merger or other transactions, or any resulting limitations on its ability to utilize its NOL carryforwards and other tax attributes. If Organovo earns taxable income, such limitations could result in increased future tax liability to Organovo and its future cash flows could be adversely affected. Organovo has recorded a full valuation allowance related to its NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

Risks Related to Tarveda

Tarveda has incurred significant net losses since inception and anticipates that it will continue to incur substantial net losses for the foreseeable future and may never achieve or maintain profitability.

Since inception in 2016, Tarveda has incurred significant net losses and has never generated any revenue from product sales. Tarveda’s net loss was $16.3 million and $16.5 million for the nine months ended

 

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December 31, 2019 and 2018, and $22.1 million and $19.0 million for years ended March 31, 2019 and 2018, respectively. As of December 31, 2019, Tarveda had an accumulated deficit of $121.5 million. Although Tarveda completed a private placement of its securities and recapitalization in December 2019 raising gross proceeds of $13.6 million before deducting estimated offering expenses, Tarveda expects to continue to incur significant expenses and increasing net losses for the foreseeable future. Since inception, Tarveda has devoted substantially all of its efforts to identifying, researching and conducting preclinical and clinical activities for its product candidates, acquiring and developing its Pentarin, including its Heat Shock Protein 90 (“HSP90”) binding miniature drug conjugate platforms and know-how to develop miniature drug conjugates, organizing and staffing the company, business planning, raising capital and establishing its intellectual property portfolio. To date, Tarveda has never obtained regulatory approval for, or commercialized, any products. It could be several years, if ever, before Tarveda has a commercialized product. The net losses Tarveda incurs may fluctuate significantly from quarter to quarter and year to year. Tarveda anticipates that its expenses will increase substantially if, and as, it:

 

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continues the ongoing and planned development of its product candidates;

 

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initiates, conducts and completes any ongoing, anticipated or future preclinical studies and clinical trials for its current and future product candidates;

 

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seeks marketing approvals for any product candidates that successfully complete clinical trials;

 

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establishes a sales, marketing, manufacturing and distribution infrastructure to commercialize any current or future product candidate for which it may obtain marketing approval;

 

•

seeks to discover and develop additional product candidates;

 

•

continues to build a portfolio of product candidates through the acquisition or in-license of products, product candidates or technologies;

 

•

maintains, protects and expands its intellectual property portfolio;

 

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makes milestone payments if it successfully achieves certain predetermined milestones under existing or future agreements;

 

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hires additional clinical, regulatory and scientific personnel;

 

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adds operational, financial and management information systems and personnel, including personnel to support its product development and planned future commercialization efforts; and

 

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incurs additional costs associated with operating as a public company.

To become and remain profitable, Tarveda must succeed in developing and eventually commercializing products that generate significant revenue. This will require Tarveda to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of its current and future product candidates, obtaining regulatory approval, procuring commercial-scale manufacturing, marketing and selling any products for which it obtains regulatory approval (including through third parties), as well as discovering or acquiring and developing additional product candidates. Tarveda is only in the preliminary stages of most of these activities. Tarveda may never succeed in these activities and, even if it does, may never generate revenue that is sufficient to offset its expenses and achieve profitability.

Because of the numerous risks and uncertainties associated with biopharmaceutical product development, Tarveda is unable to accurately predict the timing or amount of expenses or when, or if, it will be able to achieve profitability. If Tarveda is required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation and completion of its clinical trials or the development of any of its product candidates, its expenses could increase.

Even if Tarveda does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. Tarveda’s failure to become and remain profitable would decrease the value of the

 

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company and could impair its ability to raise capital, maintain its research and development efforts, expand its business or continue its operations.

There is substantial doubt about Tarveda’s ability to continue as a going concern.

Tarveda has incurred recurring losses since inception, including net losses of $22.1 million and $19.0 million for the years ended March 31, 2019 and 2018, respectively. In addition, as of March 31, 2019, Tarveda had an accumulated deficit of $105.2 million. Tarveda expects to continue to generate operating losses for the foreseeable future and will need to raise additional capital to finance its future operations. Tarveda’s management has concluded that these matters raise substantial doubt about its ability to continue as a going concern. Tarveda’s financial statements do not include any adjustments that might result from the outcome of this uncertainty. Tarveda’s auditors have included an explanatory paragraph in their audit report for this uncertainty. If Tarveda cannot continue as a viable entity, its securityholders may lose some or all of their investment in Tarveda.

