How do high-cost mergers and acquisitions take place in the biopharmaceutical industry?
By filing a 14D-9 with the Securities and Exchange Commission, Zogenix of California provided an interesting blow-by-blow on how the company made the decision to sell to UCB of Brussels and the maneuvers UCB took to prevail over other interested parties. .
The purchase was unveiled two weeks ago and could cost up to $1.9 billion. The impetus for the move was Zogenix’s epilepsy drug Fintepla, a potential blockbuster the FDA approved in June 2020 for Dravet syndrome. He is also under priority review for another rare and serious form of epilepsy, Lennox-Gastaut syndrome.
The deal was strategic for UCB, which has four epilepsy drugs on the market but lost market exclusivity in the United States in March for the most successful, Vimpat, which outsold the other three handsets.
UCB contacted Zogenix in July last year, but only after another company, identified in the SEC filing as “Party A”, entered into talks with Zogenix about acquiring the marketing rights to Fintepla. . UCB’s discussions with Zogenix were also limited to securing the rights to market the drug.
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A few weeks after UCB’s approach, another major player in the pharmaceutical industry – identified in the filing as “Party B” – also contacted Zogenix in an attempt to obtain the rights to commercialize Fintepla in the United States. United or buy the company.
Zogenix CEO Stephen Farr has ruled out the possibility of selling the company. But at a regular board meeting a month later, on Sept. 15, management discussed Zogenix’s “capital needs and capital-raising alternatives,” according to the filing. In addition, the board heard from its financial advisor, BofA Securities, who provided an overview of “biotech capital markets and recent mergers and acquisitions activity”.
On September 23, 2021, UCB offered to buy Zogenix for $20.50 per share. After meeting to discuss the offer, the company informed UCB that the price was “materially insufficient,” according to the filing. Zogenix closed trading that day at $16.26.
On October 6, 2021, UCB increased the offer to $23.00 per share. On the same day, a Zogenix executive told a Party A executive that another company had expressed interest in acquiring Zogenix.
Then, last November, Party B pulled out of talks with Zogenix, saying its assessment of the company had been “put on hold due to the prioritization of other company initiatives.”
Shortly after, Party A told Zogenix that they were evaluating the company with a view to making an offer. Then came another improved offer from UCB – $23 per share plus an additional $2 per share for each of the two incentives – if Fintepla is still an orphan drug when approved by the EU and sales of the drug reach 700 million dollars in 2026.
On December 7, 2021, Party A offered $21.50 per share, all in upfront cash. Then a bidding war ensued, with each day bringing a new development, all detailed in the filing.
And finally, on December 21, the day Party A came up with its final offer – $25 per share plus $1 per share if two conditional value rights were met – UCB and Zogenix reached an exclusivity agreement for four weeks.
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This allowed the companies to finalize their deal, which amounted to $26 per share, a 72% premium to the company’s 30-day average stock price and a premium of 66 .2% over Zogenix’s closing price the day before the announcement. public on January 19. The deal also includes $2 per share if Fintepla gains EU approval for Lennox-Gastaut Syndrome by 2023.
How did Zogenix executives make the deal? Farr will receive $4.55 million and COO Ashish Sagrolikar will receive $3.10 million. Zogenix’s other executive vice presidents – Chief Financial Officer Michael Smith, General Counsel Shawnte Mitchell, Chief Medical Officer Bradley Galer and Chief Development Officer Gail Farfel will each receive between $1.53 million and $1.93 million. dollars.