UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement
Under Section 14(d)(4) of the Securities Exchange Act of 1934
RECEPTOS, INC.
(Name of
Subject Company)
RECEPTOS, INC.
(Name of
Person Filing Statement)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
756207106
(CUSIP Number
of Class of Securities)
Faheem Hasnain
President and Chief Executive Officer
Receptos, Inc.
3033
Science Park Road, Suite 300
San Diego, California 92121
(858) 652-5700
(Name, address and telephone number of person authorized to receive notices and
communications on behalf of the persons filing statement)
With copies to:
Charles K. Ruck
R. Scott Shean
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
(714) 540-1235
¨ |
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
TABLE OF CONTENTS
i
Item 1. |
Subject Company Information. |
Name and Address.
The name of the subject company is Receptos, Inc., a Delaware corporation (the Company). The address of the Companys
principal executive office is 3033 Science Park Road, Suite 300, San Diego, California 92121. The telephone number of the Companys principal executive office is (858) 652-5700.
Securities.
The title of the class of
equity securities to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with any exhibits attached hereto, this
Schedule 14D-9) relates is the Companys common stock, par value $0.001 per share (the Common Stock). As of July 27, 2015, there were 31,606,369 shares of Common Stock
outstanding.
Item 2. |
Identity and Background of Filing Person. |
Name and Address.
The name, address and telephone number of the Company, which is the person filing this
Schedule 14D-9 and the subject company, are set forth in Item 1 above under the heading Name and Address.
Tender Offer.
This Schedule 14D-9 relates to the tender offer by Strix Corporation, a Delaware corporation (Purchaser) and a wholly owned subsidiary of Celgene Corporation, a Delaware corporation (Parent),
to purchase any and all of the issued and outstanding shares of Common Stock (the Company Shares) other than any Company Shares that are owned immediately prior to the commencement of the Offer (as defined below) by Parent, Purchaser,
the Company or any of their wholly owned subsidiaries, at a purchase price of $232.00 per Company Share (the Offer Price), net to the seller thereof in cash, without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated July 28, 2015 (as amended or supplemented from time to time, the Offer to Purchase), and in the related Letter of Transmittal (which, together with the Offer to Purchase, as each may be amended or
supplemented from time to time, constitute the Offer). The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, the Schedule TO) filed by Parent and Purchaser
with the Securities and Exchange Commission (the SEC) on July 28, 2015. The Offer to Purchase and a form of the Letter of Transmittal are filed as Exhibits (a)(1) and (a)(2), respectively, hereto and are incorporated by
reference herein.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 14, 2015, by and among
Parent, Purchaser and the Company (as it may be amended or supplemented from time to time, the Merger Agreement). The Merger Agreement provides that, among other things, subject to the satisfaction or waiver of certain conditions,
following completion of the Offer, and in accordance with the General Corporation Law of the State of Delaware, as amended (the DGCL), Purchaser will be merged with and into the Company (the Merger). Following the
consummation of the Merger, the Company will continue as the surviving corporation (the Surviving Corporation) as a wholly owned subsidiary of Parent. The Merger will be effected under Section 251(h) of the DGCL, which provides that
following consummation of a successful tender offer for a public corporation, and subject to certain statutory provisions, if the acquiror holds at least the amount of shares of each class of stock of the acquired corporation that would otherwise be
required to approve a merger of the acquired corporation, and the stockholders that did not tender their shares in the tender offer receive the same consideration for their stock in the merger as was payable in the tender offer, the acquiror can
effect a merger without the action of the stockholders of the acquired corporation. Accordingly, if Purchaser consummates the Offer, the Merger Agreement contemplates that the parties will effect the closing of the Merger without a vote of the
stockholders of the Company in accordance with Section 251(h) of the DGCL.
1
The Merger Agreement includes a remedy of specific performance and is not subject to a financing
condition. The obligation of Purchaser to purchase the Company Shares validly tendered pursuant to the Offer and not validly withdrawn prior to the expiration of the Offer is subject to the satisfaction or waiver of a number of conditions set forth
in the Merger Agreement, including (i) that there shall have been validly tendered and not validly withdrawn a number of Company Shares that, when added to the Company Shares then owned by Purchaser, represents at least a majority of all then
outstanding Company Shares, (ii) the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), (iii) the absence of any law or order by any
government, court or other governmental entity that would make illegal or otherwise prohibit the Offer or the Merger, (iv) the accuracy of the representations and warranties contained in the Merger Agreement, (v) compliance with covenants
contained in the Merger Agreement, (vi) there not having been a material adverse effect with respect to the Company that is continuing and (vii) the Merger Agreement shall not have been terminated in accordance with its terms.
At the effective time of the Merger (the Effective Time), by virtue of the Merger and without any action on the part of the
holders of any Company Shares, each outstanding Company Share (other than any Company Shares (A) owned immediately prior to the commencement of the Offer by Parent, Purchaser or the Company or any wholly owned subsidiary of Parent, Purchaser or
the Company, (B) irrevocably accepted for purchase pursuant to the Offer and (C) held by stockholders who have properly and validly perfected their appraisal rights under Delaware law) will be canceled and converted into the right to
receive an amount in cash equal to the Offer Price, without interest and less any applicable withholding taxes. In addition, at the Effective Time, (i) each outstanding option to purchase Company Shares (each, a Company Option) will
be canceled and converted into the right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal to the product of (A) the excess, if any, of (1) the Offer Price over (2) the exercise
price per share of such Company Option, and (B) the number of Company Shares underlying such Company Option, and (ii) each outstanding Company restricted stock unit award (each, a Company RSU Award) will be canceled and
converted into the right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal to the product of (A) the Offer Price, and (B) the number of Company Shares underlying such Company RSU
Award immediately prior to the Effective Time. To the extent a Company Option or Company RSU Award is unvested as of the Effective Time, the corresponding cash amount will be paid on the later of the Effective Time and December 31, 2015 (the
Anniversary Date), subject to the former award holders continued service through such date (except that such amount will be paid earlier upon a termination of employment without cause, for good reason (i.e., a constructive
termination) or due to such former award holders death or disability or if the former award is subject to earlier vesting pursuant to the original terms thereof). Any Company Option or Company RSU Award that is vested or held by a non-employee
member of the board of directors of the Company (the Company Board) will be paid as soon as reasonably practicable (but not later than the first payroll period) after the Effective Time. The Merger Agreement is summarized in the Offer to
Purchase in Section 11 under the heading Merger Agreement. The summary of the Merger Agreement set forth in the Offer to Purchase and any summary of provisions of the Merger Agreement set forth herein do not purport to be complete
and each is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit (e)(1) hereto and is incorporated herein by reference. The expiration date of the Offer is 12:00 midnight, New York City time, at
the end of the day on Monday, August 24, 2015, subject to extension in certain circumstances set forth in the Merger Agreement and described in the Offer to Purchase.
Parent has formed Purchaser for the purpose of effecting the Offer and the Merger. The Offer to Purchase states that Parents and
Purchasers principal executive offices are located at 86 Morris Avenue, Summit, New Jersey, 07901. Their telephone number at this location is (908) 673-9000.
The Company has made information relating to the Offer available online at receptos.com and the Company has filed this Schedule 14D-9 and Parent and Purchaser have filed the Schedule TO with the SEC, and these documents are available free of charge at the website maintained by the SEC at www.sec.gov.
2
Item 3. |
Past Contacts, Transactions, Negotiations and Agreements. |
Except
as described in this Schedule 14D-9 or in the excerpts from the Companys Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 17, 2015 (the 2015 Proxy Statement),
which excerpts are filed as Exhibit (e)(21) to this Schedule 14D-9 and incorporated herein by reference, to the knowledge of the Company as of the date of this
Schedule 14D-9, there are no material agreements, arrangements or understandings, nor any actual or potential conflict of interest between the Company or its affiliates, on the one hand, and (1) the
Company, its executive officers, directors or affiliates or (2) Parent, Purchaser or their respective executive officers, directors or affiliates, on the other hand. The excerpts filed as Exhibit (e)(21) to this Schedule 14D-9 are incorporated herein by reference, and include the information from the following sections of the 2015 Proxy Statement: Proposal 1: Election of Directors, Executive
Officers, Information Regarding the Board of Directors and Corporate Governance, Security Ownership of Certain Beneficial Owners and ManagementSection 16(a) Beneficial Ownership Reporting Compliance,
Executive Compensation, Director Compensation and Transactions with Related Persons. Any information contained in the excerpts from the 2015 Proxy Statement incorporated by reference herein shall be deemed
modified or superseded for purposes of this Schedule 14D-9 to the extent that any information contained in this Schedule 14D-9 modifies or supersedes such
information.
Arrangements with Purchaser and Parent.
Merger Agreement
The summary of the
Merger Agreement and the description of the conditions to the Offer contained in the Offer to Purchase are incorporated by reference herein. Such summary and description are qualified in their entirety by reference to the Merger Agreement.
The Merger Agreement has been included to provide investors and stockholders with information regarding the terms of the agreement. It is not
intended to provide any other factual information about Parent, Purchaser or the Company. The representations, warranties and covenants contained in the Merger Agreement were made only as of specified dates for the purposes of such agreement, were
solely for the benefit of the parties to such agreement and may be subject to qualifications and limitations agreed upon by such parties. In particular, in reviewing the representations, warranties and covenants contained in the Merger Agreement and
discussed in the foregoing description, it is important to bear in mind that such representations, warranties and covenants were negotiated with the principal purpose of allocating risk between the parties, rather than establishing matters as facts.
Such representations, warranties and covenants may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by
disclosures set forth in a confidential disclosure letter that was provided by the Company to Parent but is not filed with the SEC as part of the Merger Agreement. Investors and stockholders should not rely on such representations, warranties and
covenants as characterizations of the actual state of facts or circumstances described therein without consideration of the entirety of the factual disclosures about the Company, Parent or Purchaser made in this
Schedule 14D-9, the Schedule TO or reports filed with the SEC. Information concerning the subject matter of such representations, warranties and covenants, which do not purport to be accurate as of
the date of this Schedule 14D-9, may have changed since the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties public disclosures.
Nondisclosure Agreement
On
August 28, 2013, the Company and Parent entered into a non-disclosure agreement (as amended on August 28, 2014 and March 6, 2015, the Nondisclosure Agreement), pursuant to which, among other things, Parent agreed, subject
to certain exceptions, to keep confidential certain non-public information about the Company in connection with the consideration of a potential business relationship and/or transaction between the parties. The summary of the Nondisclosure Agreement
contained in the Offer to Purchase in Section 11 under the heading Nondisclosure Agreement is incorporated by reference herein.
3
Support Agreement
On July 14, 2015, each of Faheem Hasnain, the Companys President and Chief Executive Officer, and William H. Rastetter, Ph.D., the
Companys Chairman of the Board, acting solely in their respective capacities as stockholders of the Company, entered into a Tender and Support Agreement with Parent and Purchaser (the Support Agreement), pursuant to which each
agreed, among other things, to tender Company Shares held by them pursuant to the Offer. The summary of the Support Agreement contained in the Offer to Purchase in Section 11 under the heading Tender and Support Agreement is
incorporated herein by reference. Such summary does not purport to be complete and is qualified in its entirety by reference to the Support Agreement, which is filed as Exhibit (e)(2) hereto and is incorporated herein by reference.
Arrangements with Current Executive Officers and Directors of the Company.
The Companys executive officers and members of the Company Board may be deemed to have certain interests in the Offer and the Merger and
related transactions that may be different from or in addition to those of the Companys stockholders generally. The Company Board was aware of those interests and considered them, among other matters, in reaching its decision to approve the
Merger Agreement and related transactions.
Consideration for Company Shares Tendered Pursuant to the Offer
If the directors and executive officers of the Company who own Company Shares tender their Company Shares for purchase pursuant to the Offer,
they will receive the same Offer Price on the same terms and conditions as the other stockholders of the Company. As of July 28, 2015, the directors and executive officers of the Company and their affiliates beneficially owned in the aggregate
1,903,156 Company Shares, which for purposes of this subsection excludes any Company Shares issuable upon exercise or settlement of Company Options and Company RSU Awards (each, as defined below) held by such individuals. If the directors and
executive officers and their affiliates were to tender all of such Company Shares pursuant to the Offer and those Company Shares were accepted for purchase and purchased by Purchaser, the directors and executive officers and their affiliates would
receive an aggregate of $441,532,192 in cash, without interest, less any required withholding taxes. For a description of the treatment of Company Options and Company RSU Awards held by the directors and executive officers of the Company, see below
under the heading Merger AgreementEffect of the Merger on Stock Awards.
4
The following table sets forth, as of July 28, 2015, the cash consideration that each
executive officer and director and his or her affiliates would be entitled to receive in respect of outstanding Company Shares beneficially owned by him, her or it (excluding Company Shares underlying Company Options and Company RSU Awards),
assuming such individual or his or her affiliate were to tender all of his, her or its outstanding Company Shares pursuant to the Offer and those Company Shares were accepted for purchase and purchased by Purchaser. Each of Mr. Hasnain and
Dr. Rastetter has agreed, solely in their respective capacities as stockholders of the Company, to tender all of his Company Shares, as well as any additional Company Shares that he may acquire (pursuant to the exercise of Company Stock Options
or the vesting of Company RSUs Awards), to Purchaser in the Offer. See Item 3 above under the heading Arrangements with Purchaser and ParentSupport Agreement.
|
|
|
|
|
|
|
|
|
Name |
|
Number of Shares |
|
|
Consideration Payable in Respect of Shares |
|
Executive Officers |
|
|
|
|
|
|
|
|
Faheem Hasnain |
|
|
384,409 |
|
|
$ |
89,182,888 |
|
Graham Cooper |
|
|
|
|
|
|
|
|
Sheila Gujrathi, M.D. |
|
|
120,661 |
|
|
$ |
27,993,352 |
|
Marcus F. Boehm, Ph.D. |
|
|
145,656 |
|
|
$ |
33,792,192 |
|
Robert J. Peach, Ph.D. |
|
|
131,297 |
|
|
$ |
30,460,904 |
|
Christian Waage |
|
|
|
|
|
|
|
|
Chrysa Mineo |
|
|
104,692 |
|
|
$ |
24,288,544 |
|
Non-Employee Directors |
|
|
|
|
|
|
|
|
William H. Rastetter, Ph.D. |
|
|
332,234 |
|
|
$ |
77,078,288 |
|
Kristina Burow |
|
|
18,346 |
|
|
$ |
4,256,272 |
|
Mary Lynne Hedley, Ph.D. |
|
|
|
|
|
|
|
|
Richard A. Heyman, Ph.D. |
|
|
|
|
|
|
|
|
Erle T. Mast |
|
|
300 |
|
|
$ |
69,600 |
|
Mary Szela |
|
|
|
|
|
|
|
|
S. Edward Torres |
|
|
665,561 |
|
|
$ |
154,410,152 |
|
Merger Agreement
Effect of the Merger on Stock Awards
Stock Options. Pursuant to the Merger Agreement, at the Effective Time, each Company Option will be canceled and converted into the
right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal to the product of (A) the excess, if any, of (1) the Offer Price over (2) the exercise price per share of such Company
Option, and (B) the number of Company Shares underlying such Company Option. To the extent the Company Option is unvested as of the Effective Time, the corresponding cash amount will be paid on the later of the Effective Time and the
Anniversary Date, subject to the former award holders continued service through such date (except that such amount will be paid earlier upon a termination of employment without cause, for good reason (i.e., a constructive termination)
or due to such former award holders death or disability, or if the former award is subject to earlier vesting pursuant to the original terms thereof). Any Company Option that is vested or held by a non-employee member of the Company Board will
be paid in a lump sum as soon as reasonably practicable (but not later than the first payroll period) after the Effective Time.
5
The table below sets forth information regarding the Company Options held by each of the
Companys executive officers and directors as of July 28, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Number of Vested Stock Options |
|
|
Value of Vested Stock Options |
|
|
Number of Unvested Stock Options |
|
|
Value of Unvested Stock Options |
|
|
Total Value of Vested and Unvested Stock Options |
|
Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faheem Hasnain |
|
|
179,908 |
|
|
$ |
38,408,061 |
|
|
|
203,032 |
|
|
$ |
42,256,025 |
|
|
$ |
80,664,086 |
|
Graham Cooper |
|
|
76,821 |
|
|
$ |
16,668,816 |
|
|
|
106,789 |
|
|
$ |
22,963,626 |
|
|
$ |
39,632,442 |
|
Sheila Gujrathi, M.D. |
|
|
97,018 |
|
|
$ |
20,453,326 |
|
|
|
114,466 |
|
|
$ |
23,665,728 |
|
|
$ |
44,119,054 |
|
Marcus F. Boehm, Ph.D. |
|
|
51,295 |
|
|
$ |
10,835,125 |
|
|
|
61,816 |
|
|
$ |
12,727,930 |
|
|
$ |
23,563,055 |
|
Robert J. Peach, Ph.D. |
|
|
51,295 |
|
|
$ |
10,835,125 |
|
|
|
61,816 |
|
|
$ |
12,727,930 |
|
|
$ |
23,563,055 |
|
Christian Waage |
|
|
36,545 |
|
|
$ |
7,433,017 |
|
|
|
112,900 |
|
|
$ |
23,156,511 |
|
|
$ |
30,589,528 |
|
Chrysa Mineo |
|
|
41,962 |
|
|
$ |
8,688,996 |
|
|
|
58,316 |
|
|
$ |
11,803,416 |
|
|
$ |
20,492,412 |
|
Non-Employee Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William H. Rastetter, Ph.D. |
|
|
22,977 |
|
|
$ |
4,817,888 |
|
|
|
5,223 |
|
|
$ |
1,113,700 |
|
|
$ |
5,931,588 |
|
Kristina Burow |
|
|
22,977 |
|
|
$ |
4,817,888 |
|
|
|
5,223 |
|
|
$ |
1,113,700 |
|
|
$ |
5,931,588 |
|
Mary Lynne Hedley, Ph.D. |
|
|
9,223 |
|
|
$ |
1,806,055 |
|
|
|
10,967 |
|
|
$ |
2,130,559 |
|
|
$ |
3,936,614 |
|
Richard A. Heyman, Ph.D. |
|
|
6,266 |
|
|
$ |
1,206,330 |
|
|
|
12,534 |
|
|
$ |
2,413,046 |
|
|
$ |
3,619,376 |
|
Erle T. Mast |
|
|
21,933 |
|
|
$ |
4,595,276 |
|
|
|
6,267 |
|
|
$ |
1,336,312 |
|
|
$ |
5,931,588 |
|
Mary Szela |
|
|
6,266 |
|
|
$ |
1,206,330 |
|
|
|
12,534 |
|
|
$ |
2,413,046 |
|
|
$ |
3,619,376 |
|
S. Edward Torres |
|
|
22,977 |
|
|
$ |
4,817,888 |
|
|
|
5,223 |
|
|
$ |
1,113,700 |
|
|
$ |
5,931,588 |
|
Restricted Stock Units. Pursuant to the Merger Agreement, at the Effective Time, each outstanding
Company RSU Award will be canceled and converted into the right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal to the product of (A) the Offer Price, and (B) the number of Company
Shares underlying such Company RSU Award immediately prior to the Effective Time. To the extent the Company RSU Award is unvested as of the Effective Time, the corresponding cash amount will be paid on the later of the Effective Time and the
Anniversary Date, subject to the former award holders continued service through such date (except that such amount will be paid earlier upon a termination of employment without cause, for good reason (i.e., a constructive termination)
or due to such former award holders death or disability, or if the former award is subject to earlier vesting pursuant to the original terms thereof). Any Company RSU Award that is vested or held by a non-employee member of the Company Board
will be paid in a lump sum as soon as reasonably practicable (but not later than the first payroll period) after the Effective Time.
6
The table below sets forth information regarding the Company RSU Awards held by each of the
Companys executive officers and directors as of July 28, 2015.
|
|
|
|
|
|
|
|
|
Name |
|
Number of RSUs Held |
|
|
Value of RSUs |
|
Executive Officers |
|
|
|
|
|
|
|
|
Faheem Hasnain |
|
|
65,000 |
|
|
$ |
15,080,000 |
|
Graham Cooper |
|
|
21,000 |
|
|
$ |
4,872,000 |
|
Sheila Gujrathi, M.D. |
|
|
25,000 |
|
|
$ |
5,800,000 |
|
Marcus F. Boehm, Ph.D. |
|
|
14,000 |
|
|
$ |
3,248,000 |
|
Robert J. Peach, Ph.D. |
|
|
14,000 |
|
|
$ |
3,248,000 |
|
Christian Waage |
|
|
19,000 |
|
|
$ |
4,408,000 |
|
Chrysa Mineo |
|
|
14,000 |
|
|
$ |
3,248,000 |
|
Non-Employee Directors |
|
|
|
|
|
|
|
|
William H. Rastetter, Ph.D. |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Kristina Burow |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Mary Lynne Hedley, Ph.D. |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Richard A. Heyman, Ph.D. |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Erle T. Mast |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Mary Szela |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
S. Edward Torres |
|
|
7,400 |
|
|
$ |
1,716,800 |
|
Continuing Employees
The Merger Agreement provides that for a period of 12 months following the Effective Time (or, if earlier, the date of termination of the
applicable continuing employee), each employee of the Company and any of its subsidiaries who, as of the date of the closing of the Merger (the Closing Date), continues to be employed with the Company or any of its subsidiaries, will
receive (i) the same level of base salary or wage rate, as applicable, and annual cash bonus opportunity, in each case, that is not less favorable than the level of base salary or wage rate (as applicable) and annual bonus opportunity that were
provided to such employee immediately prior to the Effective Time and (ii) other compensation and benefits (excluding benefits provided pursuant to a defined benefit pension plan) that are either, in Parents sole discretion (a) taken
as a whole, at least as favorable in the aggregate as the other compensation and benefits provided to such employee immediately prior to the Effective Time, or (b) taken as a whole, substantially similar to the other compensation and benefits
provided to similarly situated employees of Parent and its affiliates (other than the Company or the Surviving Corporation).
The Merger
Agreement further provides that to the extent that a Plan (as defined in the Merger Agreement) or other employee benefit plan or other compensation or severance arrangement of the Surviving Corporation, any of its subsidiaries or Parent is made
available to any continuing employee on or following the Effective Time, the Surviving Corporation will credit each continuing employee for all service with the Company and its subsidiaries prior to the Effective Time for purposes of eligibility to
participate, vesting and entitlement to vacation/paid time off benefits where length of service is relevant, in any case, to the same extent as such continuing employee was entitled prior to the Effective Time under any similar Plan. Service need
not be credited (i) to the extent that it would result in duplication of coverage or benefits, (ii) under a newly established plan for which prior service is not taken into account or with respect to any equity-based compensation or
(iii) if such credit results in benefit accruals under a defined benefit plan.