Even after completion of the Merger, Tarveda will require substantial additional funding to finance its operations. If Tarveda is unable to raise capital when needed, it could be forced to delay, reduce or terminate certain of its development programs or other operations.

As of December 31, 2019, Tarveda had cash and cash equivalents of $15.5 million. Tarveda believes that its existing cash and cash equivalents as of December 31, 2019, will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments through September 2020 as a stand-alone private company. Upon completion of the Merger, and after taking into account the expected cash that Organovo will have on its balance sheet at the effective time of the Merger, Tarveda expects to have sufficient cash to fund the combined organization’s current operating plans through at least the 18 months following the anticipated effective time of the Merger. However, the combined organization’s operating plans may change as a result of many factors currently unknown to Tarveda, and the combined organization may need to seek additional funds sooner than planned. Tarveda expects to finance its cash needs through public or private equity or debt financings, third-party (including government) funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The combined organization’s future capital requirements will depend on many factors, including:

 

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the timing, progress and results of Tarveda’s ongoing preclinical studies and clinical trials of its product candidates;

 

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the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of other product candidates that Tarveda may pursue;

 

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Tarveda’s ability to establish and maintain collaboration, license, grant and other similar arrangements, and the financial terms of any such arrangements, including timing and amount of any future milestones, royalty or other payments due thereunder;

 

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the costs, timing and outcome of regulatory review of Tarveda’s product candidates;

 

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of Tarveda’s product candidates for which it receives marketing approval;

 

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the revenue, if any, received from commercial sales of Tarveda’s product candidates for which it receives marketing approval;

 

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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing Tarveda’s intellectual property rights and defending any intellectual property-related claims;

 

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any expenses needed to attract, hire and retain skilled personnel;

 

40

•

the costs of operating as a public company; and

 

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the extent to which Tarveda acquires or in-license other companies’ product candidates and technologies.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and Tarveda may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, Tarveda’s product candidates, if approved, may not achieve commercial success. Tarveda’s commercial revenue, if any, will be derived from sales of products that it does not expect to be commercially available for several years, if at all. Accordingly, Tarveda will need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to Tarveda on acceptable terms, or at all. If Tarveda is unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce or altogether terminate its research and development programs or future commercialization efforts, which may adversely affect its business, financial condition, results of operations and prospects. In addition, Tarveda may seek additional capital due to favorable market conditions or strategic considerations even if Tarveda believes it has sufficient funds for its current or future operating plans.

The incurrence of debt may impact Tarveda’s financial position and subject it to additional financial and operating restrictions.

In March 2019, Tarveda entered into a $10.0 million senior secured term loan credit facility with Oxford. Tarveda’s overall leverage and certain covenants and obligations contained in the related documentation could adversely affect its financial health and business and future operations by, among other things:

 

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making it more difficult to satisfy its obligations, including under the terms of the Oxford loan;

 

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limiting Tarveda’s ability to refinance its debt on terms acceptable to Tarveda or at all

 

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limiting Tarveda’s flexibility to plan for and adjust to changing business and market conditions and increasing its vulnerability to general adverse economic and industry conditions;

 

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limiting Tarveda’s ability to use its available cash flow to fund future acquisitions and to make dividend payments; and

 

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limiting Tarveda’s ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.

Furthermore, substantially all of Tarveda’s assets, including its intellectual property, secure the Oxford loan. If an event of default under the Oxford loan occurs and is continuing, Oxford may request the acceleration of the related debt and foreclose on the underlying security interests. While Oxford consented to the entry into the Merger Agreement, Tarveda does not yet have Oxford’s consent to the consummation of the Merger. Oxford may request additional covenants or other concessions from Tarveda in order to consent to the Merger.

The LIBOR calculation method may change and LIBOR is expected to be phased out after 2021.

Interest on the outstanding principal balance of the loans under the Oxford loan is calculated based on one-month LIBOR, plus an applicable margin. On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. In the meantime, actions by the FCA, other regulators or law enforcement agencies may result in changes to the method by which LIBOR is calculated. At this time, it is not possible to predict the effect of any such changes or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere.

 

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Raising additional capital may cause dilution to Tarveda’s stockholders, restrict its operations or require it to relinquish rights to its product candidates.

Until such time, if ever, as Tarveda can generate substantial product revenue, it expects to finance its cash needs through public or private equity or debt financings, third-party (including government) funding and collaborations and strategic alliances, or any combination of these approaches. To the extent that Tarveda raises additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting Tarveda’s ability to take specific actions, such as redeeming its shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on its ability to acquire, sell or license intellectual property rights. For example, Tarveda’s existing loan with Oxford is secured by a first priority lien on Tarveda’s assets and intellectual property, and requires compliance with certain affirmative and negative covenants.

If Tarveda raises additional capital through future collaborations or strategic alliances, it may have to relinquish valuable rights to its intellectual property, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to Tarveda. If Tarveda is unable to raise additional capital when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market product candidates that it would otherwise develop and market ourselves.

Tarveda’s limited operating history may make it difficult for you to evaluate the success of its business to date and to assess its future viability.

Tarveda is a clinical-stage company that spun out its legacy business and renamed itself Tarveda Therapeutics, Inc. in 2016. Since the spinout, Tarveda’s operations have been largely focused on identifying, researching and conducting preclinical and clinical activities of its product candidates, PEN-866 and PEN-221, acquiring and developing its HSP90 binding miniature drug conjugate platform and know-how to develop miniature drug conjugates, organizing and staffing the company, business planning, raising capital and establishing its intellectual property portfolio. As an organization, Tarveda has not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial-scale product or conduct sales and marketing activities necessary for successful commercialization or arrange for a third party to conduct these activities on its behalf. Consequently, any predictions about Tarveda’s future success or viability may not be as accurate as they could be if it had a longer operating history.

Tarveda currently has two product candidates in its development pipeline. Tarveda may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving its business objectives, including with respect to its Pentarin platform including its HSP90 binding miniature drug conjugate platform, and product candidates. Tarveda will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. Tarveda may not be successful in such a transition.

Risks Related to the Design and Development of Tarveda’s Drug Candidates

Tarveda is early in its development efforts and its lead drug candidates, PEN-866 and PEN-221 are still in early stage clinical development. Tarveda has not successfully completed late-stage clinical trials or obtained regulatory approval for any drug candidate. Tarveda may never obtain approval for any of its drug candidates or achieve or sustain profitability.

Tarveda currently has no products that are approved for sale. Tarveda is early in its development efforts and has only recently completed enrollment in the Phase 1 portion of the Phase 1/2a trial evaluating PEN-866 in patients with advanced solid tumors. Tarveda’s only other drug candidate in clinical trials, PEN-221 is currently

 

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being investigated in an ongoing Phase 2a clinical trial in patients with neuroendocrine cancers, including gastrointestinal, neuroendocrine tumors (“GI NET”), pancreatic neuroendocrine tumors and small cell lung cancer. There can be no assurance that PEN-866, PEN-221 or any future drug candidates in development will achieve success in their clinical trials or obtain regulatory approval.

Tarveda’s ability to generate product revenues, which it does not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of PEN-866, PEN-221 or any other future drug candidates in development. The success of its drug candidates, including PEN-886 and PEN-221, will depend on several factors, including the following:

 

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successful completion of preclinical studies and clinical trials;

 

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acceptance of INDs by the FDA or other clinical trial or similar applications from foreign regulatory authorities for Tarveda’s future clinical trials for its pipeline drug candidates;

 

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timely and successful enrollment of patients in, and completion of, clinical trials with favorable results;

 

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demonstration of safety, efficacy and acceptable risk-benefit profiles of its drug candidates to the satisfaction of the FDA and foreign regulatory agencies;

 

•

receipt and related terms of marketing approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials;

 

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for PEN-221, the continued availability of FDA-approved screening diagnostics that detect SSTR2 expression;

 

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raising additional funds necessary to complete clinical development of and commercialize its drug candidates;

 