The Merger Agreement further provides that Parent
will (a) ensure that each continuing employee will be immediately eligible to participate in all employee benefit plans sponsored by the Surviving Corporation and its subsidiaries to the extent that coverage under the plan replaces coverage
under a comparable Company benefit plan in which the employee participated immediately prior to the Effective Time, (b) for purposes of employee benefit plans sponsored by the Surviving Corporation and its subsidiaries which provide medical,
dental,
7
pharmaceutical, vision and/or disability benefits to continuing employees from and after the Effective Time, (1) cause all waiting periods,
pre-existing condition exclusions, evidence of insurability requirements and actively-at-work requirements to be waived for continuing employees and their covered dependents to the extent such waiting periods,
pre-existing condition exclusions, evidence of insurability requirements and actively-at-work requirements were waived or satisfied under the comparable Plan, and (2) provide credit for eligible expenses incurred by continuing employees and
their covered dependents under a Plan in the portion of the plan year prior to the Effective Time for purposes of satisfying applicable deductible, coinsurance and maximum out-of-pocket requirements and (c) credit the accounts of continuing
employees under any flexible spending plans sponsored by the Surviving Corporation and its subsidiaries with any unused balance in the continuing employees account under the applicable Company flexible spending plan to the extent that the
continuing employee commenced participation in a flexible spending plan sponsored by the Surviving Corporation and its subsidiaries in the same year as the unused balance was credited under the applicable Company flexible spending plan.
Pursuant to the Merger Agreement, unless otherwise requested by Parent at least ten days prior to the Closing Date, the Company will terminate
its 401(k) plan prior to the Closing Date, in which case Parent will cause each continuing employee who participated in the Companys 401(k) plan to be allowed to participate in a 401(k) plan sponsored or maintained by Parent or an affiliate,
and will credit such continuing employees for eligibility and vesting service for all periods of service with the Company to the extent credited under the Companys 401(k) plan. In addition, Parent will accept rollover contributions of eligible
rollover distributions, including loans, from the Companys 401(k) plan.
Other Compensatory Arrangements with Executive Officers and Directors
Pursuant to their employment agreements, Mr. Waage and Ms. Mineo are generally entitled to the same severance payments and
benefits as our named executive officers, other than Mr. Hasnain. Such severance payments and benefits are described in the 2015 Proxy Statement under Executive Compensation, which is incorporated herein by reference as Exhibit
(e)(21).
In addition, the Company has entered into arrangements with each of the Companys executive officers and
Dr. Rastetter, pursuant to which, if the Merger is consummated and an excise tax is imposed on the executive officer or Dr. Rastetter (as applicable) as a result of any compensation or benefits provided to the individual in connection with
the Merger, the Company will pay or reimburse the individual an amount equal to such excise tax plus any taxes resulting from such payment or reimbursement.
Please also see the description of certain severance payments and benefits below in Item 8 under the heading Additional
InformationNamed Executive Officer Golden Parachute Compensation.
Director and Officer Indemnification and Insurance
Section 102(b)(7) of the DGCL allows a corporation, by a provision of its certificate of incorporation, to eliminate the personal
liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of the DGCL, or engaged in a transaction from which the director derived an improper personal benefit. The Company
has included in its Amended and Restated Certificate of Incorporation (the Charter) a provision to limit or eliminate the personal liability of its directors to the fullest extent permitted by the DGCL, as it now exists or may in the
future be amended.
Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of the corporation in related capacities with other entities against amounts paid and expenses incurred in connection with an action or
8
proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful. The Company has included in its bylaws (the Bylaws) provisions that
require the Company to provide the foregoing indemnification to directors and officers to the fullest extent authorized by the DGCL, as it now exists or may in the future be amended, and to the extent authorized by the Bylaws. The Company has also
included in its Bylaws a provision that permits the Company, at the discretion of the Company Board, to provide the foregoing indemnification to non-officer employees to the fullest extent authorized by the
DGCL, as it now exists or may in the future be amended. In addition, pursuant to its Bylaws, the Company is required to advance expenses incurred by or on behalf of any director in connection with any such proceeding upon receipt of a written
request and an undertaking by or on behalf of such director to repay the amount so advanced if it shall ultimately be determined that such director is not entitled to be indemnified by the Company against such expenses. With respect to officers,
Section 6.3 of the Bylaws provides that the advancement of expenses incurred by or on behalf of any officer in connection with any such proceeding shall not be made if the Company Board determines that the facts then known clearly and
convincingly demonstrate that the officer acted in bad faith or in a manner that the officer did not believe to be in or not opposed to the best interests of the Company. Pursuant to authorization by the Company Board, the Company has entered into
indemnification agreements (Indemnification Agreements) with each of its directors and certain of its officers that provide greater protection than that which is provided by the Charter and Bylaws. The Indemnification Agreements provide,
among other things, that the Company will indemnify the director or officer (the Indemnitee) to the fullest extent permitted by law (subject to certain exceptions and exclusions) if the Indemnitee is or was a party to or is threatened to
be made a party to any proceeding (i) by reason of the fact that Indemnitee is or was a director, officer, employee, agent, fiduciary, joint venturer, partner, manager or other official of the Company, or a subsidiary of the Company (an
Agent) or (ii) by reason of the fact that the Indemnitee is or was serving at the request of the Company as an Agent of another corporation, partnership, joint venture, trust or other enterprise, in each case whether or not such
proceeding is an action by or in the right of the Company, against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Corporation.
In addition, and subject to certain limitations,
the Indemnification Agreements provide for the advancement of expenses incurred by Indemnitee in connection with any proceeding, and the reimbursement to the Company of the amounts advanced to the extent that it is ultimately determined that the
Indemnitee is not entitled to be indemnified by the Company. The Indemnification Agreements do not exclude any other rights to indemnification or advancement of expenses to which the Indemnitee may be entitled pursuant to the Charter or Bylaws.
The foregoing summary of the Indemnification Agreements is qualified in its entirety by reference to the Indemnification Agreements, the form
of which is filed as Exhibit (e)(4) hereto, and is incorporated herein by reference.
The Merger Agreement provides for
indemnification and insurance rights in favor of the Companys current and former directors and officers (including any person who becomes a director or officer of the Company or any of its subsidiaries prior to the Effective Time) (the
Indemnified Persons). Specifically, Parent and the Surviving Corporation and its subsidiaries as of the Effective Time have agreed to honor and fulfill in all respects the obligations of the Company and its subsidiaries under
(i) the indemnification agreements between the Company or any of its subsidiaries and the Indemnified Persons and (ii) the indemnification, expense advancement and exculpation provisions in any certificate of incorporation or bylaws or
comparable organizational document of the Company or any of its subsidiaries in effect on the date of the Merger Agreement. Furthermore, from and after the Effective Time, Parent and the Surviving Corporation and its subsidiaries as of the Effective
Time will ensure that, for a period of six years after the Effective Time, the certificates of incorporation or bylaws (and other similar organizational documents) of the Surviving Corporation
9
and its subsidiaries contain provisions with respect to indemnification, expense advancement and exculpation that are no less favorable than those provisions in the certificates of incorporation
or bylaws or other similar organizational documents of the Company or any of its subsidiaries, in effect as of the date of the Merger Agreement.
Additionally, from and after the Effective Time, for a period of six years after the Effective Time, the Surviving Corporation and its
subsidiaries as of the Effective Time will indemnify and hold harmless each Indemnified Person from and against any costs, fees and expenses (including reasonable attorneys fees and investigation expenses), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any claim, proceeding, investigation or inquiry, to the extent such claim, proceeding, investigation or inquiry arises directly or indirectly out of or pertains directly or
indirectly to (i) any action or omission or alleged action or omission in such Indemnified Persons capacity as a director, officer, employee or agent of the Company or any of its subsidiaries or other affiliates (regardless of whether
such action or omission, or alleged action or omission, occurred prior to or at the Effective Time), or (ii) any of the transactions contemplated by the Merger Agreement. Furthermore, during such six-year period after the Effective Time, the
Surviving Corporation and its subsidiaries as of the Effective Time will advance all costs, fees and expenses (including reasonable attorneys fees and investigation expenses) incurred by such Indemnified Person in connection with any such
claim, proceeding, investigation or inquiry upon receipt of an undertaking by such Indemnified Person to repay such advances if it is ultimately decided that such Indemnified Person is not entitled to indemnification under the Merger Agreement.
From and after the Effective Time, Parent and the Surviving Corporation have agreed to maintain in effect for a period of six years after the
Effective Time, in respect of acts or omissions occurring prior to or at the Effective Time, policies of directors and officers liability insurance covering the persons currently covered by the Companys existing directors and
officers liability insurance policies (Current Company D&O Insurance), on terms with respect to the coverage and amounts that are no less favorable than those of the Current Company D&O Insurance; however, Parent and the
Surviving Corporation will not be obligated to pay annual premiums for such insurance policies in excess of 300% of the annual amount paid by the Company for coverage during its current coverage period. Prior to the Effective Time, the Company may
purchase a six-year tail prepaid policy on the Current Company D&O Insurance which, in lieu of the immediately foregoing Parent and Surviving Corporation obligations, Parent and the Surviving Corporation will maintain in full force
and effect and continue to honor their respective obligations thereunder for so long as such tail policy is in full force and effect.
Item 4. |
The Solicitation or Recommendation. |
Recommendation of
the Company Board.
At a meeting of the Company Board held on July 14, 2015, the Company Board unanimously: (i) determined
that the Offer and the Merger are in the best interests of the Company and its stockholders, (ii) approved and declared advisable the Merger Agreement and approved the Offer, the Merger, the other transactions contemplated by the Merger
Agreement and all other actions or matters necessary or appropriate to give effect to the foregoing and (iii) resolved to recommend that the Companys stockholders accept the Offer and tender all of their Company Shares pursuant to the
Offer.
Accordingly, and for the other reasons described in more detail below, the Company Board hereby recommends that the
Companys stockholders accept the Offer and tender all of their Company Shares pursuant to the Offer.
A copy of the letter to
the Companys stockholders communicating the Company Boards recommendation is filed as Exhibit (a)(9) to this Schedule 14D-9 and is incorporated herein by reference.
10
Background and Reasons for the Company Boards Recommendation.
Background of the Offer
The Company Board
and management continually evaluate the Companys business and financial plans and prospects. As part of this evaluation, the Company Board and management have periodically considered strategic alternatives to enhance value to the
Companys stockholders. In particular, the Company Board and management have considered a number of potential partnering and licensing relationships and other strategic transactions, including at times exploring a potential sale of the Company
to enhance value to the Companys stockholders.
In May 2013, the Company completed its initial public offering of 5,933,277 Company
Shares at an offering price of $14.00 per share.
On August 14, 2013, the Company received an unsolicited, written, non-binding
proposal from a publicly traded pharmaceutical company (Party A) to acquire the Company for cash and contingent consideration based on the achievement of certain clinical trial, regulatory and commercial milestones relating to the
Companys product candidates. The closing price of the Common Stock on that day was $17.03 per Company Share.
Following receipt of
Party As proposal, on August 23, 2013, the Company entered into an engagement letter with Centerview Partners LLC (Centerview). The Company Board believed Centerview would be a valuable advisor in the consideration of
strategic alternatives based on Centerviews reputation and experience with respect to the pharmaceutical and biotechnology industries.
Also following receipt of Party As proposal, the Company engaged Latham & Watkins LLP (Latham & Watkins)
to act as its legal advisor in connection with the Companys consideration of Party As proposal and other potential strategic transactions. The Company Board and management believed Latham & Watkins would be a valuable advisor in
the Companys consideration of strategic alternatives based on Latham & Watkins expertise advising companies in the pharmaceutical industry.
In August and September 2013, at the direction of the Company Board, the Companys management and representatives of Centerview contacted
11 other publicly traded pharmaceutical and biotechnology companies, including Parent, to gauge their interest in pursuing a strategic transaction with the Company. However, only discussions with Parent advanced beyond a preliminary stage. The
Company entered into the Nondisclosure Agreement with Parent on August 28, 2013 and began sharing non-public information with Parent.
From August 2013 through October 2013, each of Party A and Parent conducted due diligence and continued discussions with the Company regarding
a potential acquisition. During the course of these discussions, Parent indicated that it would be willing to consider moving forward with a transaction that included a significant contingent component.
Ultimately, Party A withdrew from discussions with the Company regarding a potential acquisition. Parent and the Company continued
negotiations, including exchanging drafts of a merger agreement. On October 7, 2013, Parent informed the Company that it was not going to further pursue a transaction at that time. On that date, the closing price of the Common Stock was $29.97
per Company Share.
On December 5, 2013, the Company announced that it had completed a pre-planned interim analysis of the Phase 2
portion of RADIANCE, its Phase 2/3 trial of ozanimod in RMS, the approval of the Data Monitoring Committee to initiate the Phase 3 portion of the study and the decision of the Company to initiate the Phase 3 portion of RADIANCE. The closing price of
the Common Stock on this day was $27.64 per Company Share, compared to a closing price of $22.70 per Company Share on the prior trading day.
After the close of the U.S. markets on June 9, 2014, the Company announced that the Phase 2 portion of the RADIANCE trial of ozanimod in
RMS met its primary endpoint of reduction in MRI brain lesion activity with
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statistical significance after 24 weeks of treatment. The Company also reported that safety and tolerability data from the trial provided support for a differentiated, potential best-in-class
profile. The closing price of the Common Stock on June 10, 2014, the first trading day following this announcement, was $39.94 per Company Share, compared to a closing price of $29.20 per Company Share on the prior trading day.
After the close of the U.S. markets on October 27, 2014, the Company announced that TOUCHSTONE, the Phase 2 trial of ozanimod in
ulcerative colitis, met its primary endpoint and all secondary endpoints with statistical significance in patients on the 1 mg dose ozanimod in the 8-week induction period, with safety data consistent with the favorable profile observed in the
RADIANCE Phase 2 trial in RMS. Based on those results, the Company announced plans to initiate a Phase 3 program in 2015 to compare the safety and efficacy of the 1 mg dose of ozanimod to placebo in patients with ulcerative colitis and a plan
to initiate a Phase 2 study of ozanimod for the treatment of Crohns disease. The closing price of the Common Stock on October 28, 2014, the first trading day following this announcement, was $95.76 per Company Share, compared to a closing
price of $67.74 per Company Share on the prior trading day.
On November 10, 2014, the Company Board held a meeting to discuss
potential strategic alternatives for the Company. The Company Board discussed the potential risks and benefits of continuing to pursue its operational plan as a standalone company, including the risk that the FDA or other governmental authorities
would not approve ozanimod or the Companys other product candidates, the risks associated with the outcome of future clinical studies, the risks associated with building a commercial infrastructure and launching the Companys first
commercial product and the execution and other risks associated with transforming a biotechnology company focused on product development into a profitable pharmaceutical company with sufficient scale and commercial execution ability to compete
effectively in a competitive industry. The Company Board also discussed various strategies and issues associated with potential partnering relationships for ozanimod, including the effect of a partnership on commercial success, the maximization of
sales, the possibility of a partnership being limited to selected indications or regions, and potential partners, as well as relative attractiveness of a sale of the Company, including the likelihood of such a sale. The Company Board determined
that, in order to retain strategic flexibility in the near-term, the Company should pursue a capital raise through an equity offering.
Later in November 2014, the Company completed a public offering of 4,140,000 Company Shares at an offering price of $100.00 per share.
Also in November 2014, Mr. Hasnain was separately approached by representatives of both Parent and another publicly traded pharmaceutical
company (Party B) to discuss various strategic opportunities with the Company, including a potential acquisition of the Company. During these discussions, the representatives of both Parent and Party B indicated that they were interested
in potentially pursuing an acquisition of, or other strategic transaction with, the Company.
From November 2014 to April 2015, the
Company had discussions with, and sought proposals from, 13 publicly traded pharmaceutical companies, including Party A, Party B and Parent, regarding a possible partnership or licensing opportunity with the Company. However, except as described
below, none of these discussions advanced beyond a preliminary stage.
During December 2014 and January 2015, the Company and Parent
continued to discuss the possibility of pursuing a strategic transaction. On February 17, 2015, the Company received from Parent an oral proposal to acquire the Company for an approximate 65% premium over the Companys trading price at the
time. The closing price of the Common Stock on February 13, 2015, the last day of trading before the proposal was received, was $115.83 per Company Share, implying a proposed price of approximately $191.12 per Company Share.
On February 20, 2015, the Company Board held a telephonic meeting, with members of management and representatives of Centerview
participating. Members of the Companys management updated the Company
12
Board on the recent discussions with Parent and Party B regarding a potential collaboration or strategic transaction involving the Company, as well as regarding the process for identifying a
potential partnership or licensing opportunity.
On February 25, 2015, the Company received from Parent a written, non-binding
preliminary indication of interest to acquire the Company for $193.00 per Company Share in cash, representing a premium of approximately 60% to the closing price of the Company Shares on February 24, 2015 of $120.59 per share. Parent indicated
that its indication of interest would be subject to satisfactory completion of due diligence, Parent board approval and successful negotiation of a definitive agreement. Following receipt of the indication of interest, the Companys management,
at the direction of the Board, invited Parent to engage in further due diligence and delivered to Parent the initial draft of the Merger Agreement.
Following the receipt of Parents indication of interest, at the direction of the Company Board, the Companys management and
representatives of Centerview contacted six other publicly traded pharmaceutical companies believed by management and the Company Board to be potential acquirors of the Company, based on their anticipated interest in an acquisition of the Company,
their perceived ability to offer an acceptable value and their ability to finance such an acquisition. Of those six, all but Party B declined to pursue discussions with the Company regarding the acquisition of the Company.
On February 26, 2015, the Company received from Party B a written, non-binding proposal to acquire the Company for between $175.00 and
$185.00 per Company Share in cash.
At the direction of the Company Board, Mr. Hasnain informed Party B that it would need to
significantly increase its offer price before it was provided any of the Companys confidential information. The closing price of the Common Stock on the last day of trading before this proposal was received, February 25, 2015, was $122.33
per Company Share.
On February 27, 2015, the Company Board held a telephonic meeting, with members of management and representatives
of Centerview and Latham & Watkins participating, to discuss a potential collaboration or strategic transaction involving the Company. Members of management updated the Company Board on the written proposals received from Parent and Party
B. Representatives of Latham & Watkins reviewed with the Company Board its fiduciary duties when considering strategic transactions. Representatives of Centerview reviewed with the Company Board financial matters and informed the Company
Board of additional parties that had been contacted about a potential collaboration or strategic transaction with the Company. Following discussion, the Company Board determined that the proposals from Parent and Party B each provided a
sufficient basis for further negotiation and due diligence, but instructed management to attempt to negotiate with each of Parent and Party B for a higher price per Company Share. Also at this meeting, the Company Board instructed management to
negotiate a new engagement letter with Centerview, given that Centerviews prior engagement letter with the Company had expired.
Effective February 27, 2015, the Company entered into a second engagement letter with Centerview.
On March 2, 2015, the Company received from Party B a revised written, non-binding proposal to acquire the Company for up to $225.00 per
Company Share. The closing price of the Common Stock on the last day of trading before this proposal was received, February 27, 2015, was $126.64 per Company Share. Following receipt of the proposal, the Company invited Party B to engage in
further due diligence and delivered to Party B a draft merger agreement.
On March 6, 2015, the Company and Parent entered into an
amendment to the Nondisclosure Agreement to impose customary standstill obligations on Parent. The Company and Party B had previously entered into a substantially identical amendment to their confidentiality agreement.
13
On March 6, 16 and 23, 2015, the Company Board held three separate meetings, with members of
management and representatives of Centerview and Latham & Watkins participating. At each of these meetings, members of the Companys management updated the Company Board regarding discussions with Parent and Party B and on due
diligence activities with respect to each party, and discussed strategy and next steps with the Company Board. Also at these meetings, representatives of Latham & Watkins reviewed with the Company Board certain regulatory considerations
with respect to a possible transaction with Parent and Party B. At the conclusion of the March 23, 2015 meeting, the Company Board directed management to request that Parent and Party B submit final acquisition proposals by April 2, 2015.
During March 2015, Parent continued its due diligence review of the Company, including a face-to-face due diligence session with the
Companys management on March 23, 2015.
On March 27, 2015, Party B withdrew its proposal to acquire the Company. The
closing price of the Common Stock on that day was $147.43 per Company Share.
On April 1, 2015, various media outlets reported rumors
that the Company was for sale and that different potential acquirors were considering bids. The trading price of the Common Stock on this day increased to as high as $202.96 per Company Share during trading hours before closing at $173.44 per
Company Share, compared to a closing price of $164.89 per Company Share on the previous day.
On April 1, 2015, the Company Board
also held a telephonic meeting, with members of management and representatives of Latham & Watkins participating. Members of management updated the Company Board on recent discussions with Parent and Party B, including regarding Party
Bs withdrawal of its proposal, and informed the Company Board of recent media inquiries regarding a potential strategic transaction involving the Company.
Also on April 1, 2015, Parent informed the Company that it needed more time to consider a possible transaction with the Company. Between
mid-April through the first week of May 2015, Parent had a number of discussions with Mr. Hasnain to provide updates on Parents timeline and to facilitate Parents ongoing evaluation of a potential strategic transaction with the
Company.
On April 3, 2015, the Company Board held a telephonic meeting, with members of management and representatives of Centerview
and Latham & Watkins participating, to discuss the status of partnering discussions and of discussions with Parent.
On
April 7, 2015, the Company received a term sheet from a publicly traded pharmaceutical company (Party C) related to a potential collaboration in commercializing ozanimod. The term sheet proposed that, as part of a worldwide
commercialization collaboration for all indications of ozanimod, Party C would pay the Company an upfront cash payment, as well as contingent development and regulatory milestone payments. Party C and the Company would evenly split expenses
associated with commercialization, as well as profits.
Before the open of the U.S. markets on April 16, 2015, the Company announced
that in the maintenance period of the Phase 2 TOUCHSTONE trial of ozanimod in ulcerative colitis, the trial met all of its efficacy endpoints with statistical significance in patients on the 1 mg dose of ozanimod after 32 weeks of treatment. The
Company also announced that the overall safety and tolerability of ozanimod was consistent with the results of TOUCHSTONEs induction period and those observed in the RADIANCE Phase 2 trial in RMS, and continued to support the potential for
orally administered ozanimod to improve the treatment paradigm for ulcerative colitis patients. The closing price of the Common Stock on April 16, 2015, the first trading day following this announcement, was $167.97 per Company Share, compared
to a closing price of $158.32 per Company Share on the previous day.
14
On April 16, 2015, the Company also received a term sheet from Party A related to a
potential collaboration in commercializing ozanimod. The term sheet proposed that, as part of a worldwide exclusive development and commercialization collaboration for all indications of ozanimod, Party A would pay the Company an upfront cash
payment, as well as contingent development, regulatory and sales milestone payments. Certain strategic rights accrued to the Company under the proposed collaboration would terminate in the event that the Company was acquired by a third-party
strategic competitor of Party A.