•

obtaining and maintaining patent, trade secret and other intellectual property protection and regulatory exclusivity for its drug candidates;

 

•

making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of its drug candidates;

 

•

developing and implementing marketing and reimbursement strategies;

 

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establishing sales, marketing and distribution capabilities and launching commercial sales of its products, if and when approved, whether alone or in collaboration with others;

 

•

acceptance of Tarveda’s products, if and when approved, by patients, the medical community and third-party payors;

 

•

effectively competing with other therapies;

 

•

obtaining and maintaining third-party payor coverage and adequate reimbursement;

 

•

protecting and enforcing its rights in its intellectual property portfolio; and

 

•

maintaining a continued acceptable safety profile of the products following approval.

Many of these factors are beyond Tarveda’s control, and it is possible that none of its drug candidates will ever obtain regulatory approval even if Tarveda expends substantial time and resources seeking such approval. If Tarveda does not achieve one or more of these factors in a timely manner or at all, it could experience significant delays or an inability to successfully commercialize its drug candidates, which would materially harm its business. For example, Tarveda’s business could be harmed if results of the clinical trials of PEN-866, PEN-221 or any other drug candidates vary adversely from its expectations.

 

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Tarveda’s approach to the discovery and development of Pentarin miniature drug conjugates, including using its HSP90 binding miniature drug conjugate platform, is based on novel technologies that are unproven and may not result in marketable products.

The scientific research that forms the basis of Tarveda’s efforts to discover and develop Pentarin miniature drug conjugates, including based on its HSP90 binding miniature drug conjugate platform, is ongoing. Further, the scientific evidence to support the feasibility of developing therapeutic miniature drug conjugates, which it refers to as Pentarin miniature drug conjugates, based on Tarveda’s HSP90 binding miniature drug conjugate platform and other know-how is both preliminary and limited. Tarveda may not be correct in its assumptions about the superiority of its HSP90 binding miniature drug conjugate platform to develop effective therapeutics that bind to HSP90 to deliver anti-cancer payloads. If its HSP90 binding miniature drug conjugate platform is not able to develop Pentarin miniature drug conjugates that are successful in delivering an anti-cancer payload while minimizing toxicity outside the tumor environment, it could have a material and adverse effect on Tarveda’s business, financial condition, results of operations and prospects. Further, if PEN-866, as Tarveda’s first Pentarin developed using the HSP90 binding miniature drug conjugate platform is not successful in achieving its clinical objectives, it would materially and adversely effect Tarveda’s ability to leverage its HSP90 binding miniature drug conjugate platform to develop other Pentarin miniature drug conjugates to deliver other payloads, which would have a material and adverse effect on Tarveda’s business, financial condition, results of operations and prospects.

Drug development involves a lengthy and expensive process. Tarveda may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of PEN-866, PEN-221 or any other drug candidates.

Tarveda currently has only two drug candidates in clinical development, and the risk of failure is high. Tarveda is unable to predict when or if its drug candidates will prove effective or safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any drug candidate, Tarveda must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of its drug candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim or preliminary results of a clinical trial do not necessarily predict final results. In particular, the small number of patients in Tarveda’s early clinical trials may make the results of these trials less predictive of the outcome of later clinical trials. For example, the Phase 1 trial for PEN-866 consists of approximately 30 patients of various tumor types and the various cohorts of Phase 2a for PEN-221 range from 10 to 25 patients in each cohort.

Tarveda may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent its ability to obtain marketing approval or commercialize its drug candidates, including:

 

•

regulators or institutional review boards (“IRBs”) or ethics committees (“ECs”) may not authorize Tarveda or its investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

 

•

Tarveda may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

 

•

clinical trials for Tarveda’s drug candidates may produce negative or inconclusive results, and Tarveda may decide, or regulators may require it, to conduct additional clinical trials, delay clinical trials or abandon product development programs;

 

•

the number of patients required for clinical trials for its drug candidates may be larger than Tarveda anticipates, enrollment in these clinical trials may be slower than Tarveda anticipates, participants may drop out of these clinical trials at a higher rate than Tarveda anticipates or the duration of these clinical trials may be longer than Tarveda anticipates;

 

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•

competition for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in Tarveda’s clinical trials;

 