On April 22, 2015, the Company Board held a meeting to discuss objectives and strategy regarding
the potential commercialization of ozanimod, as well as the term sheets received from Party A and Party C. The Company Board again discussed the risks and challenges associated with continuing to pursue its operational plan as a standalone company.
Following discussion, the Company Board decided not to pursue a collaboration with either Party A or Party C on their proposed terms because the Company Board believed these proposals did not appropriately reflect the value of the Companys
prospects, would not match the potential value that could be achieved as a standalone company and would potentially limit the strategic flexibility of the Company in the future, including the potential for a sale of the Company at an attractive
valuation. The Company Board also discussed recent developments that would affect whether the Company should continue to seek a partner in the commercialization of ozanimod, including the difficulty of finding a partner candidate that had relevant
commercial experience in the particular ozanimod indications, the difficulty in finding a cultural fit, and the Companys enhanced ability to commercialize ozanimod on its own due to its increased cash resources from its recent financings and
its enhanced ability to access capital at lower costs due to the increased trading price of the Common Stock. The Company Board determined to continue to be receptive to potential offers for strategic transactions while also preparing to
commercialize ozanimod without a partner.
On May 1, 2015, representatives of Parent and the Company had a call to discuss certain
due diligence matters in connection with the evaluation of a potential strategic transaction.
At the end of the first week of May, Parent
informed the Company that it was suspending discussions regarding a possible transaction with the Company at that time.
On May 22,
2015, the Company sent letters to Parent and Party B requesting the return or destruction of any confidential information of the Company that was in their possession.
On June 10, 2015, various media outlets reported that several publicly traded pharmaceutical companies were considering bids to acquire
the Company. The closing price of the Common Stock that day was $180.52 per Company Share, compared to an opening price of $160.09 per Company Share.
On June 18, 2015, representatives of Party B met with Mr. Hasnain and expressed renewed interest in acquiring the Company. However,
the representatives of Party B indicated that they would likely only be able to offer $200.00 per Company Share in cash, plus unspecified additional contingent consideration, compared to their previous offer of $225.00 per Company Share on
March 2, 2015.
On June 18, 2015, Robert Hugin, the Chief Executive Officer of Parent, also contacted Mr. Hasnain to
express interest in renewing discussions regarding a potential business combination involving the Company and Parent. Mr. Hugin indicated that a representative of Parent would contact or meet Mr. Hasnain the following week to discuss an
offer. The closing price of the Common Stock on June 17, 2015, the day before these discussions, was $177.48 per Company Share.
On
June 23, 2015, the Company Board held a telephonic meeting, with members of management participating. Mr. Hasnain informed the Company Board of recent communications between himself and representatives of Parent and Party B. The Company
Board and members of management also discussed strategic alternatives, including continuing its operational plan as a standalone company.
15
On June 24, 2015, representatives of Parent orally conveyed an indication of interest to
Mr. Hasnain to acquire to the Company for $207.00 per Company Share in cash. Mr. Hasnain responded that Parent would need to increase its proposed price per Company Share. The closing price of the Common Stock on June 23, 2015, the
day before this discussion, was $189.65 per Company Share.
On June 25 and June 26, 2015, Mr. Hasnain and representatives
of Parent continued to discuss the financial terms of Parents indication of interest.
On June 26, 2015, the Company received
from Parent a written, non-binding proposal to acquire the Company for $230.00 per Company Share in cash subject to the completion of due diligence, Parent board approval and successful negotiation of a definitive agreement. The proposed transaction
would not be subject to any financing condition. In its proposal, Parent expressed a desire to effectuate the acquisition via tender offer so that a transaction would close as promptly as practicable. Under separate cover, Parent delivered to the
Company a revised draft of the Merger Agreement that the Company had originally delivered to Parent on February 25, 2015. The closing price of the Common Stock on June 25, 2015, the day before the proposal was received, was $183.54 per
Company Share.
On June 27, 2015, the Company Board held a telephonic meeting, with members of management and representatives of
Centerview and Latham & Watkins participating, to discuss Parents proposal. Mr. Hasnain reported on the acquisition proposal received from Parent on June 26, 2015 and the Companys prior history of discussions with
Parent. Representatives of Centerview reviewed with the Company Board the financial aspects of the proposal. Representatives of Latham & Watkins reviewed with the Company Board its fiduciary duties when considering strategic transactions.
The Company Board and management discussed Parents proposal as well as the Companys future prospects as a standalone entity and other strategic alternatives available to the Company. The Company Board, management and representatives of
Centerview discussed the responses received from potential acquirors following the process started in November 2014, all of which had either declined to participate in the process or, with respect to Party B, ultimately indicated that its maximum
offer would include contingent consideration and be less than the amount now proposed by Parent. The Company Board discussed with management and representatives of Centerview whether the Company should contact any additional potential acquirors or
conduct any further pre-signing market check. As part of this discussion, the Company Board acknowledged the prior rumors and speculation in the media in April 2015 and June 2015 about a sale of the Company and the fact that no other potential
acquirors had contacted the Company or its representatives following this speculation and the Company Board indicated its belief that if any party had an interest in acquiring the Company the party would have already contacted the Company or its
representatives. The Company Board further discussed the potential advantages of conducting a broader market check, including the potential to obtain a higher value transaction and negotiate more favorable terms. The Company Board also considered
the disadvantages of conducting a broader market check, including that it could result in Parent withdrawing its bid, it would create additional work force disruption that could negatively impact the Companys operations and it may delay the
timing of, and thereby increase the execution risks of, a transaction with Parent. Following discussion, the Company Board decided against reaching out to any additional potential acquirors, concluding that the risks of conducting a broader market
check outweighed any potential advantages, particularly given the lack of interest already expressed by potential acquirors.
At the
conclusion of its June 27 meeting, the Company Board directed management to attempt to negotiate for a higher price per Company Share from Parent.
On June 28, 2015, Mr. Hasnain spoke to a representative of Parent and informed him that Parent would need to increase its proposed
price per Company Share.
On June 30, 2015, following additional discussions between representatives of the Company and Parent,
Parent orally increased its offer to acquire the Company to $232.00 per Company Share, which represented a premium of approximately 92.4% over the closing price on February 24, 2015, the last day prior to Parents first
16
written indication of interest of 2015 to acquire the Company, and an increase of approximately 20.2% over Parents written indication of interest of February 25, 2015 to acquire the
Company for $193.00 per Company Share.
On July 1, 2015, the Company Board held a meeting to discuss the most recent offer from
Parent of $232.00 and Parents initial comments to the Companys draft of the Merger Agreement. Representatives of Centerview and Latham & Watkins were present, as were members of the Companys management. Representatives of
Latham & Watkins reviewed with the Company Board Parents comments to the draft Merger Agreement. The Company Board focused specifically on certain principal issues raised by the draft Merger Agreement, including the covenant relating
to the ability of the Company Board to change its recommendation with respect to the Offer, the parties respective obligations to consummate the transaction and the proposed termination fee payable by the Company (the Company Termination
Fee). The Company Board discussed the certainty of closing the proposed merger and the effect on any potential competing proposal that might be received after signing the Merger Agreement. Representatives of Latham & Watkins also
reviewed with the Company Board its fiduciary duties with respect to the proposed sale of the Company to Parent and led a discussion on the potential sale process. Representatives of Centerview then reviewed with the Company Board certain financial
matters. The Company Board instructed management and representatives of Latham & Watkins to negotiate terms in the Merger Agreement that were more favorable to the Company.
On July 2, 2015, Latham & Watkins sent a revised draft of the Merger Agreement to Proskauer Rose LLP, outside counsel to Parent
(Proskauer), reflecting input from management and the Company Board.
During the week of July 5, 2015, the Company and
Latham & Watkins worked with Parent and its advisors to facilitate the completion of Parents due diligence, including face-to-face due diligence sessions on July 9 and 10.
Also during the week of July 5, 2015, at the direction of the Company and Parent, respectively, representatives of Latham &
Watkins and Proskauer negotiated various provisions of the draft Merger Agreement, including the covenant relating to the parties respective obligations to consummate the transaction, the proposed Company Termination Fee and a termination fee
payable by Parent (the Parent Termination Fee) in the event the Merger Agreement were to be terminated for failure to obtain regulatory approvals.
On the afternoon of July 10, 2015, the Company Board held a telephonic meeting, with members of management and representatives of
Centerview and Latham & Watkins participating, to discuss the status of negotiations with Parent. Representatives of Latham & Watkins discussed the key terms being negotiated in the Merger Agreement, and again reviewed with the
Company Board its fiduciary duties in the context of a sale of the Company. Representatives of Centerview reviewed with the Company Board a financial analysis of the per Company Share consideration offered by Parent.
On the evening of July 10, 2015, Latham & Watkins sent a revised draft of the Merger Agreement to Proskauer, reflecting input
from the Companys management and the Company Board.
Between July 12 and July 14, 2015, representatives of
Latham & Watkins, with input from the Company, negotiated satisfactory resolution of all of the open issues in the Merger Agreement with Proskauer. As part of this resolution, the parties agreed that (i) the Company Termination Fee
would be equal to $230.0 million, or approximately 2.95% of the aggregate equity value of the transaction, (ii) the Parent Termination Fee would be equal to $400.0 million, or approximately 5.1% of the aggregate equity value of the transaction,
and (iii) if the Merger Agreement were to be terminated under the same circumstances giving rise to payment of the Parent Termination Fee, Parent would be obligated to loan the Company up to an aggregate principal amount of $350.0 million
if requested by the Company (the Termination Loan).
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On the afternoon of July 14, 2015, the Company Board held a special telephonic meeting, with
members of management and representatives of Centerview and Latham & Watkins participating, to consider approval of the proposed Merger Agreement with Parent. Also at this meeting,
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representatives of Latham & Watkins again reviewed with the Company Board its fiduciary duties when considering the proposed transaction; |
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management and representatives of Latham & Watkins reviewed with the Company Board the outcome of the negotiations with Parent and the revised terms and conditions of the proposed Merger Agreement; and
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representatives of Centerview reviewed with the Company Board Centerviews financial analysis of the $232.00 per Company Share cash consideration, and rendered to the Company Board an oral opinion, which was
subsequently confirmed by delivery of a written opinion dated July 14, 2015, to the effect that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations
upon the review undertaken in preparing its opinion, the $232.00 per Company Share cash consideration to be paid to the holders of Company Shares (other than as specified in such opinion) pursuant to the Merger Agreement was fair, from a financial
point of view, to such holders. For a detailed discussion of Centerviews opinion, please see below under the heading Opinion of the Companys Financial Advisor. |
The Company Board considered various reasons to approve the Merger Agreement, including certain countervailing factors. After discussions with
its financial and legal advisors and members of the Companys senior management, and in light of the reasons considered, the Company Board unanimously (i) determined that it is in the best interests of the Company and its stockholders to
enter into, and approved and declared advisable, the Merger Agreement, (ii) approved the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its covenants and agreements contained in the Merger
Agreement and the consummation of the Offer and the Merger upon the terms and subject to the conditions contained in the Merger Agreement, and (iii) resolved, subject to the terms and conditions set forth in the Merger Agreement, to recommend
that the holders of Company Shares accept the Offer and tender their Company Shares to Purchaser pursuant to the Offer. For a detailed description of the various reasons considered by the Company Board, please see below under the heading
Reasons for the Recommendation of the Company Board.
At the recommendation of the compensation committee of the Company
Board, the Company Board also approved certain compensatory matters related to the Merger to provide for the payment or reimbursement of excise taxes imposed on any compensation or benefits provided to certain of the Companys officers or
chairman of the Company Board in connection with the Merger.
On the afternoon of July 14, 2015, Parent, Purchaser and the Company
executed and delivered the Merger Agreement. Following the close of U.S. stock markets on July 14, 2015, the Company and Parent issued a joint press release announcing the execution of the Merger Agreement.
On July 28, 2015, Purchaser commenced the Offer.
Reasons for the Recommendation of the Company Board
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and recommending that the
Companys stockholders accept the Offer and tender all of their Company Shares pursuant to the Offer, the Company Board consulted with the Companys senior management, Latham & Watkins and Centerview and considered and analyzed a
range of factors. The Company Board also consulted with Latham & Watkins regarding the Company Boards fiduciary duties, legal due diligence matters and the terms of the Merger Agreement and related agreements. Based on these
consultations, considerations and analyses, and the factors discussed below, the Company Board concluded that entering into the Merger Agreement with Parent and Purchaser would yield the highest value reasonably available for the Companys
stockholders and is fair to, and in the best interests of, the Companys stockholders.
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The Company Board believed the following material factors and benefits supported its unanimous
determination and recommendation:
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Premium to Market Price. The Company Board considered the relationship of the Offer Price to the current and historical market prices of the Company Shares. The Offer Price to be paid in cash for each Company
Share would provide stockholders of the Company with the opportunity to receive a premium over the current and historical market price of the Company Shares. The Company Board reviewed historical market prices, volatility and trading information
with respect to the Company Shares, including the fact that the Offer Price represents: |
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a premium of approximately 17.7% over the closing price per share of the Company Shares on the NASDAQ Global Market on July 13, 2015, the trading day before the execution of the Merger Agreement; and
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a premium of approximately 44.6% over the closing price per share of the Company Shares on the NASDAQ Global Market on June 9, 2015, the trading day before media speculation that the Company was involved in
discussions regarding a potential sale. |
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Certainty of Value. The Company Board considered that the consideration to be received by the Companys stockholders in the Offer and the Merger will consist entirely of cash, which provides liquidity and
certainty of value to stockholders. The Company Board believed this certainty of value was compelling compared to the long-term value creation potential of the Companys business taking into account the risks of remaining independent and
pursing the Companys current business and financial plans. |
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The Prospects of the Company. The Company Board considered the Companys prospects and risks if the Company were to remain an independent company. The Company Board discussed the Companys current
business and financial plans, including the risks and uncertainties associated with achieving and executing upon the Companys business and financial plans in the short- and long-term, as well as the general risks of market conditions that
could reduce the price of the Common Stock. Among the potential risks identified by the Company Board were: |
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the risk that the FDA will not approve ozanimod or RPC4046, or any product candidates that the Company may develop, or any related restrictions, limitations or warnings in the label of an approved product;
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the risks associated with the outcome of future clinical studies and the possibility that future clinical study results will not be consistent with those previously observed; |
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the Companys ability to successfully manufacture, distribute and commercialize new products; |
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the Companys ability, and the ability of the Companys in-licensors, to obtain and maintain patent coverage for its product candidates, including risks related to pending and any future patent infringement
lawsuits, re-examinations and the risk of generic products competing with any products marketed by the Company; |
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the net losses that the Company has incurred since its inception and the Companys expectation that it will continue to incur significant continued net losses for at least the next several years; |
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the competitive nature of the Companys industry and target markets; |
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the Companys financial resources relative to its competitors and the significant amount of capital (and incremental stockholder dilution) that the Company would need to raise to fund ongoing clinical trials,
commercialization of its pipeline products and continuance of its existing research and development operations; |
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the execution risks associated with transforming a biotechnology company focused on product development into a profitable specialty pharmaceutical company with sufficient scale and sales execution ability to compete
effectively; |
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the potential impact on the Companys business of government healthcare reform; and |
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general risks and market conditions that could reduce the market price of the Company Shares. |
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Potential Strategic Alternatives. The Company Board considered possible alternatives to the acquisition by Parent (including the possibility of continuing to operate the Company as an independent entity and the
desirability and perceived risks of that alternative), potential benefits to the Companys stockholders of these alternatives and the timing and likelihood of effecting such alternatives, as well as the Company Boards assessment that none
of these alternatives was reasonably likely to create greater value for the Companys stockholders, taking into account risks of execution as well as business, competitive, industry and market risks. The Company Board also considered the risk
that Parent could withdraw its proposal if the Company delayed in proceeding with Parents Offer. |
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Value. The Company Board believed that the Offer Price of $232.00 per Company Share represents full and fair value for the Company Shares, taking into account the Company Boards familiarity with the
business strategy, assets and prospects, and the relative certainty of the consideration in cash for the Offer as compared to forecasted financial results. |
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Negotiations with Parent and Terms of the Merger Agreement. The Company Board believed that the Offer Price of $232.00 per Company Share represented the highest value reasonably obtainable for the Company Shares,
based on the progress and outcome of its negotiations with Parent. The Company Board believed, based on these negotiations and discussions, that the Offer Price was the highest price per Company Share that Parent was willing to pay and that the
Merger Agreement contained the most favorable terms to the Company to which Parent was willing to agree, as the Company Board was aware of a number of changes in the terms and conditions of the Merger Agreement from the version initially proposed by
Parent that were favorable to the Company. Terms of the Merger Agreement supporting the Company Boards belief that the agreement was advisable and in the best interest of the Companys stockholders include: |
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Ability to Respond to Certain Unsolicited Acquisition Proposalsthe Merger Agreement permits the Company Board, in furtherance of the exercise of its fiduciary duties under Delaware law, to engage in
negotiations or discussions with any third-party that has made an unsolicited and written acquisition proposal that could reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement) if the Company Board reasonably
determines in good faith that the failure to take such actions would be inconsistent with its fiduciary duties. |
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Change of Recommendationeither in the event that the Company receives a Superior Proposal or in the event of an Intervening Event (as defined in the Merger Agreement), the Company Board has the right, prior
to the purchase of Company Shares pursuant to the Offer, to withhold, withdraw, amend, modify or qualify, in a manner adverse to Parent or Purchaser, its recommendation to its stockholders of the Offer, provided that the Company Board may not make
such an adverse recommendation change unless (i) the Company notifies Parent in writing at least four business days before the adverse recommendation change of its intention to take such action, and provides Parent with certain information
relating to the Superior Proposal or Intervening Event, (ii) the Company Board determines, after consultation with legal counsel, that the failure to do so would be inconsistent with its fiduciary duties and (iii) in the case of a Superior
Proposal, such proposal did not involve a material breach by the Company or its subsidiaries of its non-solicitation and change-of-recommendation obligations. After delivering notice to Parent of the potential recommendation change, the Company must
consider in good faith any revisions to the terms of the Merger Agreement made by Parent, and if such terms are revised, then the Company Board may not change its recommendation unless it again finds that the failure to do so would still be
inconsistent with its fiduciary duties. |
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Fiduciary Termination Rightthe Company Board may terminate the Merger Agreement to accept a Superior Proposal if (i) the Company has materially complied with requirements set forth in the previous
bullet and (ii) prior to such termination, the Company pays to Parent the Company Termination Fee of $230.0 million, which the Company Board believed was reasonable and would not likely deter competing bids. |
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Conditions to Consummation of the Offer and Merger; Likelihood of Closingthe fact that Parents obligations to purchase Company Shares in the Offer and to close the Merger are subject to a limited
number of conditions and the Company Boards belief that the transactions contemplated by the Merger Agreement are reasonably likely to be consummated. |
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Parent Termination Fee and Parent Termination Loanthe fact that, if the Merger Agreement is terminated in certain circumstances where regulatory approvals have not been obtained, Parent must pay the Company
the Parent Termination Fee of $400.0 million and, at the election of the Company, loan the Company an aggregate amount of up to $350.0 million. The Company Board believed these remedies would provide the Company with sufficient resources to
commercialize ozanimod in the event the Merger Agreement were to be terminated under the prescribed circumstances and the Company were to continue operations as a stand-alone entity. |
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Extension of Offer Periodthe fact that that the Purchaser must if requested by the Company extend the Offer for successive extension periods of 15 business days each (or any longer period as may be approved
in advance by the Company) if at any scheduled expiration of the Offer any condition to the Offer has not been satisfied or waived (other than the minimum condition set forth in the Merger Agreement, which may not be waived by Purchaser), and must
extend the Offer twice (and for further extension periods, in its sole and absolute discretion) for a period of ten business days for each extension period if all conditions to the Offer other than the minimum condition have been met.
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No Financing Conditionthe representation of Parent and Purchaser that they would have access to sufficient cash resources to pay the amounts required to be paid under the Merger Agreement and that the Offer
and the Merger are not subject to a financing condition. |
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Timing and Likelihood of Completion. The Company Board considered the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement, including the structure of the transaction as
a cash tender offer for all outstanding Company Shares, with the anticipated result of allowing stockholders to receive the Offer Price in a relatively short time frame, followed by the Merger in which stockholders who do not validly exercise
appraisal rights will receive the same consideration received by those stockholders who tender their Company Shares in the Offer. The Company Board considered that the potential for closing in a relatively short time frame could also reduce the
amount of time in which the Companys business would be subject to the potential uncertainty of closing and related disruption. |
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Business Reputation of Parent. The Company Board considered the business reputation, management and financial resources of Parent, including the financing commitment that Parent obtained from JPMorgan Chase Bank,
N.A. and J.P. Morgan Securities LLC with respect to the transaction. The Company Board believed that these factors supported the conclusion that a transaction with Parent and Purchaser could be completed relatively quickly and in an orderly manner.
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Opinion of the Companys Financial Advisor. The oral opinion of Centerview rendered to the Company Board on July 14, 2015, which was subsequently confirmed by delivery of a written opinion dated such
date, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the $232.00
per Company Share cash consideration to be paid to the holders of Company Shares (other than as specified in such opinion) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described below
under the heading Opinion of the Companys Financial Advisor. |
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Support Agreement. The Company Board considered the fact that the Support Agreement entered into by Mr. Hasnain and Dr. Rastetter terminates in the event that the Merger Agreement is terminated or the
Company Board changes its recommendation to its stockholders of the Offer, which would permit Mr. Hasnain and Dr. Rastetter, in their respective capacities as stockholders of the Company, to support a transaction involving a Superior
Proposal. |
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Appraisal Rights. The Company Board considered the fact that the stockholders that do not tender their Company Shares in the Offer and who properly exercise their appraisal rights under Delaware law will be
entitled to such appraisal rights in connection with the Merger. |
The Company Board also considered a variety of
uncertainties, risks and other potentially negative factors in its deliberations concerning the Offer, the Merger and the other transactions contemplated by the Merger Agreement, including the following:
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No Stockholder Participation in Future Growth or Earnings. The nature of the Offer and the Merger as a cash transaction means that the stockholders will not participate in future earnings or growth of the Company
and will not benefit from any appreciation in value of the combined company. |
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Risk Associated with Failure to Complete the Offer and Consummate the Merger. The possibility that the transactions contemplated by the Merger Agreement, including the Offer and the Merger, might not be
consummated, and the fact that if the Offer and the Merger are not consummated, (i) the Companys directors, senior management and other employees will have expended extensive time and effort and will have experienced significant
distractions from their work during the pendency of the transaction, (ii) the Company will have incurred significant transaction costs, (iii) the Companys continuing business relationships with consultants, licensors, business
partners and employees may be adversely affected, (iv) the trading price of the Company Shares could be adversely affected and (v) the markets perceptions of the Companys prospects could be adversely affected.
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Interim Restrictions on Business Pending the Completion of the Offer and the Merger. Restrictions on the conduct of the Companys business prior to the Effective Time due to pre-closing covenants in the
Merger Agreement whereby the Company agreed that it will carry on its business in the ordinary course of business consistent with past practice and, subject to specified exceptions, will not take a number of actions related to the conduct of its
business without the prior written consent of Parent, which may have a material adverse effect on the Companys ability to respond to changing market and business conditions in a timely manner or at all. |
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No Solicitation and Termination Fee. Subject to certain exceptions, the Merger Agreement precludes the Company from soliciting alternative acquisition proposals, and requires the Company to pay to Parent a
termination fee in certain circumstances. |
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Effects of Transaction Announcement. The effect of the public announcement of the Merger Agreement, including effects on the Companys stock price, and the Companys ability to attract and retain key
management and scientific and research personnel, during the pendency of the transactions contemplated by the Merger Agreement, as well as the likelihood of litigation in connection with the Merger. |
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Timing Risks. The amount of time it could take to complete the Offer and the Merger, including the risk that Parent and Purchaser might not receive the necessary regulatory approvals or clearances to complete the
Offer or the Merger or that governmental authorities could attempt to condition their approvals or clearances of the Offer or the Merger on one or more of the parties compliance with certain terms or conditions which may cause one or more of
the Offer conditions not to be satisfied. |
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Taxable Consideration. The gains from the consideration to be received by the stockholders in the Offer and the Merger will be taxable to the stockholders for federal income tax purposes. |
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Potential Conflicts of Interest. The fact that certain of the Companys officers and directors may have interests in the transactions contemplated by the Merger Agreement that are different from, or in
addition to, those of the Companys other stockholders. |
The foregoing discussion of the information and factors
considered by the Company Board is intended to be illustrative and not exhaustive, but includes the material reasons and factors considered by the Company Board in reaching its conclusions and recommendation in relation to the Offer, the Merger, the
Merger Agreement and the transactions proposed thereby. In view of the wide variety of reasons and factors considered and the complexity
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of these matters, the Company Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the specified factors considered in reaching its determinations or
the reasons for such determinations. Individual directors may have given differing weights to different factors or may have had different reasons for their ultimate determination. In addition, the Company Board did not reach any specific conclusion
with respect to any of the factors or reasons considered. Instead, the Company Board conducted an overall analysis of the factors and reasons described above and determined in its business judgment that, in the aggregate, the potential benefits of
the Offer and the Merger to the stockholders of the Company outweighed the risks or potential negative consequences.
Opinion of the Companys
Financial Advisor
The Company retained Centerview as financial advisor to the Company Board in connection with the Offer, the Merger
and the other transactions contemplated by the Merger Agreement, which are collectively referred to in this summary of Centerviews opinion as the Transaction. In connection with this engagement, the Company Board requested that
Centerview evaluate the fairness, from a financial point of view, to the holders of Shares (other than any Company Shares held by Parent, Purchaser or the Company or any wholly owned subsidiary of Parent, Purchaser or the Company, any stockholders
who are entitled to and who properly exercise appraisal rights under the Delaware law, and Company Shares held by any affiliate of Parent, which are collectively referred to as Excluded Shares) of the $232.00 per Company Share cash
consideration (referred to in this summary of Centerviews opinion and under the heading Summary of Centerview Financial Analysis as the Consideration) proposed to be paid to such holders pursuant to the Merger
Agreement.
On July 14, 2015, Centerview rendered to the Company Board its oral opinion, subsequently confirmed in a written
opinion dated such date, to the effect that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken by Centerview in preparing its opinion, the
Consideration to be paid to the holders of Company Shares (other than Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.
The full text of Centerviews written opinion, dated July 14, 2015, which describes the assumptions made, procedures followed,
matters considered, and qualifications and limitations upon the review undertaken, is attached as Annex I and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety to
the full text of Centerviews written opinion attached as Annex I. Centerviews financial advisory services and opinion were provided for the information and assistance of the Company Board (in their capacity as directors and not in
any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerviews opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of Company Shares
(other than Excluded Shares) of the Consideration to be paid to such holders pursuant to the Merger Agreement. Centerviews opinion did not address any other term or aspect of the Merger Agreement or the Transaction and does not constitute a
recommendation to any stockholder of the Company as to whether or not such holder should tender Company Shares in connection with the Offer, or otherwise act with respect to the Transaction or any other matter.
The full text of Centerviews written opinion should be read carefully in its entirety for a description of the assumptions made,
procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.
In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other
things:
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an execution version of the Merger Agreement, dated July 14, 2015, referred to in this summary of Centerviews opinion as the Merger Agreement; |
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Annual Reports on Form 10-K of the Company for the years ended December 31, 2014 and 2013; |
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the Registration Statement on Form S-1 of the Company (Registration No. 333-193074) declared effective by the SEC on January 8, 2014 and the Registration Statement filed by the Company with the SEC pursuant to
Rule 462(b) on January 8, 2014; |
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certain Quarterly Reports on Form 10-Q of the Company; |
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certain publicly available research analyst reports for the Company; |
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certain other communications from the Company to its stockholders; and |
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certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including certain financial forecasts, analyses and projections relating to the
Company prepared by management of the Company and furnished to Centerview by the Company for purposes of Centerviews analysis, which are referred to in this summary of Centerviews opinion and under the heading Summary of Centerview
Financial Analysis as the Forecasts, and Certain Projections and which is collectively referred to in this summary of Centerviews opinion and under the heading Summary of Centerview Financial
Analysis as the Internal Data. |
Centerview also conducted discussions with members of the senior
management and representatives of the Company regarding their assessment of the Internal Data. In addition, Centerview reviewed publicly available financial and stock market data for the Company and compared that data with similar data for certain
other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly
available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.
Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal,
regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with the Companys consent, Centerview relied upon such information as being complete and accurate. In
that regard, Centerview assumed, at the Companys direction, that the Internal Data (including, without limitation, the Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the matters covered thereby and Centerview relied, at the Companys direction, on the Internal Data for purposes of Centerviews analysis and opinion. Centerview expressed no view or opinion as to the
Internal Data or the assumptions on which it was based. In addition, at the Companys direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or
otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the
Companys direction, that the final executed Merger Agreement would not differ in any respect material to its analysis or opinion from the execution copy reviewed by Centerview. Centerview also assumed, at the Companys direction, that the
Transaction will be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or
agreement, the effect of which would be material to Centerviews analysis or Centerviews opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the
Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerviews analysis or Centerviews opinion. Centerview did not evaluate and did not express any opinion
as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy,
insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.
Centerviews opinion expressed no view as to, and did not address, the Companys underlying business decision to proceed with or
effect the Transaction, or the relative merits of the Transaction as compared to any
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alternative business strategies or transactions that might be available to the Company or in which the Company might engage. Centerviews opinion was limited to and addressed only the
fairness, from a financial point of view, as of the date of Centerviews written opinion, to the holders of the Company Shares (other than Excluded Shares) of the Consideration to be paid to such holders pursuant to the Merger Agreement. For
purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Transaction, including, without limitation, the structure or
form of the Transaction, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or
any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or
any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of
the Company or any party, or class of such persons in connection with the Transaction, whether relative to the Consideration to be paid to the holders of the Company Shares (other than Excluded Shares) pursuant to the Merger Agreement or otherwise.
Centerviews opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerviews written
opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview written opinion. Centerviews opinion
does not constitute a recommendation to any stockholder of the Company as to whether or not such holder should tender Company Shares in connection with the Offer, or otherwise act with respect to the Transaction or any other matter.
Centerviews financial advisory services and its written opinion were provided for the information and assistance of the Company Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its
consideration of the Transaction. The issuance of Centerviews opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.
Summary of Centerview Financial Analysis
The following is a summary of the material financial analyses prepared and reviewed with the Company Board in connection with Centerviews
opinion, dated July 14, 2015. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the
financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges
resulting from any particular portion of the analyses summarized below should not be taken to be Centerviews view of the actual value of the Company. Some of the summaries of the financial analyses set forth below include information presented
in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview.
Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could
create a misleading or incomplete view of the processes underlying Centerviews financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Transaction. None of the Company, Parent, Purchaser or Centerview or any other person assumes responsibility if future results are
materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth
below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the
financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or
25
before July 13, 2015 (the last full trading day before the delivery of Centerviews opinion) and is not necessarily indicative of current market conditions. The implied per share equity
value ranges described below were based on the Companys fully diluted Company Shares outstanding as of July 13, 2015 calculated on a treasury stock method basis (taking into account outstanding in-the-money Company Options, Company RSU
Awards, and other equity awards) based on information provided by Company management.
Selected Public Company Analysis
Centerview reviewed and compared certain financial information for the Company to corresponding financial information for the following
publicly traded companies that Centerview deemed comparable, based on its experience and professional judgment, to the Company:
|
|
|
Agios Pharmaceuticals, Inc. |
|
|
|
Alnylam Pharmaceuticals, Inc. |
|
|
|
Celldex Therapeutics, Inc. |
|
|
|
Intercept Pharmaceuticals, Inc. |
|
|
|
Juno Therapeutics, Inc. |
|
|
|
Neurocrine Biosciences, Inc. |
|
|
|
Ultragenyx Pharmaceutical Inc. |
Although none of the selected companies is directly comparable
to the Company, the companies listed above were chosen by Centerview, among other reasons, because they are publicly traded development-stage biopharmaceutical companies with certain operational and business characteristics that, for purposes of
Centerviews analysis, may be considered similar to those of the Company.
Using publicly available information obtained from SEC
filings and FactSet (a data source containing historical and estimated financial data) as of July 13, 2015, Centerview calculated for each selected company, the companys enterprise value (calculated as the market value of common equity
(determined using the treasury stock method and taking into account outstanding in-the-money options, warrants, restricted stock units, and convertible securities) plus the book value of debt less cash, which is referred to, with respect to the
selected publicly traded companies, as Enterprise Value).
The results of this analysis are summarized as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25th Percentile |
|
|
Median |
|
|
75th Percentile |
|
Enterprise Value |
|
$ |
1,938 |
|
|
$ |
3,568 |
|
|
$ |
4,236 |
|
Applying the valuation range above and adding to it the Companys net cash balance estimated by the
Companys management as of July 10, 2015, resulted in an implied per Company Share equity value range for
26
the Common Stock of approximately $74.70 to $143.05. Centerview then compared this range to the Consideration of $232.00 per Company Share to be paid to the holders of Company Shares (other than
Excluded Shares) pursuant to the Merger Agreement.
Selected Precedent Transactions Analysis
Centerview reviewed and analyzed certain information relating to selected other transactions involving biopharmaceutical companies that
Centerview, based on its experience and judgment as a financial advisor, deemed relevant to consider in relation to the Company and the Transaction. These transactions were:
|
|
|
|
|
Date Announced |
|
Target |
|
Acquiror |
05/06/15 |
|
Synageva BioPharma Corp. |
|
Alexion Pharmaceuticals, Inc. |
03/30/15 |
|
Auspex Pharmaceuticals, Inc. |
|
Teva Pharmaceutical Industries Ltd. |
01/11/15 |
|
NPS Pharmaceuticals, Inc. |
|
Shire plc |
12/08/14 |
|
Cubist Pharmaceuticals, Inc. |
|
Merck & Co., Inc. |
12/02/14 |
|
Avanir Pharmaceuticals, Inc. |
|
Otsuka Pharmaceutical Co., Ltd. |
08/24/14 |
|
InterMune, Inc. |
|
Roche Holding A.G. |
04/07/14 |
|
Questcor Pharmaceuticals, Inc. |
|
Mallinckrodt plc |
11/11/13 |
|
ViroPharma Inc. |
|
Shire plc |
08/25/13 |
|
Onyx Pharmaceuticals, Inc. |
|
Amgen Inc. |
06/29/12 |
|
Amylin Pharmaceuticals, Inc. |
|
Bristol-Myers Squibb Company |
05/02/11 |
|
Cephalon, Inc. |
|
Teva Pharmaceutical Industries Ltd. |
05/16/10 |
|
OSI Pharmaceuticals, Inc. |
|
Astellas Pharma Inc. |
No company or transaction used in this analysis is identical or directly comparable to the Company or the
Transaction. The companies included in the selected transactions above are companies with certain characteristics that, for the purposes of this analysis, may be considered similar to certain characteristics of the Company. The reasons for and the
circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected
precedent transactions analysis. This analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading, acquisition or other
values of the selected target companies and the Company.
Financial data for the precedent transactions was based on information
Centerview obtained from SEC filings, relevant press releases, FactSet and Wall Street equity research. Centerview reviewed the implied premiums paid in the selected transactions over the target companys most recent closing share price prior
to the public becoming aware of the possibility of such transaction, which is referred to as % Premium to Unaffected Closing Price.
The results of this analysis are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25th Percentile |
|
|
Median |
|
|
75th Percentile |
|
% Premium to Unaffected Closing Price |
|
|
38 |
% |
|
|
47 |
% |
|
|
68 |
% |
Applying the range above to the Companys June 9, 2015 closing price per Company Share, the last
closing price prior to publicly reported rumors of a pending acquisition of the Company resulted in an implied per Company Share equity value range for the Common Stock of approximately $221.95 to $269.60. Centerview compared this range to the
Consideration of $232.00 per Company Share to be paid to the holders of Company Shares (other than Excluded Shares) pursuant to the Merger Agreement.
27
Sum-of-the-Parts Discounted Cash Flow Analysis
Centerview also performed a sum-of-the-parts discounted cash flow analysis of the Company. A discounted cash flow analysis is a traditional
valuation methodology used to derive a valuation of an asset by calculating the present value of estimated future cash flows of the asset. Present value refers to the current value of future cash flows or amounts and is
obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
Centerview performed the discounted cash flow analysis of the Company based on the projected unlevered free cash flows from the third fiscal
quarter of 2015 through 2032. The fully-taxed unlevered free cash flows and a terminal value (calculated using an 80% year-over-year decline in fully-taxed unlevered free cash flows after 2032) were then discounted to present values using a range of
discount rates from 11.0% to 13.0% using a mid-year convention. This range of discount rates was determined based on Centerviews analysis of the Companys weighted average cost of capital. The discounted cash flow analysis accounted for:
(i) projected risk-adjusted, worldwide sales and product-related expenses of ozanimod in RMS, Ulcerative Colitis and Crohns Disease, (ii) projected risk-adjusted, U.S. co-promote revenue and expenses and ex-U.S. royalty revenue for
RPC4046, (iii) projected corporate general and administrative expenses and changes in net working capital, (iv) projected overhead research and development expenses, (v) current and projected net operating losses and (vi) net
cash as of July 10, 2015. Projections for non-cash expenses such as stock-based compensation and depreciation were not included in the Forecasts provided by the Company.
This analysis resulted in an implied per Company Share equity value range for the Common Stock of approximately $172.55 to $211.15. Centerview
compared this range to the Consideration of $232.00 per Company Share to be paid to the holders of Company Shares (other than Excluded Shares) pursuant to the Merger Agreement.
Other Considerations
Centerview noted for the Company Board certain additional factors solely for informational purposes, including, among other things, the
following:
|
|
|
Historical closing trading prices of the Common Stock during the 12-month period ended June 13, 2015, which reflected low and high closing trading prices for the Company during such period of $34.49 to $198.25 per
Company Share; and |
|
|
|
Stock price targets for the Common Stock in publicly available Wall Street equity research analyst reports (excluding one research analyst report that provided a target acquisition price rather than a target trading
price), which indicated low and high stock price targets for the Company of $163.00 and $225.00 per Company Share, respectively. |
General
The preparation
of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a
financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its
determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.
Centerviews financial analyses and opinion were only one of many factors taken into consideration by the Company Board in its evaluation
of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the Company Board or management of the Company with respect to the
28
Consideration or as to whether the Company Board would have been willing to determine that a different consideration was fair. The Consideration for the Transaction was determined through
arms-length negotiations between the Company and Parent and was approved by the Company Board. Centerview provided advice to the Company during these negotiations. Centerview did not, however, recommend any specific amount of consideration to
the Company or the Company Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction.
Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial
advisory and merchant banking activities. In the past two years, Centerview has not provided any investment banking or other services to the Company, Parent or Purchaser for which it has received any compensation. Centerview may provide investment
banking or other services to or with respect to the Company or Parent or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerviews and its affiliates directors, officers,
members and employees, or family members of such persons, (ii) of affiliated or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may
co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Parent or any of their respective
affiliates, or any other party that may be involved in the Transaction.
The Company Board selected Centerview as its financial advisor in
connection with the Transaction based on Centerviews reputation and experience with respect to the pharmaceutical and biotechnology industries. Centerview is an internationally recognized investment banking firm that has substantial experience
in transactions similar to the Transaction.
Certain Projections.
The Company does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due
to the inherent unpredictability of the underlying assumptions, estimates and projections. However, the Companys management regularly prepares internal financial forecasts regarding its future operations for subsequent fiscal years.
In connection with the Companys strategic planning process, the Companys management prepared and provided to the Company Board and
Centerview risk-adjusted, forward-looking financial information for the fiscal years 2015 through 2032 based upon projections developed by the Company. These internal, risk-adjusted financial forecasts for the fiscal years 2015 through 2032 (the
Forecasts) were reviewed by the Company Board and used by Centerview in connection with their opinion to the Company Board and related financial analyses. The Forecasts are subject to certain assumptions, risks and limitations, as
described below. A summary of the Forecasts is set forth below.
The Forecasts were not prepared with a view toward public disclosure, nor
were they prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally
accepted accounting principles. In addition, the Forecasts were not prepared with the assistance of or reviewed, compiled or examined by independent accountants. The Forecasts do not comply with U.S. generally accepted accounting principles
(GAAP). The summary of the Forecasts is not being included in this Schedule 14D-9 to influence any stockholders decision whether to tender his, her or its Company Shares in the Offer, but because these Forecasts were made available
to the Company Board and Centerview. The Forecasts may differ from publicized analyst estimates and forecasts and do not take into account any events or circumstances after the date they were prepared, including the announcement of the Offer and
Merger.
The Forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of the
Companys management. Important factors that may affect actual results and result in
29
such forecasts not being achieved include, but are not limited to: failure to consummate the Merger; the effects of disruption caused by the transaction making it more difficult to maintain
relationships with employees, collaborators, vendors and other business partners; the risk that stockholder litigation in connection with the Offer or the Merger may result in significant costs of defense, indemnification and liability; and risks
and uncertainties pertaining to the Companys business, including the risks and uncertainties detailed in the Companys public periodic filings with the SEC. In addition, the Forecasts may be affected by the Companys ability to
achieve strategic goals, objectives and targets over the applicable period. These assumptions upon which the Forecasts were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory
conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the Companys control. The Forecasts also reflect assumptions as to certain business decisions that are
subject to change.
Accordingly, there can be no assurance that the projections will be realized, and actual results may vary materially
from those shown. The inclusion of the Forecasts in this Schedule 14D-9 should not be regarded as an indication that the Company and Centerview or their respective affiliates, officers, directors, advisors or other representatives considered or
consider the Forecasts necessarily predictive of actual future events, and the Forecasts should not be relied upon as such. None of the Company, Centerview, or their respective affiliates, officers, directors, advisors or other representatives can
give any assurance that actual results will not differ from these Forecasts, and the Company undertakes no obligation to update or otherwise revise or reconcile the Forecasts to reflect circumstances existing after the date such Forecasts were
generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. Neither the Company, nor, to the knowledge of the Company, Centerview intends to make
publicly available any update or other revisions to these Forecasts. None of the Company or its respective affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person
regarding the ultimate performance of the Company compared to the information contained in the Forecasts or that forecasted results will be achieved. The Company has made no representation to Parent or Purchaser, in the Merger Agreement or
otherwise, concerning these Forecasts.
The estimates of EBIT included in the Forecasts were calculated using GAAP and other measures
which are derived from GAAP, but such estimates constitute non-GAAP financial measures within the meaning of applicable rules and regulations of the SEC. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for,
financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies.
In light of the foregoing factors and the uncertainties inherent in these projections, stockholders are cautioned not to place undue, if
any, reliance on these projections.