•

Tarveda’s third-party contractors may fail to meet their contractual obligations to it in a timely manner, or at all, or may fail to comply with regulatory requirements;

 

•

currently available FDA-approved screening diagnostics that are routinely used to detect SSTR2 expression in diagnosing neuroendocrine tumors may cease to be available;

 

•

Tarveda may have to suspend or terminate clinical trials for its drug candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

 

•

Tarveda’s drug candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing it or its investigators, regulators or IRBs/ECs to suspend or terminate the trials;

 

•

the cost of clinical trials for Tarveda’s drug candidates may be greater than it anticipates; and

 

•

the supply or quality of Tarveda’s drug candidates or other materials necessary to conduct clinical trials for its drug candidates may be insufficient or inadequate and result in delays or suspension of its clinical trials.

Tarveda’s product development costs will increase if it experiences delays in preclinical studies or clinical trials or in obtaining marketing approvals. Tarveda does not know whether any of its planned preclinical studies or clinical trials will begin on a timely basis or at all, will need to be restructured or will be completed on schedule, or at all. For example, the FDA may place a partial or full clinical hold on, any of Tarveda’s clinical trials for a variety of reasons. For example, early in the development of PEN-866 the Phase 1 clinical trial was delayed to resolve a solubility issue. Although rectified, additional issues could arise in the future that could further delay Tarveda’s development of PEN-866.

Significant preclinical or clinical trial delays also could shorten any periods during which Tarveda may have the exclusive right to commercialize its drug candidates or allow Tarveda’s competitors to bring products to market before it does and impair Tarveda’s ability to successfully commercialize its drug candidates and may harm its business and results of operations.

Any delays in the commencement or completion, or termination or suspension, of Tarveda’s ongoing, planned or future clinical trials could result in increased costs to Tarveda, delay or limit its ability to generate revenue and adversely affect its commercial prospects.

Before Tarveda can initiate clinical trials of a drug candidate in any indication, Tarveda must submit the results of preclinical studies to the FDA along with other information, including information about the drug candidate’s chemistry, manufacturing and controls and its proposed clinical trial protocol, as part of an IND or similar regulatory filing.

Before obtaining marketing approval from the FDA for the sale of PEN-866, PEN-221 or any other drug candidate in any indication, Tarveda must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. In addition, Tarveda expects to rely in part on preclinical, clinical and quality data generated by its contract research organizations (“CROs”) and other third parties for regulatory submissions for its drug candidates. While Tarveda has or will have agreements governing these third parties’ services, Tarveda has limited influence over their actual performance. If these third parties do not make data available to Tarveda, or, if the quality or completeness of the data is not appropriate, or if applicable, make regulatory submissions in a timely manner, in each case pursuant to Tarveda’s agreements with them, its development programs may be significantly delayed and it may need to conduct additional studies or collect additional data independently. In either case, Tarveda’s development costs would increase. To date, Tarveda has submitted two INDs to the FDA: Phase 1/2a clinical trials for both PEN-866 and PEN-221 to evaluate safety and tolerability and one clinical trial authorization (“CTA”) to conduct a Phase 1/2a clinical trial

 

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of PEN-221 in the United Kingdom. The FDA may require Tarveda to conduct additional preclinical studies for any drug candidate before it allows Tarveda to initiate clinical trials under any IND, which may lead to additional delays and increase the costs of its preclinical development programs.

Any delays in the commencement or completion of Tarveda’s ongoing, planned or future clinical trials could significantly affect its product development costs. Tarveda does not know whether its planned trials will begin on time or at all, or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

 

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the FDA disagreeing as to the design or implementation of Tarveda’s clinical trials or with its recommended dose for any of its pipeline programs;

 

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obtaining FDA authorization to commence a trial or reaching a consensus with the FDA on trial design;

 

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any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

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obtaining approval from one or more IRBs/ECs;

 

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IRBs/ECs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

 

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changes to clinical trial protocol;

 

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clinical sites deviating from trial protocol or dropping out of a trial;

 

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failing to manufacture or obtain sufficient quantities of drug candidate or, if applicable, combination therapies for use in clinical trials;

 

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patients failing to enroll or remain in Tarveda’s trial at the rate it expects, or failing to return for post-treatment follow-up;