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in millions |
|
For the year ended December 31, |
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
2030 |
|
|
2031 |
|
|
2032 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ozaninod in RMS |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
62 |
|
|
$ |
306 |
|
|
$ |
584 |
|
|
$ |
903 |
|
|
$ |
1,130 |
|
|
$ |
1,216 |
|
|
$ |
1,250 |
|
|
$ |
1,272 |
|
|
$ |
1,293 |
|
|
$ |
1,314 |
|
|
$ |
1,335 |
|
|
$ |
1,357 |
|
|
$ |
1,379 |
|
|
$ |
1,401 |
|
|
$ |
1,328 |
|
Ozanimod in Ulcerative Colitis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
80 |
|
|
|
277 |
|
|
|
724 |
|
|
|
1,311 |
|
|
|
1,813 |
|
|
|
2,119 |
|
|
|
2,276 |
|
|
|
2,358 |
|
|
|
2,411 |
|
|
|
2,453 |
|
|
|
2,493 |
|
|
|
2,534 |
|
|
|
2,454 |
|
Ozanimod in Crohns Disease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
61 |
|
|
|
158 |
|
|
|
398 |
|
|
|
715 |
|
|
|
981 |
|
|
|
1,143 |
|
|
|
1,226 |
|
|
|
1,272 |
|
|
|
1,302 |
|
|
|
1,327 |
|
|
|
1,350 |
|
|
|
1,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Ozanimod |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
323 |
|
|
|
683 |
|
|
|
1,241 |
|
|
|
2,011 |
|
|
|
2,924 |
|
|
|
3,777 |
|
|
|
4,372 |
|
|
|
4,711 |
|
|
|
4,898 |
|
|
|
5,018 |
|
|
|
5,112 |
|
|
|
5,199 |
|
|
|
5,285 |
|
|
|
5,090 |
|
RPC4046 (ex-U.S. Royalties) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
2 |
|
|
|
5 |
|
|
|
9 |
|
|
|
13 |
|
|
|
16 |
|
|
|
18 |
|
|
|
19 |
|
|
|
21 |
|
|
|
22 |
|
|
|
23 |
|
|
|
25 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
323 |
|
|
|
683 |
|
|
|
1,243 |
|
|
|
2,016 |
|
|
|
2,993 |
|
|
|
3,790 |
|
|
|
4,388 |
|
|
|
4,730 |
|
|
|
4,918 |
|
|
|
5,038 |
|
|
|
5,134 |
|
|
|
5,222 |
|
|
|
5,310 |
|
|
|
5,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(6 |
) |
|
|
(14 |
) |
|
|
(25 |
) |
|
|
(41 |
) |
|
|
(60 |
) |
|
|
(77 |
) |
|
|
(89 |
) |
|
|
(97 |
) |
|
|
(100 |
) |
|
|
(103 |
) |
|
|
(105 |
) |
|
|
(107 |
) |
|
|
(109 |
) |
|
|
(105 |
) |
COGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(6 |
) |
|
|
(14 |
) |
|
|
(25 |
) |
|
|
(40 |
) |
|
|
(58 |
) |
|
|
(76 |
) |
|
|
(87 |
) |
|
|
(94 |
) |
|
|
(98 |
) |
|
|
(100 |
) |
|
|
(102 |
) |
|
|
(104 |
) |
|
|
(106 |
) |
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total COGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(13 |
) |
|
|
(27 |
) |
|
|
(50 |
) |
|
|
(81 |
) |
|
|
(118 |
) |
|
|
(153 |
) |
|
|
(177 |
) |
|
|
(191 |
) |
|
|
(198 |
) |
|
|
(203 |
) |
|
|
(207 |
) |
|
|
(211 |
) |
|
|
(214 |
) |
|
|
(207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
310 |
|
|
|
656 |
|
|
|
1,193 |
|
|
|
1,935 |
|
|
|
2,815 |
|
|
|
3,637 |
|
|
|
4,211 |
|
|
|
4,539 |
|
|
|
4,720 |
|
|
|
4,835 |
|
|
|
4,926 |
|
|
|
5,011 |
|
|
|
5,095 |
|
|
|
4,909 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total G&A |
|
|
(47 |
) |
|
|
(47 |
) |
|
|
(48 |
) |
|
|
(53 |
) |
|
|
(66 |
) |
|
|
(86 |
) |
|
|
(115 |
) |
|
|
(155 |
) |
|
|
(202 |
) |
|
|
(246 |
) |
|
|
(278 |
) |
|
|
(296 |
) |
|
|
(307 |
) |
|
|
(315 |
) |
|
|
(321 |
) |
|
|
(328 |
) |
|
|
(334 |
) |
|
|
(326 |
) |
Total S&M |
|
|
|
|
|
|
(20 |
) |
|
|
(70 |
) |
|
|
(110 |
) |
|
|
(163 |
) |
|
|
(213 |
) |
|
|
(311 |
) |
|
|
(404 |
) |
|
|
(485 |
) |
|
|
(579 |
) |
|
|
(650 |
) |
|
|
(683 |
) |
|
|
(694 |
) |
|
|
(701 |
) |
|
|
(708 |
) |
|
|
(715 |
) |
|
|
(722 |
) |
|
|
(730 |
) |
Total R&D |
|
|
(215 |
) |
|
|
(202 |
) |
|
|
(183 |
) |
|
|
(89 |
) |
|
|
(23 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
(261 |
) |
|
|
(269 |
) |
|
|
(301 |
) |
|
|
(251 |
) |
|
|
(253 |
) |
|
|
(313 |
) |
|
|
(440 |
) |
|
|
(574 |
) |
|
|
(702 |
) |
|
|
(841 |
) |
|
|
(943 |
) |
|
|
(994 |
) |
|
|
(1,017 |
) |
|
|
(1,031 |
) |
|
|
(1,045 |
) |
|
|
(1,058 |
) |
|
|
(1,071 |
) |
|
|
(1,071 |
) |
RPC4046 (U.S. Co-Promote)(1) |
|
|
|
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
0 |
|
|
|
1 |
|
|
|
3 |
|
|
|
9 |
|
|
|
14 |
|
|
|
18 |
|
|
|
21 |
|
|
|
22 |
|
|
|
23 |
|
|
|
25 |
|
|
|
26 |
|
|
|
28 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(2) |
|
|
(261 |
) |
|
|
(270 |
) |
|
|
(305 |
) |
|
|
(196 |
) |
|
|
55 |
|
|
|
343 |
|
|
|
754 |
|
|
|
1,365 |
|
|
|
2,122 |
|
|
|
2,811 |
|
|
|
3,287 |
|
|
|
3,566 |
|
|
|
3,725 |
|
|
|
3,827 |
|
|
|
3,906 |
|
|
|
3,979 |
|
|
|
4,052 |
|
|
|
3,867 |
|
Net Income(3) |
|
($ |
257 |
) |
|
($ |
268 |
) |
|
($ |
305 |
) |
|
($ |
196 |
) |
|
$ |
55 |
|
|
$ |
343 |
|
|
$ |
756 |
|
|
$ |
923 |
|
|
$ |
1,393 |
|
|
$ |
1,852 |
|
|
$ |
2,174 |
|
|
$ |
2,369 |
|
|
$ |
2,488 |
|
|
$ |
2,571 |
|
|
$ |
2,638 |
|
|
$ |
2,702 |
|
|
$ |
2,766 |
|
|
$ |
2,663 |
|
Reconciliation to GAAP Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(2) |
|
($ |
261 |
) |
|
($ |
270 |
) |
|
($ |
305 |
) |
|
($ |
196 |
) |
|
$ |
55 |
|
|
$ |
343 |
|
|
$ |
754 |
|
|
$ |
1,365 |
|
|
$ |
2,122 |
|
|
$ |
2,811 |
|
|
$ |
3,287 |
|
|
$ |
3,566 |
|
|
$ |
3,725 |
|
|
$ |
3,827 |
|
|
$ |
3,906 |
|
|
$ |
3,979 |
|
|
$ |
4,052 |
|
|
$ |
3,867 |
|
Stock-Based Compensation |
|
|
(30 |
) |
|
|
(31 |
) |
|
|
(32 |
) |
|
|
(33 |
) |
|
|
(34 |
) |
|
|
(35 |
) |
|
|
(36 |
) |
|
|
(37 |
) |
|
|
(38 |
) |
|
|
(39 |
) |
|
|
(40 |
) |
|
|
(42 |
) |
|
|
(43 |
) |
|
|
(44 |
) |
|
|
(45 |
) |
|
|
(47 |
) |
|
|
(48 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
|
($ |
291 |
) |
|
($ |
301 |
) |
|
($ |
337 |
) |
|
($ |
229 |
) |
|
$ |
22 |
|
|
$ |
308 |
|
|
$ |
718 |
|
|
$ |
1,328 |
|
|
$ |
2,084 |
|
|
$ |
2,772 |
|
|
$ |
3,247 |
|
|
$ |
3,524 |
|
|
$ |
3,682 |
|
|
$ |
3,783 |
|
|
$ |
3,861 |
|
|
$ |
3,932 |
|
|
$ |
4,003 |
|
|
$ |
3,818 |
|
Calculation of Free Cash Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Profit after Tax(2) |
|
($ |
261 |
) |
|
($ |
270 |
) |
|
($ |
305 |
) |
|
($ |
196 |
) |
|
$ |
36 |
|
|
$ |
223 |
|
|
$ |
490 |
|
|
$ |
887 |
|
|
$ |
1,379 |
|
|
$ |
1,827 |
|
|
$ |
2,137 |
|
|
$ |
2,318 |
|
|
$ |
2,421 |
|
|
$ |
2,488 |
|
|
$ |
2,539 |
|
|
$ |
2,586 |
|
|
$ |
2,633 |
|
|
$ |
2,514 |
|
Working Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(11 |
) |
|
|
(12 |
) |
|
|
(21 |
) |
|
|
(29 |
) |
|
|
(35 |
) |
|
|
(31 |
) |
|
|
(20 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash Flow(4) |
|
($ |
261 |
) |
|
($ |
270 |
) |
|
($ |
305 |
) |
|
($ |
199 |
) |
|
$ |
25 |
|
|
$ |
211 |
|
|
$ |
469 |
|
|
$ |
858 |
|
|
$ |
1,344 |
|
|
$ |
1,796 |
|
|
$ |
2,116 |
|
|
$ |
2,306 |
|
|
$ |
2,415 |
|
|
$ |
2,483 |
|
|
$ |
2,535 |
|
|
$ |
2,582 |
|
|
$ |
2,629 |
|
|
$ |
2,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Managements forecast assumes a co-promotion arrangement of RPC4046 in the United States. |
(2) |
Excludes stock-based compensation expense. Depreciation expense excluded from projections as immaterial. |
(3) |
Excludes stock-based compensation expense. Depreciation expense excluded from projections as immaterial. Includes the impact of net operating losses. |
(4) |
No adjustment for capital expenditures, as deemed by management to be immaterial |
31
Intent to Tender.
To the knowledge of the Company after making reasonable inquiry, all of the Companys executive officers and directors currently
intend to tender or cause to be tendered all Company Shares held of record or beneficially owned by such person or entity pursuant to the Offer. The foregoing does not include any Company Shares over which, or with respect to which, any such
executive officer, director or affiliate acts in a fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender. In addition, Mr. Hasnain and Dr. Rastetter entered into the Support
Agreement, pursuant to which each agreed to tender all of the Shares held by such stockholder, as well as any additional Shares that such stockholder may acquire (pursuant the conversion, vesting payment, exercise or exchange of Company Options and
Company RSU Awards or otherwise), to Purchaser in the Offer. See Item 3 above under the heading Arrangements with Purchaser and ParentSupport Agreement.
Item 5. |
Persons/Assets Retained, Employed, Compensated or Used. |
In connection with Centerviews services as the financial advisor to the Company Board, the Company has agreed to pay Centerview an
aggregate fee of approximately $55.2 million, $1.0 million of which was payable upon the rendering of Centerviews opinion and approximately $54.2 million of which is payable contingent upon consummation of the Transaction. In addition, the
Company has agreed to reimburse certain of Centerviews expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerviews engagement.
Additional information pertaining to the retention of Centerview by the Company in Item 4 under the heading Background and Reasons
for the Company Boards RecommendationOpinion of the Companys Financial Advisor is hereby incorporated by reference in this Item 5.
Neither the Company, nor any person acting on its behalf, has employed, retained or agreed to compensate any other person or class of persons
to make solicitations or recommendations in connection with the Offer or the Merger, except that such solicitations or recommendations may be made by directors, officers or employees of the Company, for which services no additional compensation will
be paid.
Item 6. |
Interest in Securities of the Subject Company. |
No transactions in the Company Shares have been effected during the past 60 days by the Company, or, to the Companys knowledge after
making reasonable inquiry, any of the directors, executive officers, subsidiaries or affiliates of the Company, except for the transactions set forth below:
|
|
|
Each of Mr. Hasnain and Dr. Rastetter, solely in their respective capacities as stockholders of the Company, entered into the Support Agreement, dated July 14, 2015, with Parent and Purchaser, as
described under Item 3 above under the heading Arrangements with Purchaser and ParentSupport Agreement; and |
|
|
|
See chart of transactions below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Person |
|
Transaction Date |
|
|
Number of Shares |
|
|
Sale, Purchase or Exercise Price per Share (If Applicable) |
|
|
Nature of Transaction |
S. Edward Torres |
|
|
06/16/15 |
|
|
|
50,400 |
|
|
$ |
182.89 |
|
|
Sale(1) |
S. Edward Torres |
|
|
06/15/15 |
|
|
|
88,400 |
|
|
$ |
175.54 |
|
|
Sale(1) |
S. Edward Torres |
|
|
06/12/15 |
|
|
|
81,200 |
|
|
$ |
180.33 |
|
|
Sale(1) |
Kristina Burow |
|
|
06/09/15 |
|
|
|
59,822 |
|
|
|
n/a |
|
|
Distribution of shares of Common Stock held by a limited partnership for no consideration.(2) |
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Person |
|
Transaction Date |
|
|
Number of Shares |
|
|
Sale, Purchase or Exercise Price per Share (If Applicable) |
|
|
Nature of Transaction |
Kristina Burow |
|
|
06/09/15 |
|
|
|
970,000 |
|
|
|
n/a |
|
|
Distribution of shares of Common Stock held by a limited partnership for no consideration.(3) |
Mary Lynne Hedley, Ph.D. |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
Richard A. Heyman, Ph.D. |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
S. Edward Torres |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
Erle T. Mast |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
Kristina Burow |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
Mary T. Szela |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
William H. Rastetter, Ph.D |
|
|
05/28/15 |
|
|
|
7,400 |
|
|
|
n/a |
|
|
Company RSU Award(4) |
(1) |
These shares were owned directly by Lilly Ventures Fund I, LLC (the Fund). Eli Lilly and Company, as sole Managing Member of the Fund, and pursuant to provisions of the LLC Agreement of the Fund, has voting
authority with respect to shares owned by the Fund. S. Edward Torres is a non-managing member of the Fund and may be deemed to beneficially own the shares. Mr. Torres disclaims beneficial ownership of the shares held of record by the Fund,
except to the extent of his pecuniary interest therein. |
(2) |
These shares are owned directly by ARCH Venture Fund VI, L.P. (ARCH Fund VI). The sole general partner of ARCH Fund VI is ARCH Venture Partners VI, L.P. (ARCH Partners VI). The sole general
partner of ARCH Partners VI is ARCH Venture Partners VI, LLC. Kristina Burow owns an interest in ARCH Partners VI but does not have voting or investment control over the shares held by ARCH Fund VI and disclaims beneficial ownership of such shares,
except to the extent of any pecuniary interest therein. |
(3) |
These shares are owned directly by ARCH Venture Fund VII, L.P. (ARCH Fund VII). The sole general partner of ARCH Fund VII is ARCH Venture Partners VII, L.P. (ARCH Partners VII). The sole general
partner of ARCH Partners VII is ARCH Venture Partners VII, LLC. Kristina Burow owns an interest in ARCH Partners VII but does not have voting or investment control over the shares held by ARCH Fund VII and disclaims beneficial ownership of such
shares, except to the extent of any pecuniary interest therein. |
(4) |
Represents time-based restricted stock units which vest 100% on the first anniversary of the date of grant. |
Item 7. |
Purposes of the Transaction and Plans or Proposals. |
Except as indicated in this Schedule 14D-9, (a) the Company is not undertaking or engaged in
any negotiations in response to the Offer that relate to, or would result in: (i) a tender offer for or other acquisition of the Companys securities by the Company, any of its subsidiaries, or any other person; (ii) any extraordinary
transaction such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (iii) any purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries; or (iv) any
material change in the present dividend rates or policy, or indebtedness or capitalization of the Company, and (b) there are no transactions, board resolutions or agreements in principle or signed contracts in response to the Offer that relate
to, or would result in, one or more of the events referred to in clause (a) of this paragraph.
Item 8. |
Additional Information. |
Named Executive Officer Golden
Parachute Compensation.
The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer that is based on or otherwise relates to the Offer and the Merger.
Please note that the amounts indicated below are estimates based on the material assumptions described in the notes to the table below, which
may or may not actually occur. Some of these assumptions are based on
33
information currently available and, as a result, the actual amounts, if any, that may become payable to a named executive officer may differ in material respects from the amounts set forth
below. Furthermore, for purposes of calculating such amounts, the Company has assumed:
|
|
|
A Closing Date for the Offer and the Merger of July 28, 2015; and |
|
|
|
With respect to each named executive officer, a termination of employment by the executive for good reason (i.e., a constructive termination) or by the Company without cause, in each case, on July 28, 2015, in
which case the executive would be entitled to receive each of the payments and benefits described in further detail below. |
Golden
Parachute Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Cash(1) |
|
|
Equity(2) |
|
|
Perquisites/ Benefits(3) |
|
|
Tax Reimbursement(4) |
|
|
Total
|
|
Faheem Hasnain |
|
$ |
2,042,250 |
|
|
$ |
63,232,780 |
|
|
$ |
168,136 |
|
|
$ |
11,972,958 |
|
|
$ |
77,416,124 |
|
Graham Cooper |
|
$ |
514,460 |
|
|
$ |
27,835,626 |
|
|
$ |
76,537 |
|
|
$ |
3,162,757 |
|
|
$ |
31,589,380 |
|
Sheila Gujrathi, M.D. |
|
$ |
579,710 |
|
|
$ |
32,620,777 |
|
|
$ |
76,537 |
|
|
$ |
4,981,796 |
|
|
$ |
38,258,820 |
|
Marcus F. Boehm, Ph.D. |
|
$ |
478,355 |
|
|
$ |
18,645,524 |
|
|
$ |
77,453 |
|
|
$ |
2,879,280 |
|
|
$ |
22,080,612 |
|
Robert J. Peach, Ph.D. |
|
$ |
478,355 |
|
|
$ |
18,645,524 |
|
|
$ |
81,288 |
|
|
$ |
2,881,022 |
|
|
$ |
22,086,189 |
|
(1) |
Under the named executive officers Amended and Restated Employment Agreements, cash severance would be payable in a lump sum on the 60th day following a
termination without cause or a constructive termination (each, as defined in the Amended and Restated Employment Agreements), in either case, during the period beginning one month prior to a change in control and ending
12 months following a change of control (i.e., pursuant to a double trigger arrangement), subject, in either case, to the executives timely execution, delivery and non-revocation of a
general release of claims. In either such event, pursuant to the Amended and Restated Employment Agreements, the named executive officer will receive severance payments equal to 24 months (for Mr. Hasnain) or 12 months (for the other
named executive officers) of base salary, plus an amount equal to 1x (or 2x for Mr. Hasnain) the executives then-current target bonus amount. |
The following table quantifies the base salary severance and bonus component of severance included in the aggregate total reported in the
column.
|
|
|
|
|
|
|
|
|
Name |
|
Base Salary Severance |
|
|
Bonus Component of Severance |
|
Faheem Hasnain |
|
$ |
1,167,000 |
|
|
$ |
875,250 |
|
Graham Cooper |
|
$ |
354,800 |
|
|
$ |
159,660 |
|
Sheila Gujrathi, M.D. |
|
$ |
399,800 |
|
|
$ |
179,910 |
|
Marcus F. Boehm, Ph.D. |
|
$ |
329,900 |
|
|
$ |
148,455 |
|
Robert J. Peach, Ph.D. |
|
$ |
329,900 |
|
|
$ |
148,455 |
|
(2) |
Under the Amended and Restated Employment Agreements, each named executive officer would be entitled to accelerated vesting of his or her unvested equity-based compensation pursuant to a double trigger
arrangement (i.e., the occurrence of a change of control and the executives qualifying termination as described in footnote (1) above). |
Additionally, pursuant to the Merger Agreement, (i) each restricted Company Share (a Company Restricted Share) that is
outstanding at the Effective Time will be canceled and converted into the right to receive an amount in cash equal to the Offer Price (less any applicable withholding taxes), (ii) each Company Option that is outstanding at the Effective Time
will be canceled and converted into the right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal to the product of (A) the excess, if any, of (1) the Offer Price over (2) the
exercise price per share of such Company Option, and (B) the number of Company Shares underlying such Company Option, and (iii) each Company RSU Award
34
that is outstanding at the Effective Time will be canceled and converted into the right to receive an amount in cash, if any, without interest and less the amount of any tax withholdings, equal
to the product of (A) the Offer Price and (B) the number of Company Shares underlying such Company RSU Award. To the extent any Company Option or Company RSU Award is unvested as of the Effective Time, the corresponding cash amount will be
paid on the later of the Effective Time and the Anniversary Date, subject to the former award holders continued service through such date (except that such amount will be paid earlier upon a termination of employment without cause, for good
reason (i.e., a constructive termination) or due to such former award holders death or disability or if the former award is subject to earlier vesting pursuant to the original terms thereof).
Amounts included in this column as they relate to payment for Company Restricted Shares are single trigger (closing of the Offer
and the Merger) because they would be paid at the Effective Time, without regard to whether the named executive officer experiences a termination of employment. Amounts included in this column as they relate to payment for unvested Company Options
and Company RSU Awards are double trigger because they will become payable only upon the satisfaction of a vesting requirement (continued service through the earlier of the applicable vesting date or the Anniversary Date, or a qualifying
termination of employment prior to such date).
The following table quantifies the value of the unvested Company Restricted Shares, Company
Options and Company RSU Awards held by the named executive officers, assuming the occurrence of a change of control and qualifying termination of employment on the Closing Date and a price per share of Company Common Stock equal to the Offer Price
of $232.00.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Number of Restricted Shares |
|
|
Value of Restricted Shares |
|
|
Number of Unvested Stock Options |
|
|
Value of Unvested Stock Options |
|
|
Number of Restricted Stock Units |
|
|
Value of Restricted Stock Units |
|
Faheem Hasnain |
|
|
25,436 |
|
|
$ |
5,896,755 |
|
|
|
203,032 |
|
|
$ |
42,256,025 |
|
|
|
65,000 |
|
|
$ |
15,080,000 |
|
Graham Cooper |
|
|
|
|
|
|
|
|
|
|
106,789 |
|
|
$ |
22,963,626 |
|
|
|
21,000 |
|
|
$ |
4,872,000 |
|
Sheila Gujrathi, M.D. |
|
|
13,617 |
|
|
$ |
3,155,049 |
|
|
|
114,466 |
|
|
$ |
23,665,728 |
|
|
|
25,000 |
|
|
$ |
5,800,000 |
|
Marcus F. Boehm, Ph.D. |
|
|
11,520 |
|
|
$ |
2,669,594 |
|
|
|
61,816 |
|
|
$ |
12,727,930 |
|
|
|
14,000 |
|
|
$ |
3,248,000 |
|
Robert J. Peach, Ph.D. |
|
|
11,520 |
|
|
$ |
2,669,594 |
|
|
|
61,816 |
|
|
$ |
12,727,930 |
|
|
|
14,000 |
|
|
$ |
3,248,000 |
|
(3) |
Amounts include the estimated value of Company-subsidized COBRA healthcare coverage for each named executive officer for up to 12 months (24 months for Mr. Hasnain), which the named executive officers are entitled
to receive under the Amended and Restated Employment Agreements upon a double trigger qualifying termination in connection with a change in control as described in footnote (1) above. |
(4) |
In connection with the signing of the Merger Agreement, each executive entered into an amendment to his or her Amended and Restated Employment Agreement to provide that, if the Merger is consummated and an excise tax is
imposed on the executive, the executive will be entitled to a tax gross-up payment in an amount equal to such excise tax plus any taxes resulting from such payment. All tax gross-up payments are payable in connection with a
single-trigger change of control (closing of the Offer and the Merger). |
In addition to calculating any gross-up
related to the equity award acceleration, the gross-up payment quantified in the table assumes the payment of severance (which is a double-trigger payment).
Narrative Disclosure to Named Executive Officer Golden Parachute Compensation Table
The Company has entered into Amended and Restated Employment Agreements, and amendments to such agreements, with each named executive officer,
each of which provide for severance payments and benefits, including equity award acceleration and certain tax gross-up obligations, upon certain terminations of employment. For more information relating to these arrangements, see the excerpts filed
as Exhibit (e)(21) to this Schedule 14D-9 that are incorporated herein by reference, including the information from the 2015 Proxy Statement under Executive Compensation.
35
Stockholder Approval Not Required.
Parent and Purchaser have represented and warranted to the Company in the Merger Agreement that neither Parent nor Purchaser, nor any of their
respective affiliates or associates, is, or at any time for the past three years has been, an interested stockholder of the Company (as such quoted terms are defined in Section 203 of the DGCL).
Section 251(h) of the DGCL provides that following consummation of a successful tender offer for a public corporation, and subject to certain statutory provisions, if the acquiror holds at least the amount of shares of each class of stock of
the acquired corporation that would otherwise be required to approve a merger of the acquired corporation, and the stockholders that did not tender their shares in the tender offer receive the same consideration for their stock in the merger as was
payable in the tender offer, the acquiror can effect a merger without the action of the stockholders of the acquired corporation. Accordingly, if Purchaser consummates the Offer, the Merger Agreement contemplates that the parties will effect the
closing of the Merger without a vote of the stockholders of the Company in accordance with Section 251(h) of the DGCL. If the Merger is effected, (i) Company stockholders who do not tender their Company Shares in the Offer will be entitled
to appraisal rights under Delaware law, provided that the relevant requirements under the DGCL have been satisfied, and (ii) Company stockholders who do not validly exercise appraisal rights under Delaware law will receive the same cash
consideration for their Company Shares as was payable in the Offer following the consummation of the Merger.
Appraisal Rights.
Holders of Company Shares will not have appraisal rights in connection with the Offer. However, if Purchaser purchases Company Shares in the
Offer, and the Merger is consummated, holders of Company Shares immediately prior to the Effective Time will be entitled to appraisal rights under Section 262 of the DGCL, provided they comply with the applicable statutory procedures under
Section 262. Holders whose Company Shares are tendered pursuant to the Offer will not be entitled to appraisal rights.
The
following discussion summarizes appraisal rights of stockholders under the DGCL in connection with the Merger assuming that the Merger is consummated pursuant to Section 251(h) of the DGCL and is qualified in its entirety by the full text of
Section 262 of the DGCL, which is attached to this Schedule 14D-9 as Annex II. All references in Section 262 of the DGCL and in this summary to a stockholder are to the record
holder of Company Shares immediately prior to the Effective Time as to which appraisal rights are asserted. A person having a beneficial interest in Company Shares held of record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. Stockholders should carefully review the full text of Section 262 of the DGCL as well as the information
discussed below.
Under the DGCL, if the Merger is completed, holders of Company Shares immediately prior to the Effective Time and
who (i) did not tender their Company Shares in the Offer, (ii) follow the procedures set forth in Section 262 of the DGCL and (iii) do not thereafter withdraw their demand for appraisal of such Company Shares or otherwise lose
their appraisal rights, in each case in accordance with the DGCL, will be entitled to have their Company Shares appraised by the Delaware Court of Chancery and to receive payment in cash of the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, as determined by such court. The fair value as so determined by the court could be greater than, less than or the same
as the Offer Price.
Under Section 262 of the DGCL, where a merger is approved under Section 251(h), either a constituent
corporation before the effective date of the merger, or the surviving corporation within 10 days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of Section 262. This Schedule 14D-9 constitutes the formal notice of appraisal rights under Section 262 of the
36
DGCL. Any holder of Company Shares who wishes to exercise such appraisal rights or who wishes to preserve his, her or its right to do so, should review the following discussion and
Annex II carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.
Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise such rights.
If a stockholder elects to exercise appraisal rights under Section 262 of the DGCL and the Merger is consummated pursuant to
Section 251(h) of the DGCL, such stockholder must do all of the following:
|
|
|
within the later of the consummation of the Offer and 20 days after the date of mailing of this Schedule 14D-9 (which date of mailing is July 28, 2015), deliver to
the Company at the address indicated below a written demand for appraisal of Company Shares held, which demand must reasonably inform the Company of the identity of the stockholder and that the stockholder is demanding appraisal; |
|
|
|
not tender such stockholders Company Shares in the Offer; and |
|
|
|
continuously hold of record such Company Shares from the date on which the written demand for appraisal is made through the Effective Time. |
If the Merger is consummated pursuant to Section 251(h) of the DGCL, Parent will cause the Surviving Corporation to deliver an additional
notice of the effective date of the Merger to all stockholders of the Company who delivered a written demand to the Company (in accordance with the first bullet above) within ten days after the closing of the Merger, as required by
Section 262(d)(2) of the DGCL. However, only stockholders who have delivered a written demand in accordance with the first bullet above will receive such notice of the effective date. If the Merger is consummated pursuant to Section 251(h)
of the DGCL, a failure to deliver a written demand for appraisal in accordance with the time periods specified in the first bullet above (or to take any of the other steps specified in the above bullets or summarized below) will be deemed to be a
waiver or a termination of your appraisal rights.
Written Demand by the Record Holder
All written demands for appraisal should be addressed to Receptos, Inc., 3033 Science Park Road, Suite 300, San Diego, California 92121,
attention: Corporate Secretary. The written demand for appraisal must be executed by or for the record holder of Company Shares and must reasonably inform the Company of the identity of the stockholder of record and that such stockholder intends
thereby to demand appraisal of his, her or its Company Shares. If the Company Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the Company
Shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for
appraisal for a holder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).
A beneficial owner of Company Shares held in street name who wishes to exercise appraisal rights should take such actions as may
be necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the Company Shares. If Company Shares are held through a brokerage firm, bank or other nominee who in turn holds the Company Shares through a
central securities depository nominee, such as Cede & Co., a demand for appraisal of such Company Shares must be made by or on behalf of the depository nominee, and must identify the depository nominee as the record holder. Any beneficial
owner who wishes to exercise appraisal rights and holds Company Shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the Company Shares should
instruct the nominee holder that the demand for appraisal should be made by the record holder of the Company Shares, which may be a central securities depository nominee if the Company Shares have been so deposited.
37
A record holder, such as a broker, bank, fiduciary, depository or other nominee, who holds
Company Shares as a nominee for several beneficial owners may exercise appraisal rights with respect to the Company Shares held for one or more beneficial owners while not exercising such rights with respect to the Company Shares held for other
beneficial owners. In such case, the written demand must set forth the number of Company Shares covered by the demand. Where the number of Company Shares is not expressly stated, the demand will be presumed to cover all Company Shares held in the
name of the record owner.
Filing a Petition for Appraisal
Within 120 days after the Effective Time, the Surviving Corporation, or any holder of Company Shares who has complied with
Section 262 of the DGCL and is entitled to appraisal rights under Section 262, may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the Company Shares
held by all holders who did not tender their shares in the Offer and who timely and properly demanded appraisal. If no such petition is filed within that 120-day period, appraisal rights will be lost for all
holders of Company Shares who had previously demanded appraisal of their Company Shares. The Company is under no obligation to and has no present intention to file a petition, and holders should not assume that the Company will file a petition or
that it will initiate any negotiations with respect to the fair value of the Company Shares. Accordingly, it is the obligation of the holders of Company Shares to initiate all necessary action to perfect their appraisal rights in respect of the
Company Shares within the period prescribed in Section 262 of the DGCL.
Within 120 days after the Effective Time, any holder of
Company Shares who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of Company Shares not voted in
favor of the Merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such Company Shares. Such statement must be mailed within 10 days after a written request therefor has been received
by the surviving corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the foregoing requirement that a demand for appraisal must be made by or on behalf of
the record owner of the Company Shares, a person who is the beneficial owner of Company Shares held either in a voting trust or by a nominee on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may,
in such persons own name, file a petition for appraisal or request from the Surviving Corporation the statement described in this paragraph.
Upon the filing of such petition by any such holder of Company Shares, service of a copy thereof must be made upon the Surviving Corporation,
which will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list (the Verified List) containing the names and addresses of all stockholders who have demanded payment for their Company
Shares and with whom agreements as to the value of their Company Shares has not been reached. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be
mailed to the Surviving Corporation and all of the stockholders shown on the Verified List. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington,
Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation.
After notice to the stockholders as required by the Delaware Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the
petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded payment for their Company
Shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding and, if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the
proceedings as to that stockholder.
38
Determination of Fair Value
After the Delaware Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in
accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court of Chancery will determine the fair value of the Company Shares, exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown,
interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period
between the Effective Time and the date of payment of the judgment.
In determining fair value, the Delaware Court of Chancery will take
into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that proof of value by any
techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court should be considered, and that fair price obviously requires consideration of all relevant factors involving the
value of a company. The Delaware Supreme Court stated that, in making this determination of fair value, the Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other
facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be exclusive of any element of value arising from the
accomplishment or expectation of the merger. In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a narrow exclusion [that] does not encompass known elements of value, but
which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.
Stockholders considering appraisal should be aware that the fair value of their Company Shares as so determined could be more than, the same
as or less than the Offer Price and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the Offer and the Merger, is not an opinion as to, and does not
otherwise address, fair value under Section 262 of the DGCL. Although the Company believes that the Offer Price is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court
of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Offer Price. Neither Parent nor the Company anticipates offering more than the Offer Price to
any stockholder exercising appraisal rights, and they reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a Company Share is less than the Offer Price.
Upon application by the Surviving Corporation or by any holder of Company Shares entitled to participate in the appraisal proceeding, the
Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of Company Shares whose name appears on the Verified List and who has
submitted such stockholders certificates of stock to the Delaware Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. The
Court of Chancery will direct the payment of the fair value of the Company Shares, together with interest, if any, by the Surviving Corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder upon the surrender
to the Surviving Corporation of such stockholders certificates. The Court of Chancerys decree may be enforced as other decrees in such Court may be enforced.
If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the action (which do not include
attorneys fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable. Upon application of a
39
stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding, including reasonable attorneys fees and
the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the Company Shares entitled to appraisal. In the absence of such determination or assessment, each party bears its own expenses.
Any stockholder who has duly demanded and perfected appraisal rights in compliance with Section 262 of the DGCL will not, after the
Effective Time, be entitled to vote his or her Company Shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of Company Shares as of a
date prior to the Effective Time.
If any stockholder who demands appraisal of Company Shares under Section 262 of the DGCL fails to
perfect, successfully withdraws or loses such holders right to appraisal, such stockholders Company Shares will be deemed to have been converted at the Effective Time into the right to receive the consideration payable in connection with
the Merger (which is equal to the Offer Price). A stockholder will fail to perfect, or effectively lose, the stockholders right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time. In addition, a
stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL and accept the consideration payable in connection
with the Merger by delivering to the Surviving Corporation a written withdrawal of such stockholders demand for appraisal and acceptance of the merger either within 60 days after the effective date of the Merger or thereafter with the
written approval of the Surviving Corporation. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned
upon such terms as the Court deems just; provided, however, that the limitation set forth in this sentence shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to
withdraw such stockholders demand for appraisal and to accept the terms offered upon the Merger within 60 days after the effective date of the Merger.
If you wish to exercise your appraisal rights, you must NOT tender your Company Shares in the Offer and must comply with the procedures set
forth in Section 262 of the DGCL. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the termination or waiver of your appraisal rights.
The foregoing summary of the rights of the Companys stockholders to seek appraisal rights under Delaware law is qualified in its
entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires adherence to the applicable provisions of the DGCL. A copy of Section 262 of the DGCL is included as Annex II to this Schedule 14D-9.
Anti-Takeover Statutes.
As a Delaware corporation, the Company is subject to Section 203 of the DGCL (Section 203). In general, Section 203
restricts an interested stockholder (in general, a person who owns or has the right to acquire 15% or more of a corporations outstanding voting stock) from engaging in a business combination (defined to include mergers
and certain other actions) with a Delaware corporation for three years following the date such person became an interested stockholder unless: (i) before such person became an interested stockholder, the board of directors of the corporation
approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; (ii) upon consummation of the transaction which resulted in the interested stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting
stock owned by the interested stockholder) those shares owned by (A) persons who are directors and also officers and (B) employee stock plans in which employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or (iii) following the transaction in which such
40
person became an interested stockholder, the business combination is (A) approved by the board of directors of the corporation and (B) authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of the holders of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. In accordance with the provisions of Section 203,
the Company Board has approved the Merger Agreement, the Support Agreement, the Offer and the transactions contemplated thereby, as described in this Schedule 14D-9, and Parent and Purchaser have
represented that neither they nor any of their affiliates or associates (as defined in Section 203) are or have been an interested stockholder at any time during the past three years. Therefore, the restrictions of
Section 203 are inapplicable to the Merger and the transactions contemplated under the Merger Agreement.
Many other states also have
adopted laws and regulations applicable to attempts to acquire securities of corporations that are incorporated or have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in such states. In the event it is asserted that any such provisions apply to the Offer or the Merger, the Company may be required to take certain actions with respect to such provisions.
Regulatory Approvals.
Under the HSR Act
and the rules promulgated thereunder, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the Antitrust Division) and the Federal
Trade Commission (FTC) in Notification and Report Forms provided by the acquiring and acquired persons, and certain waiting period requirements have been satisfied. The initial waiting period for a cash tender offer is 15 days, but
this period may be shortened if the reviewing agency grants early termination, or (i) it may be restarted if the acquiring person voluntarily withdraws and re-files its Notification and Report
Form, or (ii) it may be extended if the reviewing agency issues a request for additional information and documentary material, in which case the waiting period expires 10 days after the date when the acquiring person has substantially
complied with such request. The purchase of Company Shares pursuant to the Offer is subject to such requirements. The Company filed the Premerger Notification and Report Forms with the FTC and the Antitrust Division in connection with the purchase
of Company Shares in the Offer and the Merger on July 24, 2015. The required waiting period with respect to the Offer will expire at 11:59 p.m., New York City time, 15 calendar days after such filings, unless earlier terminated by the
FTC and the Antitrust Division or extended by a request for additional information and documentary material prior to that time. The Antitrust Division and the FTC assess the legality under the antitrust laws of transactions such as the acquisition
of Company Shares by Purchaser pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws of the United States as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of Company Shares pursuant to the Offer or seeking divestiture of the Company Shares so acquired or divestiture of substantial assets of Parent, Purchaser and/or the
Company. Private parties and individual States of the United States may also bring legal actions under the antitrust laws of the United States. The Company does not believe that the consummation of the Offer will result in a violation of any
applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result would be.
The Company is not aware of any other filings, approvals or other actions by or with any governmental authority or administrative or
regulatory agency (other than the forgoing filings under the HSR Act, consents as may be required by federal or state securities laws, and the filing and recordation of the certificate of merger with the Secretary of State of the State of Delaware
and such filings with any other governmental authorities to satisfy the applicable laws of states and foreign jurisdictions in which the Company and its subsidiaries are qualified to do business) that would be required for Parents or
Purchasers acquisition or ownership of the Company Shares.
41
Annual and Quarterly Reports.
For additional information regarding the business and the financial results of the Company, please see the Companys Annual Report on Form 10-K for the year ended December 31, 2014 and the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the
SEC.
Certain Litigation.
On
July 20, 2015, a putative class action, Scott v. Receptos, Inc., related to the Merger Agreement was commenced by the filing of a complaint in the Court of Chancery for the State of Delaware, Case No. 11316, against the Company, members
of the Company Board, Parent and Purchaser. Four other complaints, Cacioppo v. Hasnain and Rosenberg v. Receptos, Inc., (Case Nos. 11324 and 11325) filed on July 23, Kadin v. Receptos, Inc., filed on July 27 (Case No.
11337), and Rockaway v. Hasnain, filed on July 28, 2015 (Case No. 11346), raise similar putative class claims in the Court of Chancery for the State of Delaware against some or all of the Company, members of the Company Board,
Parent and Purchaser. These complaints generally allege breaches of fiduciary duty by the members of the Company Board in connection with the Merger Agreement. In the Scott, Rosenberg, Kadin and Rockaway actions, the plaintiffs
also allege that Parent and Purchaser aided and abetted the purported breaches of fiduciary duty. These complaints seek equitable and injunctive relief, including an order enjoining the defendants from completing the proposed merger transaction,
rescission of any consummated transaction, unspecified damages and attorneys fees. The Company believes these lawsuits are wholly without merit, and intends to vigorously defend against them.
Additional lawsuits may be filed against the Company, Parent, Purchaser and/or any of their respective directors in connection with the
Merger.
Cautionary Note Regarding Forward-Looking Statements.
The statements included in this Schedule 14D-9 that are not a description of historical facts are forward-looking statements. Words or phrases such as believe, may, could, will, estimate, continue, anticipate, intend,
seek, plan, expect, should, would or similar expressions are intended to identify forward-looking statements and are based on the Companys current beliefs and expectations. These forward-looking statements include: statements regarding the planned completion of the Offer and the Merger; statements regarding the anticipated timing of filings and approvals relating to the Offer and the Merger;
statements regarding the expected timing of the completion of the Offer and the Merger; statements regarding the ability to complete the Offer and the Merger considering the various closing conditions; and projected financial information. The
Companys actual future results may differ materially from the Companys current expectations due to the risks and uncertainties inherent in its business. These risks include, but are not limited to: uncertainties as to the timing of the
Offer and the Merger; uncertainties as to the percentage of the Company stockholders tendering their shares in the Offer; the possibility that competing offers will be made; the possibility that various closing conditions for the Offer or the Merger
may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the Merger; the effects of disruption caused by the transaction making it more difficult to maintain
relationships with employees, collaborators, vendors and other business partners; the risk that stockholder litigation in connection with the Offer or the Merger may result in significant costs of defense, indemnification and liability; and risks
and uncertainties pertaining to the business of the Company, including the risks and uncertainties detailed under Risk Factors and elsewhere in the Companys public periodic filings with the SEC, as well as the tender offer
materials filed by Parent and Purchaser in connection with the Offer.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and the Company undertakes no obligation to revise or update this report to reflect
events or circumstances after the date hereof, except as required by law.
42
|
|
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Exhibit Number |
|
Description |
|
|
(a)(1) |
|
Offer to Purchase, dated July 28, 2015 (incorporated herein by reference to Exhibit (a)(1)(A) to the Schedule TO filed with the SEC on July 28, 2015 by Parent and Purchaser (the Schedule TO)). |
|
|
(a)(2) |
|
Form of Letter of Transmittal (including Internal Revenue Service Form W-9, including instructions for completing the form) (incorporated herein by reference to Exhibit (a)(1)(B) to the Schedule TO). |
|
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(a)(3)* |
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Opinion of Centerview Partners LLC, dated July 14, 2015 (included as Annex I to this Schedule 14D-9). |
|
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(a)(4) |
|
Form of Notice of Guaranteed Delivery (incorporated herein by reference to Exhibit (a)(1)(C) to the Schedule TO). |
|
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(a)(5) |
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Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated herein by reference to Exhibit (a)(1)(D) to the Schedule TO). |
|
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(a)(6) |
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Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated herein by reference to Exhibit (a)(1)(E) to the Schedule TO). |
|
|
(a)(7) |
|
Joint Press Release issued by Parent and the Company, dated July 14, 2015 (incorporated herein by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed
with the SEC on July 14, 2015). |
|
|
(a)(8) |
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Summary Newspaper Advertisement, published July 28, 2015 in The New York Times (incorporated herein by reference to Exhibit (a)(5)(D) to the Schedule TO). |
|
|
(a)(9)* |
|
Letter to Stockholders of the Company, dated July 28, 2015, from Faheem Hasnain, President and Chief Executive Officer of the Company. |
|
|
(e)(1) |
|
Agreement and Plan of Merger, dated as of July 14, 2015, by and among Parent, Purchaser and the Company (incorporated herein by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed with the SEC on
July 16, 2015). |
|
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(e)(2) |
|
Tender and Support Agreement, dated as of July 14, 2015, by and among Parent, Purchaser and each of the stockholders named therein (incorporated herein by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K
filed with the SEC on July 16, 2015). |
|
|
(e)(3) |
|
Nondisclosure Agreement, dated as of August 28, 2013, as amended August 28, 2014 and March 6, 2015, by and between Parent and the Company (incorporated herein by reference to Exhibit (d)(3) to the Schedule TO). |
|
|
(e)(4) |
|
Form of Indemnification Agreement between the Company and its officers and directors (incorporated herein by reference to Exhibit 10.1 of the Companys Amendment No. 1 to the Registration Statement on Form S-1 (File No.
333-187737), filed with the SEC on April 16, 2013). |
|
|
(e)(5) |
|
2008 Stock Plan, as amended to date (incorporated herein by reference to Exhibit 10.2 of the Companys Registration Statement on Form S-1, as amended (File No. 333-187737), originally filed with the SEC on April 4,
2013). |
|
|
(e)(6) |
|
Form of Stock Option Agreement for options granted under 2008 Stock Plan (incorporated herein by reference to Exhibit 10.3 of the Companys Registration Statement on Form S-1, as amended (File No. 333-187737), originally filed
with the SEC on April 4, 2013). |
|
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(e)(7) |
|
Form of Stock Option AgreementEarly Exercise for options granted under 2008 Stock Plan (incorporated herein by reference to Exhibit 10.4 of the Companys Registration Statement on Form S-1, as amended (File No.
333-187737), originally filed with the SEC on April 4, 2013). |
43
|
|
|
Exhibit Number |
|
Description |
|
|
(e)(8) |
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2013 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.5 of the Companys Registration Statement on Form S-1, as amended (File No. 333-187737), originally filed with the SEC on April 4, 2013). |
|
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(e)(9) |
|
Form of Non-Qualified Stock Option Agreement and Form of Restricted Stock Agreements for awards granted under the 2013 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.6 of the Companys Registration
Statement on Form S-1, as amended (File No. 333-187737), originally filed with the SEC on April 4, 2013). |
|
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(e)(10) |
|
Restricted Stock Issuance Agreement, dated November 19, 2010, between Receptos, Inc. and Faheem Hasnain (incorporated herein by reference to Exhibit 10.32 of the Companys Registration Statement on Form S-1, as amended
(File No. 333-187737), originally filed with the SEC on April 4, 2013). |
|
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(e)(11) |
|
Restricted Stock Issuance Agreement, dated July 30, 2009, between Receptos, Inc. and Robert J. Peach (incorporated herein by reference to Exhibit 10.35 of the Companys Registration Statement on Form S-1, as amended (File No.
333-187737), originally filed with the SEC on April 4, 2013). |
|
|
(e)(12) |
|
Restricted Stock Issuance Agreement, dated July 30, 2009, between Receptos, Inc. and Marcus F. Boehm (incorporated herein by reference to Exhibit 10.36 of the Companys Registration Statement on Form S-1, as amended (File No.