 

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patients choosing an alternative treatment, or participating in competing clinical trials;

 

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lack of adequate funding to continue the clinical trial;

 

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patients experiencing severe or unexpected drug-related adverse effects;

 

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occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

 

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selecting or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;

 

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for PEN-221, the lack of a readily available and FDA-approved screening diagnostics for SSTR2 expression;

 

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a facility manufacturing Tarveda’s drug candidates or any of their components being ordered by the FDA to temporarily or permanently shut down due to violations of current good manufacturing practice (“cGMP”), regulations or other applicable requirements, or infections or cross-contaminations of drug candidates in the manufacturing process;

 

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lack of stability of Tarveda’s clinical trial material or any quality issues that arise with the clinical trial material;

 

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any changes to Tarveda’s manufacturing process that may be necessary or desired;

 

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third-party clinical investigators losing the licenses or permits necessary to perform Tarveda’s clinical trials, not performing Tarveda’s clinical trials on its anticipated schedule or consistent with the clinical trial protocol, good clinical practices (“GCP”), or other regulatory requirements;

 

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•

Tarveda, or its third-party contractors not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical trial protocol; or

 

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third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case Tarveda may need to find a substitute contractor, and Tarveda may not be able to use some or all of the data produced by such contractors in support of its marketing applications.

Tarveda could also encounter delays if a clinical trial is suspended or terminated by it, by the IRBs/ECs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or its clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and Tarveda may need to amend clinical trial protocols to comply with these changes. Amendments may require Tarveda to resubmit its clinical trial protocols to IRBs/ECs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

If Tarveda experiences delays in the completion of, or termination of, any clinical trial of PEN-866 or PEN-221 or any other drug candidate, the commercial prospects of such drug candidate will be harmed, and Tarveda’s ability to generate product revenues will be delayed. Moreover, any delays in completing its clinical trials will increase its costs, slow down its development and approval process and jeopardize Tarveda’s ability to commence product sales and generate revenues, which may harm its business, financial condition, results of operations and prospects significantly.

If Tarveda experiences delays or difficulties in enrolling patients in its ongoing or planned clinical trials, its receipt of necessary regulatory approval could be delayed or prevented.

Tarveda may not be able to initiate or continue its ongoing or planned clinical trials for its drug candidates if it is unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA. In addition, some of Tarveda’s competitors may have ongoing clinical trials for drug candidates that would treat the same patients as PEN-866 or PEN-221 or any other drug candidates, and patients who would otherwise be eligible for Tarveda’s clinical trials may instead enroll in clinical trials of its competitors’ drug candidates. For example, this is relevant for Tarveda’s development of PEN-866 for the treatment of small cell lung cancer, an indication for which investigational drugs are competing for clinical trial participants. In addition, introduction of new drugs to the market place may have an effect on the number of patients available or timing of the availability of the patients. For example, the introduction of Lutathera has changed the treatment paradigm for neuroendocrine patients in the United States and has an impact on the availability of patients for inclusion in the PEN-221 trial. Patient enrollment is also affected by other factors, including:

 

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severity of the disease under investigation;

 

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Tarveda’s ability to recruit clinical trial investigators of appropriate competencies and experience;

 

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the incidence and prevalence of Tarveda’s target indications;

 

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clinicians’ and patients’ awareness of, and perceptions as to the potential advantages and risks of Tarveda’s drug candidates in relation to other available therapies, including any new drugs that may be approved for the indications it is investigating;

 

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invasive procedures required to enroll patients and to obtain evidence of the drug candidate’s performance during the clinical trial;

 

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•

availability and efficacy of approved medications for the disease under investigation;

 

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eligibility criteria defined in the protocol for the trial in question;

 

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the size of the patient population required for analysis of the trial’s primary endpoints;

 

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efforts to facilitate timely enrollment in clinical trials;

 

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whether Tarveda is subject to a partial or full clinical hold on any of its clinical trials;

 

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reluctance of physicians to encourage patient participation in clinical trials;

 

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the ability to monitor patients adequately during and after treatment;

 

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Tarveda’s ability to obtain and maintain patient consents; and

 

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proximity and availability of clinical trial sites for prospective patients.