333-187737), originally filed with the SEC on April 4, 2013). |
|
|
(e)(13) |
|
Amended and Restated Employment Agreement, dated September 17, 2013, by and between Receptos, Inc. and Faheem Hasnain (incorporated herein by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed with
the SEC October 31, 2013). |
|
|
(e)(14) |
|
Amended and Restated Employment Agreement, dated September 17, 2013, by and between Receptos, Inc. and Graham Cooper (incorporated herein by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed with
the SEC October 31, 2013). |
|
|
(e)(15) |
|
Amended and Restated Employment Agreement, dated September 17, 2013, by and between Receptos, Inc. and Sheila K. Gujrathi, M.D. (incorporated herein by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q
filed with the SEC October 31, 2013). |
|
|
(e)(16) |
|
Amended and Restated Employment Agreement, dated September 17, 2013, by and between Receptos, Inc. and Robert Peach, Ph.D. (incorporated herein by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q filed
with the SEC October 31, 2013). |
|
|
(e)(17) |
|
Amended and Restated Employment Agreement, dated September 17, 2013, by and between Receptos, Inc. and Marcus F. Boehm, Ph.D. (incorporated herein by reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q
filed with the SEC October 31, 2013). |
|
|
(e)(18) |
|
Form of Notice of Stock Unit Award and Stock Unit Agreement for awards granted under the 2013 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed with the
SEC May 21, 2014). |
|
|
(e)(19) |
|
Form of Amendment to Employment Agreement (incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC July 16, 2015). |
|
|
(e)(20)* |
|
Agreement, dated July 14, 2015, between Receptos, Inc. and William H. Rastetter, Ph.D. |
|
|
(e)(21)* |
|
Excerpts from the Companys Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 17, 2015. |
44
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and
correct.
|
|
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Receptos, Inc. |
|
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By: |
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/s/ Faheem Hasnain |
|
|
Name: Faheem Hasnain |
|
|
Title: President and Chief Executive Officer |
Dated: July 28, 2015
45
ANNEX I
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Centerview Partners LLC |
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31 West 52nd Street |
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New York, NY 10019 |
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July 14, 2015 |
The Board of Directors
Receptos, Inc.
3033 Science Park Road, Suite 300
San Diego, CA 92121
The Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of the outstanding shares of common stock,
par value $0.001 per share (the Shares) (other than Excluded Shares, as defined below) of Receptos, Inc., a Delaware corporation (the Company), of the $232.00 per Share in cash, without interest, proposed to be paid to
such holders pursuant to the Agreement and Plan of Merger proposed to be entered into (the Agreement) by and among Celgene Corporation, a Delaware corporation (Parent), Strix Corporation, a Delaware corporation and wholly
owned subsidiary of Parent (Merger Sub), and the Company. The Agreement provides (i) for Merger Sub to commence a tender offer to purchase all of the Shares (the Tender Offer) at a price of $232.00 per Share, net to the
seller in cash without interest, for each Share accepted and (ii) that following completion of the Tender Offer, Merger Sub will be merged with and into the Company (the Merger and, collectively with the Tender Offer and the other
transactions contemplated by the Agreement, the Transaction), as a result of which the Company will become a wholly owned subsidiary of Parent and each issued and outstanding Share immediately prior to the effective time of the Merger
(other than (i) Shares held by Parent, Merger Sub or the Company or any direct or indirect wholly owned subsidiary or Parent, Merger Sub or the Company, and (ii) Dissenting Shares (as defined in the Agreement)(the Shares referred to in
clauses (i) and (ii), together with Shares held by any affiliate of Parent, the Excluded Shares)) will be converted into the right to receive $232.00 per Share in cash, without interest (the $232.00 per Share consideration to be
paid in the Tender Offer and the Merger, the Consideration). The terms and conditions of the Transaction are more fully set forth in the Agreement.
We have acted as financial advisor to the Board of Directors of the Company in connection with the Transaction. We will receive a fee for our
services in connection with the Transaction, a portion of which is payable upon the rendering of this opinion and a substantial portion of which is contingent upon the consummation of the Transaction. In addition, the Company has agreed to reimburse
certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement.
We are a securities
firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the past two years, we have not provided investment banking or other services to the Company,
Parent or Merger Sub for which we have received any compensation. We may provide investment banking and other services to or with respect to the
31 WEST 52ND STREET,
22ND FLOOR, NEW YORK, NY 10019
PHONE: (212) 380-2650 FAX:
(212) 380-2651 WWW.CENTERVIEWPARTNERS.COM
|
NEW YORK
LONDON
SAN FRANCISCO
LOS ANGELES |
The Board of Directors
Receptos, Inc.
July 14, 2015
Page
2
Company or Parent or their respective affiliates in the future, for which we may receive compensation. Certain (i) of our and our affiliates directors, officers, members and employees,
or family members of such persons, (ii) of our affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time
acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Parent, or any of their respective affiliates or any other party
that may be involved in the Transaction.
In connection with this opinion, we have reviewed, among other things: (i) an execution
copy of the Agreement; (ii) Annual Reports on Form 10-K of the Company for the years ended December 31, 2014 and December 31, 2013; (iii) the Registration Statement on Form S-1 of the Company (Registration No. 333-193074)
declared effective by the Securities and Exchange Commission (SEC) on January 8, 2014 and the Registration Statement filed by the Company with the SEC pursuant to Rule 462(b) on January 8, 2014; (iv) certain Quarterly
Reports on Form 10-Q of the Company; (v) certain publicly available research analyst reports for the Company; (vi) certain other communications from the Company to its stockholders; and (vii) certain internal information relating to
the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including certain financial forecasts, analyses and projections relating to the Company prepared by management of the Company and furnished to us by the
Company for purposes of our analysis (the Forecasts) (collectively, the Internal Data). We have also conducted discussions with members of the senior management and representatives of the Company regarding their assessment of
the Internal Data. In addition, we reviewed publicly available financial and stock market data for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business
that we deemed relevant. We also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that we deemed relevant and conducted such other financial
studies and analyses and took into account such other information as we deemed appropriate.
We have assumed, without independent
verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by us for purposes of this opinion and have, with your
consent, relied upon such information as being complete and accurate. In that regard, we have assumed, at your direction, that the Internal Data (including, without limitation, the Forecasts) has been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company as to the matters covered thereby and we have relied, at your direction, on the Internal Data for purposes of our analysis and this opinion. We express no view or opinion
as to the Internal Data or the assumptions on which it is based. In addition, at your direction, we have not made any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of
the Company, nor have we been furnished with any such evaluation or appraisal, and we have not been asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. We have assumed, at your direction, that the
final executed Agreement will not differ in any respect material to our analysis or this opinion from the execution copy reviewed by us. We have also assumed, at your direction, that the Transaction will be consummated on the terms set forth in the
Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to our analysis or
this opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the
effect of which would be material to our analysis or this opinion. We have not evaluated and do not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as
to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. We are not legal, regulatory, tax or accounting advisors, and we express no opinion as to any legal,
regulatory, tax or accounting matters.
The Board of Directors
Receptos, Inc.
July 14, 2015
Page
3
We express no view as to, and our opinion does not address, the Companys underlying
business decision to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might engage.
This opinion is limited to and addresses only the fairness, from a financial point of view, as of the date hereof, to the holders of the Shares (other than Excluded Shares) of the Consideration to be paid to such holders pursuant to the Agreement.
We have not been asked to, nor do we express any view on, and our opinion does not address, any other term or aspect of the Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other
agreements or arrangements contemplated by the Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction
to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, we express no
view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in
connection with the Transaction, whether relative to the Consideration to be paid to the holders of the Shares pursuant to the Agreement or otherwise. Our opinion is necessarily based on financial, economic, monetary, currency, market and other
conditions and circumstances as in effect on, and the information made available to us as of, the date hereof, and we do not have any obligation or responsibility to update, revise or reaffirm this opinion based on circumstances, developments or
events occurring after the date hereof. Our opinion does not constitute a recommendation to any stockholder of the Company as to whether or not such holder should tender Shares in connection with the Tender Offer, or how such stockholder or other
person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.
Our financial
advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company (in their capacity as directors and not in any other capacity) in connection with and for purposes of its
consideration of the Transaction. The issuance of this opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.
Based upon and subject to the foregoing, including the various assumptions made, procedures followed, matters considered, and qualifications
and limitations set forth herein, we are of the opinion, as of the date hereof, that the Consideration to be paid to the holders of Shares (other than Excluded Shares) pursuant to the Agreement is fair, from a financial point of view, to such
holders.
Very truly yours,
/s/ Centerview Partners LLC
CENTERVIEW PARTNERS LLC
ANNEX II
SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW
RIGHTS OF APPRAISAL
Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in this section, the word stockholder means a holder of record of stock in a corporation; the words stock and share mean and
include what is ordinarily meant by those words; and the words depository receipt mean a receipt or other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of this
title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or § 264 of this title:
(1) Provided,
however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders
of the surviving corporation as provided in § 251(f) of this title.
(2) Notwithstanding paragraph (b)(1) of this section, appraisal
rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252,
254, 255, 256, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the
corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a
national securities exchange or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or
fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a., b. and c. of this section.
(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or
§ 267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(4) In the event of an amendment to a corporations certificate of incorporation contemplated by § 363(a) of this title,
appraisal rights shall be available as contemplated by § 363(b) of this title, and the procedures of this
section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as practicable, with the word amendment substituted for the words
merger or consolidation, and the word corporation substituted for the words constituent corporation and/or surviving or resulting corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the
corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with §
255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall
deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of this title, then either a
constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy
of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a merger approved pursuant to § 251(h) of this
title, within the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal
of such holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice
did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to § 251(h) of this
title, later than the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holders shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give
either notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed
and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of
the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named
party shall have the right to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under
subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person
may, in such persons own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition
was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved
by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the
Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted
in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from
the accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors.
Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders
entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholders certificates of stock to the
Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the
fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the
effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the
Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal
and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
Exhibit (a)(9)
Receptos, Inc.
3033 Science Park Road, Suite 300
San Diego, CA 92121
July 28, 2015
Dear Stockholder:
We are pleased to inform you
that, on July 14, 2015, Receptos, Inc. (Receptos) entered into a definitive Agreement and Plan of Merger (the Merger Agreement) with Celgene Corporation (Parent) and Strix Corporation, a wholly owned
subsidiary of Parent (Purchaser). In accordance with the Merger Agreement, Purchaser has commenced on July 28, 2015 a tender offer (the Offer) to purchase all of the outstanding shares of our common stock, par value
$0.001 per share (the Company Shares), other than any Cancelled Company Shares (as defined below), at a price per Company Share of $232.00, net to the holder thereof in cash, without interest (the Offer Price) and subject to
any withholding of taxes required by applicable law.
If successful, the Offer will be followed by the merger of Purchaser with and into
Receptos, with Receptos surviving the merger as a wholly owned subsidiary of Parent (the Merger). In the Merger, each Company Share then outstanding (other than any Company Shares (i) owned by Parent, Purchaser or Receptos or any
wholly owned subsidiary of Parent, Purchaser or Receptos (Cancelled Company Shares), (ii) irrevocably accepted for purchase pursuant to the Offer or (iii) owned by holders who have properly and validly perfected appraisal
rights under Delaware law) will be converted into the right to receive the Offer Price, without interest and subject to any withholding of taxes required by applicable law.
The Board of Directors of Receptos (the Receptos Board) unanimously: (i) determined that it is in the best interests of
Receptos and its stockholders to enter into, and approved and declared advisable, the Merger Agreement, (ii) approved the execution and delivery by Receptos of the Merger Agreement, the performance by Receptos of its covenants and agreements
contained in the Merger Agreement and the consummation of the Offer and the Merger upon the terms and subject to the conditions contained in the Merger Agreement, and (iii) resolved, subject to the terms and conditions set forth in the Merger
Agreement, to recommend that the Companys stockholders accept the Offer and tender their Company Shares pursuant to the Offer. Accordingly, and for the other reasons described in more detail in the enclosed copy of Receptos
Solicitation/Recommendation Statement on Schedule 14D-9, the Company Board recommends that Receptos stockholders accept the Offer and tender their Company Shares pursuant to the Offer.
Accompanying this letter is (i) a copy of Receptos Solicitation/Recommendation Statement on Schedule 14D-9,
(ii) Purchasers Offer to Purchase, dated July 28, 2015, which sets forth the terms and conditions of the Offer and (iii) a Letter of Transmittal containing instructions as to how to tender your Company Shares into the Offer.
We urge you to read the enclosed materials carefully. The Offer is scheduled to expire at 12:00 midnight, New York City time, at the end of the day on Monday, August 24, 2015, unless extended.
Sincerely,
Faheem Hasnain
President and Chief Executive Officer
Exhibit (e)(20)
AGREEMENT
This AGREEMENT
(the Agreement), dated as of July 14, 2015, is made and entered into by and between Receptos, Inc., a Delaware corporation (the Company), and William H. Rastetter, Ph.D. (the Rastetter).
WHEREAS, the Company, Celgene Corporation, a Delaware corporation (Parent), and Strix Corporation, a Delaware
corporation and direct wholly owned subsidiary of Parent (the Acquisition Sub), have entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which Acquisition Sub will commence a tender
offer to acquire all of the outstanding shares of common stock of the Company, and will then merge with and into the Company, with the Company as the surviving corporation of such merger (the Merger); and
WHEREAS, in connection with the Merger, the Company and Rastetter desire to enter into this Agreement with respect to the effect of the Merger
on the Payments (as defined below) received by Rastetter.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. |
Certain Payments by the Company. |
(a) Gross-Up Payment. If it
shall be determined that any Payment (as defined below) would be subject to the Excise Tax (as defined below), then Rastetter shall be entitled to receive an additional payment (the Gross-Up Payment) in an amount such that, after
payment by Rastetter of all taxes (and any interest or penalties imposed with respect to such taxes), including without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, but excluding any income taxes and penalties imposed pursuant to Section 409A of the Code, Rastetter retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Companys obligation to
make Gross-Up Payments under this Section 1 shall not be conditioned upon Rastetters termination of service.
(b) Determinations. Subject to the provisions of Section 1(c) below, all determinations required to be made under
this Section 1, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young LLP (the
Accounting Firm). The Accounting Firm shall provide detailed supporting calculations both to the Company and Rastetter within 15 business days of the receipt of notice from Rastetter that there has been a Payment or such
earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and Rastetter. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will not have been made by the
Company should have been made (the Underpayment), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to
Section 1(c) below and Rastetter thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of Rastetter.
(c) Claims by the IRS. Rastetter shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after Rastetter is informed in
writing of such claim. Rastetter shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Rastetter shall not pay such claim prior to the expiration of the 30-day period following the date on
which Rastetter gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Rastetter in writing prior to the expiration of such period that the
Company desires to contest such claim, Rastetter shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to effectively contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest, and shall indemnify and hold Rastetter harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions of this Section 1(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings, and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on behalf of Rastetter and
direct Rastetter to sue for a refund or to contest the claim in any permissible manner, and Rastetter agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction, and in one or more
appellate courts, as the Company shall determine; provided, however, that, if the Company pays such claim and directs Rastetter to sue for a refund, the Company shall indemnify and hold Rastetter harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties) imposed with respect to such payment or with respect to any imputed income in connection with such payment;
2
and provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Rastetter with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the Companys control of the contest shall be limited to issues with respect to which the Gross-Up Payment would be payable hereunder, and Rastetter shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) Refunds. If, after the receipt by Rastetter of a Gross-Up Payment or payment by the Company of an amount on
Rastetters behalf pursuant to Section 1(c) above, Rastetter becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, Rastetter shall (subject to the
Companys complying with the requirements of Section 1(c) above, if applicable) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after payment
by the Company of an amount on Rastetters behalf pursuant to Section 1(c) above, a determination is made that Rastetter shall not be entitled to any refund with respect to such claim and the Company does not notify Rastetter in writing of
its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Payment of the Gross-Up Payment. Any Gross-Up Payment, as determined pursuant to this Section 1, shall be paid
by the Company within five days of the receipt of the Accounting Firms determination; provided that the Gross-Up Payment shall in all events be paid no later than the end of Rastetters taxable year next following Rastetters
taxable year in which the Excise Tax (and any income or other related taxes or interest or penalties thereon) on a Payment are remitted to the Internal Revenue Service or any other applicable taxing authority or, in the case of amounts relating to a
claim described in Section 1(c) above that does not result in the remittance of any federal, state, local, and foreign income, excise, social security, and other taxes, the calendar year in which the claim is finally settled or otherwise
resolved.
(f) Certain Definitions. The following terms shall have the following meanings for purposes of this
Agreement:
(i) Excise Tax shall mean the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such excise tax.
(ii) A Payment shall mean any
payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of Rastetter, whether paid or payable pursuant to this Agreement or otherwise.
2. |
In the event the Merger Agreement is terminated prior to consummation of the Merger, this Agreement shall automatically and without further action terminate. |
3
3. |
This Agreement shall be administered, interpreted and enforced under the internal laws of the State of California without regard to the principles of conflicts of laws thereof. |
4. |
If any provision of this Agreement is determined to be invalid or unenforceable, it shall be adjusted rather than voided, to achieve the intent of the parties to the extent possible, and the remainder of the Agreement
shall be enforced to the maximum extent possible. |
5. |
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. The parties hereto agree to accept a
signed facsimile copy of this Agreement as a fully binding original. |
(Signature page follows)
4
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
|
|
|
RECEPTOS, INC., |
a Delaware corporation |
|
|
By |
|
/s/ Faheem Hasnain |
Faheem Hasnain |
President & Chief Executive Officer |
|
RASTETTER |
|
|
By |
|
/s/ William H. Rastetter, Ph.D. |
William H. Rastetter, Ph.D. |
S-1
Exhibit (e)(21)
Excerpts from the Receptos, Inc. Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 17, 2015.
Board of Directors
The names of
our directors, their ages and their positions with the Company as of April 2, 2015 are set forth below.
|
|
|
|
|
Name |
|
Age |
|
Position(s) |
William H. Rastetter, Ph.D. |
|
67 |
|
Chairman of the Board of Directors |
Kristina Burow |
|
41 |
|
Director |
Mary Lynne Hedley, Ph.D. |
|
52 |
|
Director |
Richard A. Heyman, Ph.D. |
|
57 |
|
Director |
Erle T. Mast |
|
52 |
|
Director |
Mary Szela |
|
51 |
|
Director |
S. Edward Torres |
|
52 |
|
Director |
Faheem Hasnain |
|
56 |
|
Director, President and Chief Executive Officer |
William H. Rastetter, Ph.D. has been a director and has served as Chairman of the Board since May 2009,
and from May 2009 to November 2010 he was our Acting Chief Executive Officer. He is a Co-Founder of Receptos, Inc. Dr. Rastetter also serves as the Chairman of Illumina, Inc., Chairman of Neurocrine Biosciences, Inc., Chairman of Fate
Therapeutics Inc., as lead outside director of Cerulean Pharma Inc., as a director of Regulus Therapeutics Inc., and as an advisor to Leerink Partners, a healthcare focused investment bank. Dr. Rastetter served as a Partner at the venture
capital firm of Venrock Associates from 2006 to February 2013. Prior to his tenure with us and Venrock, Dr. Rastetter was Executive Chairman of Biogen Inc., a biotechnology company specializing in neurological disorders, autoimmune disorders
and cancer, from the merger of the two companies (Biogen and Idec Pharmaceuticals) in 2003 through the end of 2005. He joined Idec Pharmaceuticals at its founding in 1986 and served as Chairman and Chief Executive Officer. Prior to Idec, he was
Director of Corporate Ventures at Genentech, Inc. and served as well in a scientific capacity at Genentech. Dr. Rastetter held various faculty positions at the Massachusetts Institute of Technology and Harvard University and is an Alfred P.
Sloan Fellow. Dr. Rastetter holds an S.B. in Chemistry from the Massachusetts Institute of Technology and received his M.A. and Ph.D. in Chemistry from Harvard University. Our Board of Directors believes that Dr. Rastetter is qualified to
serve on our Board of Directors due to his extensive experience in the biotechnology industry, his broad leadership experience with Idec Pharmaceuticals and on several boards, and his experience with financial matters.
Kristina Burow has served as one of our directors since February 2010 and is one of our Co-Founders. She is also a Managing Director
with ARCH Venture Partners, joining the firm in 2002. Ms. Burow is a director of Lycera Corp., AgBiome, LLC, BlackThorn Therapeutics, Cenexys, Inc., Kilimanjaro Energy, Trelys, Inc. and Scholar Rock, LLC. Prior to ARCH, Ms. Burow was an
Associate with the Novartis BioVenture Fund in San Diego where she was involved in numerous investments in the life sciences sector. As an early employee at the Genomics Institute of the Novartis Research Foundation (GNF), she directed Chemistry
Operations and was active in Business Development where she helped create numerous companies as spin outs from GNF. Ms. Burow holds a M.B.A. from the University of Chicago, a M.A. in Chemistry from Columbia University and a B.S. in Chemistry
from the University of California, Berkeley. Our Board of Directors believes that Ms. Burow is qualified to serve on our Board of Directors due to her extensive experience in the biotechnology industry, and her financial expertise with life
sciences companies.
Mary Lynne Hedley, Ph.D. has served as one of our directors since April 2014. Dr. Hedley has served as
President of Tesaro, Inc. and as a member of its board of directors since co-founding Tesaro in March 2010. From July 2009 to February 2010, Dr. Hedley served as Executive Vice President of Operations and Chief Scientific Officer of Abraxis
BioScience, Inc., a biotechnology company. Dr. Hedley served as Executive Vice President of Eisai Corporation of North America from January 2008 until July 2009, following Eisai Co. Ltd.s acquisition of MGI Pharma, Inc. in January 2008.
Dr. Hedley served in various positions at MGI Pharma from 2004 through its acquisition in January 2008, most recently as Executive Vice President and Chief Scientific Officer. Prior to that,
Dr. Hedley co-founded and served as the President and Chief Executive Officer of Zycos, Inc., a biotechnology company, which was acquired by MGI Pharma in 2004. Prior to co-founding Zycos,
Dr. Hedley completed two consecutive postdoctoral fellowships at Harvard University and earned a B.S. in microbiology from Purdue University and a Ph.D. in Immunology from the University of Texas, Southwestern Medical Center. She also currently
sits on the board of Youville Place. Our Board of Directors believes that Dr. Hedley has the qualifications and skills to serve on our Board of Directors due to her extensive operating and management experience with life sciences companies, as
well as her educational background.
Richard A. Heyman, Ph.D. has served as one of our directors since July 2014. Dr. Heyman
co-founded and served as Chief Executive Officer of Seragon Pharmaceuticals, Inc. from 2013 until its acquisition by Genentech, a member of the Roche Group, in August 2014. From 2009 to 2013, Dr. Heyman was the Chief Executive Officer and
co-founder of Aragon Pharmaceuticals until its acquisition by Johnson & Johnson. Previously, Dr. Heyman co-founded and served as Chief Scientific Officer of X-Ceptor Therapeutics, a company that developed compounds targeting nuclear
receptors for the treatment of metabolic diseases. X-Ceptor was acquired by Exelixis in 2004. Before X-Ceptor, he was Vice President of Research at Ligand Pharmaceuticals. Dr. Heyman is a member of the board of directors of Organovo Holdings,
Inc. Dr. Heyman was an NIH postdoctoral fellow and staff scientist at the Salk Institute for Biological Studies and received a Ph.D. in pharmacology from the University of Minnesota and a B.S. in chemistry from the University of Connecticut.