Tarveda’s inability to enroll a sufficient number of patients for its clinical trials would result in significant delays or may require it to abandon one or more clinical trials altogether. Enrollment delays in its clinical trials may result in increased development costs, which would cause the value of the company to decline and limit its ability to obtain additional financing.

Adverse side effects or other safety risks associated with PEN-866, PEN-221 or any other drug candidates could delay or preclude approval, cause Tarveda to suspend or discontinue clinical trials or abandon further development, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

As is the case with pharmaceuticals generally, and with oncology drugs in particular, Tarveda has observed side effects and adverse events associated with PEN-866 and PEN-221, including but not limited to toxicities consistent with the anti-cancer payloads, including but not limited to fatigue, diarrhea, and neutropenia. While Tarveda has not experienced any serious adverse events to date, they could occur in the future.

Results of Tarveda’s ongoing and planned clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by Tarveda’s drug candidates could result in the delay, suspension or termination of clinical trials by Tarveda or the FDA for a number of reasons. Additionally, due to the high mortality rates of the cancers for which Tarveda is pursuing development and the pretreated nature of many patients in its ongoing and planned clinical trials of PEN-866 and PEN-221 and future drug candidates, a material percentage of patients in these clinical trials may die during a trial. The percentage of patient death, timing of patient death, or cause thereof could impact development of PEN-866, PEN-221 or future drug candidates. If Tarveda elects or is required to delay, suspend or terminate any clinical trial, the commercial prospects of its drug candidates will be harmed and its ability to generate product revenues from its drug candidates will be delayed or eliminated. Serious adverse events observed in clinical trials could hinder or prevent market acceptance of Tarveda’s drug candidates. Any of these occurrences may harm Tarveda’s business, prospects, financial condition and results of operations significantly.

Moreover, if Tarveda’s drug candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, Tarveda may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for its drug candidates, if approved. Tarveda may also be required to modify its study plans based on findings in its clinical trials. Many drugs that initially showed promise in early stage testing have later been found to cause side effects that prevented further development. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.

It is possible that as Tarveda tests its drug candidates in larger, longer and more extensive clinical trials, including with different dosing regimens, or as the use of its drug candidates becomes more widespread

 

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following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If such side effects become known later in development or upon approval, if any, such findings may harm Tarveda’s business, financial condition, results of operations and prospects significantly.

In addition, if any of Tarveda’s drug candidates receive marketing approval, and it or others later identify undesirable side effects caused by treatment with such drug, a number of potentially significant negative consequences could result, including:

 

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regulatory authorities may withdraw approval of the drug;

 

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Tarveda may be required to recall a product or change the way the drug is administered to patients;

 

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regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

 

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Tarveda may be required to implement a Risk Evaluation and Mitigation Strategy (“REMS”) or create a medication guide outlining the risks of such side effects for distribution to patients;

 

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additional restrictions may be imposed on the marketing or promotion of the particular product or the manufacturing processes for the product or any component thereof;

 

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Tarveda could be sued and held liable for harm caused to patients;

 

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the drug could become less competitive; and

 

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Tarveda’s reputation may suffer.

Any of these events could prevent Tarveda from achieving or maintaining market acceptance of its drug candidates, if approved, and could significantly harm its business, financial condition, results of operations and prospects.

Interim, topline and preliminary data from Tarveda’s clinical trials that it announces or publishes from time to time may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, Tarveda may publicly disclose preliminary, interim or topline data from its clinical trials such as Phase 1 dose escalation data for PEN-866 presented at the European Society for Medical Oncology Congress held in Barcelona, Spain in September 2019, or the PEN-221 Phase 1 clinical data presented at the American Society of Clinical Oncology Annual Meeting held in Chicago, Illinois in June, 2018. These interim updates are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. Tarveda also makes assumptions, estimations, calculations and conclusions as part of its analyses of data, and Tarveda may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that it reports may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data it previously published. As a result, topline data should be viewed with caution until the final data are available. In addition, Tarveda may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that Tarveda may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse changes between interim data and final data could significantly harm its business and prospects. Further, additional disclosure of interim data by Tarveda or by its competitors in the future could result in stock price volatility.

 

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