Our Board of Directors believes that Dr. Heyman is qualified to serve on our Board of Directors due to his successful operating and management track record with life sciences companies.
Erle T. Mast has served as one of our directors since July 2013. Mr. Mast is a co-founder of Clovis Oncology, Inc. and has served
as its Executive Vice President and Chief Financial Officer since 2009. Previously, Mr. Mast served in the same role at Pharmion Corporation, beginning in 2002. From 1997 through 2002, Mr. Mast worked for Dura Pharmaceuticals, Inc. and its
successor, Elan Corporation. From 2000 to 2002, he served as Chief Financial Officer for the Global Biopharmaceuticals business unit for Elan. From 1997 to 2000, Mr. Mast served as Vice President of Finance for Dura Pharmaceuticals. Prior to
that, Mr. Mast was a partner with Deloitte & Touche, LLP. Mr. Mast also serves on the board of directors of Zogenix, Inc., and served as a director of Somaxon Pharmaceuticals, Inc. Mr. Mast received a B.Sc. in business
administration from California State University Bakersfield. Our Board of Directors believes that Mr. Mast is qualified to serve on our Board of Directors due to his extensive financial expertise with life sciences companies.
Mary Szela has served as one of our directors since July 2014. Ms. Szela was appointed Chairperson of the Board of Melinta
Therapeutics, Inc. in January 2013 and transitioned to Chief Executive Officer in April 2013. From 2010 to 2012, Ms. Szela was Senior Vice President of Global Strategic Marketing and Services at Abbott Laboratories Pharmaceutical Products Group
and also served as its Senior Vice President of U.S. Pharmaceuticals from 2008 to 2009. Prior to this role, she served more than two decades in senior leadership roles at Abbott Laboratories. Ms. Szela is also a member of the board of directors
of Novo Nordisk A/S, Coherus BioSciences, Inc., and Suneva Medical, Inc. Ms. Szela earned a B.S. in nursing and a Master of Business Administration from the University of Illinois. Our Board of Directors believes that Ms. Szela is
qualified to serve on our Board of Directors due to her substantial experience in the biotechnology industry and her extensive leadership experience with Abbott Laboratories.
S. Edward Torres has served as one of our directors since November 2009. He has been a Managing Director of Lilly Ventures Fund I, LLC,
a venture capital fund since 2009. From 2006 to 2009, he was a Managing Director of Lilly Ventures while Lilly Ventures was a subsidiary of Eli Lilly and Company. Since co-founding Lilly Ventures, he has led the investments in, and previously served
on the boards of, Serenex (acquired by Pfizer), Conforma Therapeutics (acquired by Biogen Idec) and Cabrellis Pharmaceuticals (acquired by Pharmion Corporation). Mr. Torres currently sits on the boards of GlobeImmune Inc., Innocrin
Pharmaceuticals and Viamet Pharmaceuticals as well as various non-profit institutions. Prior to joining Lilly Ventures, he had a diverse set of experiences throughout the domestic and international pharmaceutical businesses including operational
finance, planning, M&A, business development and global marketing roles. Mr. Torres received a B.A. from Creighton University and a M.B.A. from the University of Michigan Business School, where he was a Consortium Fellow. Our Board of
Directors believes that Mr. Torres is qualified to serve on our Board of Directors due to his extensive experience within the field of drug discovery and development, his broad leadership experience on various boards, and his financial
expertise with life sciences companies.
Faheem Hasnain has served as our President, Chief Executive Officer and one of our
directors since November 2010. Prior to joining us, Mr. Hasnain was the President and Chief Executive Officer and a director of Facet Biotech Corporation, a biology driven antibody company with a focus in multiple sclerosis and oncology. He
held that position from December 2008 until the companys acquisition by Abbott Laboratories in April 2010. Previously, Mr. Hasnain was President, Chief Executive Officer and a director of PDL BioPharma, Inc. from October 2008 until Facet
Biotech was spun off from PDL BioPharma in December 2008. From October 2004 to September 2008, Mr. Hasnain served at Biogen Inc., most recently as Executive Vice President in charge of the oncology/rheumatology strategic business unit. Prior to
Biogen, Mr. Hasnain held roles with Bristol Myers Squibb, where he was President of the Oncology Therapeutics Network, and for 14 years at GlaxoSmithKline and its predecessor organizations. He has been Chairman of the Board of Sente, Inc. since
2008 and Chairman of the Board of Tocagen Inc. since November 2014. He previously served as a member of the board of directors of Ambit Biosciences Corporation, Seragon Pharmaceuticals, Tercica, Inc., Aragon Pharmaceuticals and Somaxon
Pharmaceuticals, Inc. Mr. Hasnain received a B.H.K. and B.Ed. from the University of Windsor Ontario in Canada. Our Board of Directors believes that Mr. Hasnain is qualified to serve on our Board of Directors due to his years of experience
with drug discovery and development.
Executive Officers and Key Employees
The names of our executive officers and other key employees, their ages and positions within the Company as of April 17, 2015 are set
forth below.
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|
|
|
|
Name |
|
Age |
|
Position(s) |
Faheem Hasnain |
|
56 |
|
President, Chief Executive Officer and Director |
Graham Cooper |
|
45 |
|
Chief Financial Officer |
Sheila Gujrathi, M.D. |
|
44 |
|
Chief Medical Officer |
Marcus F. Boehm, Ph.D. |
|
55 |
|
Chief Technology Officer and Co-Founder |
Robert J. Peach, Ph.D. |
|
59 |
|
Chief Scientific Officer and Co-Founder |
Christian Waage |
|
48 |
|
Senior Vice President and General Counsel |
Chrysa Mineo |
|
48 |
|
Senior Vice President, Corporate Development |
Mr. Hasnains biographical information is set forth above.
Graham Cooper joined us as Chief Financial Officer in February 2013. Prior to joining us, during 2012, Mr. Cooper was the
Executive Vice President, Finance and Chief Financial Officer of Geron Corporation, a biopharmaceutical company focused on cancer therapies. From 2006 until 2011, Mr. Cooper served as Senior Vice President, Chief Financial Officer and Treasurer
of Orexigen Therapeutics, Inc., a biotechnology company focused on obesity. From 1999 to 2006, Mr. Cooper held positions of increasing responsibility including Director, Health Care Investment Banking, at Deutsche Bank Securities, where he was
responsible for executing and managing a wide variety of financing and merger and acquisition transactions in the life sciences field. From August 1992 to January 1995, he worked as an accountant at Deloitte & Touche, and was previously a
C.P.A. Mr. Cooper has served on the board of directors of Celladon Corporation since September 2013. Mr. Cooper holds a B.A. in Economics from the University of California at Berkeley and an M.B.A. from the Stanford Graduate School of
Business.
Sheila Gujrathi, M.D. has served as our Chief Medical Officer since June 2011. She joined us from Bristol Myers Squibb
where she was Vice President of the Global Clinical Research Group in Immunology from 2008 to 2011. Prior to joining BMS, Dr. Gujrathi worked at Genentech where she held roles of increasing responsibility in the Immunology, Tissue Growth and
Repair clinical development group from 2002 to 2008. From 1999 to 2002, Dr. Gujrathi was a management consultant at McKinsey & Company in the healthcare practice where she provided strategic advice on a variety of projects in the
healthcare and pharmaceutical industry. Dr. Gujrathi received her B.S. with highest distinction in Biomedical Engineering and M.D. from Northwestern University in their accelerated Honors Program in Medical Education. She completed her Internal
Medicine Internship and Residency at Brigham and Womens Hospital, Harvard Medical School and is board certified in internal medicine. She received additional training at University of California, San Francisco and Stanford University in their
Allergy and Immunology Fellowship Program.
Marcus F. Boehm, Ph.D. has served as our Chief Technology Officer since October 2011, as
well as our Vice President of Chemistry from May 2009 to October 2011, and he is a Co-Founder. From 2007 to 2009, Dr. Boehm served as the Vice President of Chemistry for Apoptos, Inc., which we acquired in May 2009. From 2006 to 2007,
Dr. Boehm held the position of Senior Director of Chemistry at Biogen Inc. with responsibility for multiple medicinal chemistry programs and served as the head of chemistry for the San Diego site. Dr. Boehm formerly served as Vice
President of Chemistry at Conforma Therapeutics until its acquisition by Biogen Inc. in 2006. Prior to joining Conforma, Dr. Boehm held various positions with progressing responsibility in medicinal chemistry at Ligand Pharmaceuticals, where he
led chemistry efforts on multiple intracellular receptor programs. Dr. Boehm received a B.A. in Chemistry from the University of California, San Diego and a Ph.D. in Chemistry from State University of New York Stony Brook, and completed a
National Institutes of Health Postdoctoral Fellowship at Columbia University.
Robert J. Peach, Ph.D. has served as our Chief
Scientific Officer since October 2011, as well as our Vice President of Biology from May 2009 to October 2011, and he is a Co-Founder. From 2007 to 2009, Dr. Peach co-founded and served as the Vice President of Biology for Apoptos, Inc., which
we acquired in May 2009. From 2005 to 2007, Dr. Peach was Senior Director of Oncology Discovery at Biogen Inc. where he had responsibility for several bicoastal research programs. From 2001 to 2005, Dr. Peach served as Director of Antibody
Discovery and Tumor Immunology at IDEC Pharmaceuticals and at the merged Biogen Inc. where he worked on developing new autoimmune therapeutic opportunities. Prior to joining Biogen Inc., Dr. Peach held several research positions with increasing
responsibility at Bristol Myers Squibb from 1991 to 2000. He received his B.S. and M.S. (1st class honors) from the University of Canterbury and a Ph.D. in Biochemistry from the University of Otago, New Zealand.
Christian Waage has served as our Senior Vice President and General Counsel since November 2013. He joined Receptos from Websense Inc.,
where he served as Vice President and General Counsel from July 2012 until its acquisition in August 2013. Prior to Websense, Mr. Waage served as Vice President and General Counsel of Ardea Biosciences, Inc. from March 2008 until its
acquisition in July 2012. Prior to Ardea Biosciences, Mr. Waage practiced law for over a decade at DLA Piper, where he was a partner. He received a J.D. from the University of San Diego School of Law and a B.A. in Economics from the University
of California, San Diego.
Chrysa Mineo has served as our Senior Vice President, Corporate Development since January 2014. She
previously served as our Vice President, Corporate Development beginning in July 2009. She is responsible for our collaborations with AbbVie, Ono and Lilly and our partnership with Janssen Pharmaceuticals. Ms. Mineo has extensive experience in
the biotechnology industry, including in roles of increasing responsibility from 1997 to 2009, leading to Senior Director of Business Development for Neurocrine Biosciences. Prior to Neurocrine, Ms. Mineo served in various capacities in
research, marketing and business development for such companies as Amgen, DNAX Research Institute, Schering Plough and Baxter Biotech. She began her career in 1987 with Amgen as a member of a cellular biology team. Ms. Mineo holds a B.S. in
Zoology from the University of California, Davis and received her M.B.A. from Duke Universitys Fuqua School of Business.
Corporate Governance
Code of Ethics
We have
adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct
and Ethics is available on our website at www.receptos.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on our website (i) the nature of any amendment to the code that applies to our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the code that is granted to
one of these specified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person who is granted the waiver and the date of the waiver.
Board of Directors and Committees
Meetings of the
Board of Directors
The Board of Directors met 12 times during the last fiscal year. All directors who served in 2014
attended at least 75% of the aggregate number of meetings of the Board and of the committees on which they served, held during the portion of the last fiscal year for which they were directors or committee members, respectively.
Board Leadership Structure
Our
Board of Directors is currently chaired by Dr. Rastetter, who has authority, among other things, to call and preside over Board meetings, including meetings of the independent directors, to set meeting agendas and to determine materials to be
distributed to the Board. Accordingly, the Board Chairman has substantial ability to shape the work of our Board. As a general policy, our Board of Directors believes that separation of the positions of Chairman and Chief Executive Officer
reinforces the independence of the Board of Directors from management, creates an environment that encourages objective oversight of managements performance and enhances the effectiveness of the Board of Directors as a whole, including in the
area of risk oversight. As such, Mr. Hasnain serves as our President and Chief Executive Officer while Dr. Rastetter serves as our Chairman of the Board of Directors, but is not an officer. We expect and intend the positions of Chairman of
the Board of Directors and Chief Executive Officer to continue to be held by separate individuals in the future.
Role of the Board in Risk
Oversight
One of the key functions of our Board of Directors is informed oversight of our risk management process. The Board of
Directors does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing committees of our Board of Directors that address
risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to consider and discuss our major
financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors
non-financial risks, including compliance with legal and regulatory requirements. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing
illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Board Committees
Audit
Committee. The Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act), to oversee our corporate
accounting and financial reporting processes and audits of its financial statements. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the
independent auditors; determines and approves the engagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors; reviews and approves the
retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on our audit engagement team as required by law; reviews and approves or rejects transactions
between us and any related persons; confers with management and the independent auditors regarding the effectiveness of internal controls over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention
and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets
to review our annual audited financial statements and quarterly financial statements with management and the independent auditor, including a review of our disclosures under Managements Discussion and Analysis of Financial Condition and
Results of Operations.
The Audit Committee is currently composed of three directors: Mr. Torres (chair), Dr. Rastetter
and Mr. Mast. The Audit Committee met seven times during the 2014 fiscal year. The Audit Committee has adopted a written charter that is available to stockholders on our website at www.receptos.com.
The Board of Directors reviews the NASDAQ listing standards definition of independence for Audit
Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the NASDAQ listing standards). The Board of Directors has
also determined that each of Messrs. Torres and Mast and Dr. Rastetter qualify as an audit committee financial expert, as defined in applicable SEC rules. The Board made a qualitative assessment of Mr. Torres level of
knowledge and experience based on a number of factors, including his formal education, operational finance background and broad financial experience with life sciences companies. The Board also made a qualitative assessment of Mr. Masts
level of knowledge and experience based on a number of factors, including his formal education, his experience as a chief financial officer for a public company and his service as a Partner with Deloitte & Touche LLP. The Board also made a
qualitative assessment of Dr. Rastetters level of knowledge and experience based on a number of factors, including his formal education, his experience as a chief executive officer of a public company and his deep experience with
financial matters.
Compensation Committee. The Compensation Committee is currently composed of three directors: Ms. Burow
(chair), Dr. Hedley and Mr. Torres. Dr. Hedley became a member of the Compensation Committee in July 2014. Our Board of Directors has determined that each of the Compensation Committee members is an independent director under NASDAQ
Marketplace Rules. The Compensation Committee met five times during the 2014 fiscal year. The Compensation Committee has adopted a written charter that is available to stockholders on our website at www.receptos.com.
The Compensation Committee of the Board of Directors acts on behalf of the Board to review, adopt and/or recommend for adoption and oversee
our compensation strategy, policies, plans and programs, including:
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establishment of corporate and individual performance objectives relevant to the compensation of our executive officers, directors and other senior management and evaluation of performance in light of these stated
objectives; |
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review and recommendation to the Board for approval of the compensation and other terms of employment or service, including severance and change-in-control arrangements of our Chief Executive Officer and the other
executive officers and directors; and |
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administration of our equity compensation plans, pension and profit-sharing plans, deferred compensation plans and other similar plan and programs. |
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee of the Board of Directors is
responsible for identifying, reviewing and evaluating candidates to serve as our directors (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, recommending to the Board for selection candidates for
election to the Board of Directors, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of the Board and monitoring our adherence to the Code of Business Conduct and Ethics.
The Nominating and Corporate Governance Committee is currently composed of four directors: Dr. Rastetter (chair), Ms. Burow,
Dr. Heyman and Ms. Szela. Dr. Heyman and Ms. Szela became members of the Nominating and Corporate Governance Committee concurrently with their appointment to the Board in July 2014. All members of the Nominating and Corporate
Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing standards). The Nominating and Corporate Governance Committee met three times during the 2014 fiscal year. The Nominating and
Corporate Governance Committee has adopted a written charter that is available to stockholders on our website and www.receptos.com.
The
Nominating and Corporate Governance Committee believes that candidates for director, both individually and collectively, can and do provide the integrity, experience, judgment, commitment (including having sufficient time to devote to us and level
of participation), skills, diversity and expertise appropriate for us. In assessing the directors, both individually and collectively, the Nominating and Corporate Governance Committee may consider the current needs of the Board and of us to
maintain a balance of knowledge, experience and capability in various areas. However, the Nominating and Corporate Governance Committee retains the right to modify these
qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of
stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board and us, to maintain a
balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors overall service to us during their terms,
including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors independence. In the case of new director candidates, the Nominating and
Corporate Governance Committee also determines whether the nominee is independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if
necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate
Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to
discuss and consider the candidates qualifications and then selects a nominee for recommendation to the Board by majority vote.
During 2014, the Nominating and Corporate Governance Committees efforts led to the recommendation of three new qualified candidates to
serve on our Board of Directors, Drs. Hedley and Heyman and Ms. Szela, all of whom joined our Board of Directors in 2014.
The
Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the
minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for
election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: 3033 Science Park Road, Suite 300, San Diego, CA 92121, Attn: Secretary, no later than the 90th day
and no earlier than the 120th day prior to the one-year anniversary of the date of the proxy statement for the preceding years annual meeting. Submissions must include (1) the name and address of the stockholder on whose behalf the
submission is made; (2) the number of shares that are owned beneficially by such stockholder as of the date of the submission; (3) a description of all arrangements or understandings between such stockholder and the proposed candidate
pursuant to which the proposed nomination is being made; (4) the full name, age and business and residence addresses of the proposed candidate; (5) a description of the proposed candidates business experience for at least the
previous five years; (6) the number of shares that are owned beneficially by the proposed candidate; (7) any other information relating to the proposed candidate that is required to be disclosed in solicitations for proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder; (8) the nominees written consent to serve, if elected; and (9) any other information required by our
Bylaws. We may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director or that could be material to a reasonable
stockholders understanding of the independence, or lack thereof, of such proposed nominee.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based
solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2014, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied with.
Compensation Discussion and Analysis
Executive Summary
The Compensation
Committee designs our executive compensation programs to reward corporate and individual performance against clearly defined goals and align the long-term interests of our executive officers with our stockholders. We compensate our executive
officers with a mix of salary, employee benefits, annual cash incentive compensation and long-term equity incentive compensation. Overall, over eighty percent (80%) of our Named Executive Officers compensation is targeted for delivery in
the form of incentive compensation. As a biopharmaceutical company without a product approved for marketing, our corporate goals focus on the timely development and testing of our two key therapeutic candidates, ozanimod (formerly RPC1063) and
RPC4046, the advancement of a pre-clinical stage development program and the strategic use of fundraising to support our balance sheet. Our incentive compensation programs are informed by these corporate goals.
In order to retain our successfully integrated leadership team, we design our executive compensation program to be competitive with market
standards. The Compensation Committee generally looks to the 50th percentile of our peer group for cash compensation and the 50th through 75th percentile of our peer group for equity compensation in checking our compensation levels against the
market. However, our compensation targets are not bound strictly to market rates. Each of our executives compensation is ultimately personalized based on corporate and individual accomplishments, personal experience and skillsets as well as
the executives responsibilities under our management framework.
Our compensation to executive officers for 2014 is reflective of a
highly successful year at a critical juncture in our corporate development. We executed and exceeded a number of corporate funding and clinical development milestones, including:
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Completed the Phase 2 portion of the RADIANCE study for use of ozanimod in treatment of patients with relapsing multiple sclerosis. Positive results of such Phase 2 portion not only met primary and secondary efficacy
endpoints, but also indicated differentiated safety characteristics. |
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Completed the induction portion of the Phase 2 TOUCHSTONE study for use of ozanimod in treatment of patients with ulcerative colitis. Positive results of such induction portion of TOUCHSTONE met primary and secondary
efficacy endpoints, and echoed safety and tolerability indicia of the Phase 2 portion of the RADIANCE study. |
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Proceeded with the Phase 3 portion of the RADIANCE study and commenced SUNBEAM, a second Phase 3 trial for use of ozanimod in treatment of patients with relapsing multiple sclerosis. |
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Completed three (3) secondary stock offerings to the public that raised approximately $700 million in net proceeds. |
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Initiated the Phase 2 HEROES study for use of RPC4046 in treatment of patients with eosinophilic esophagitis. |
During 2014, the Compensation Committee and Board, as applicable, approved salary increases, annual cash incentive targets and criteria and
annual refresher equity grants for our Named Executive Officers. In January 2014, the Board enacted annual salary increases for our executive officers, including Named Executive Officers, pursuant to a proposal of the Compensation Committee. In
April 2014, the Compensation Committee established performance criteria and weighting for our 2014 annual cash incentive program after having previously approved the annual cash incentive targets for each Named Executive Officer in December 2013.
Awards under the 2014 cash incentive program were approved and paid at above-target levels in February 2015. In April 2014, the Board granted annual stock option awards to the Companys executive officers, including Named Executive Officers, on
terms proposed by the Compensation Committee. These stock options were priced at fair market value and subject to four (4)-year graded vesting with a one (1)-year cliff. Stock options were determined to be the most appropriate form of equity award
considering our pre-commercial stage of development and peer company practices.
Compensation Philosophy and Objectives
The Compensation Committee believes that the compensation of our executive officers, including our Named Executive Officers, should:
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Encourage creation of stockholder value and achievement of strategic corporate objectives; |
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Integrate compensation with our annual and long-term corporate objectives and strategy, and focus executive behavior on the fulfillment of those objectives; |
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Provide a competitive total compensation package that enables us to attract and retain, on a long-term basis, qualified personnel; and |
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Provide fair compensation consistent with internal compensation programs. |
Implementing Our Objectives
Role of Compensation Committee. The Compensation Committee designs, administers and interprets our executive compensation
and benefits policies, including our cash incentive and equity incentive plans. Our Board has authority to review and approve the proposals of our Compensation Committee on executive compensation matters. The performance of our Chief Executive
Officer (CEO) is reviewed by the Compensation Committee in light of our corporate goals. Our Compensation Committee considers input from our CEO to assess the performance of our other executive officers and determine their compensation.
From time to time, our Human Resources department provides market data and other information to assist the Compensation Committee in determining appropriate compensation levels for our executives.
Role of Compensation Consultant. The Compensation Committee directly retained the services of Radford, an Aon Hewitt Company (Radford),
as an independent compensation consultant to advise on executive compensation for 2014. Radford supports the Compensation Committee on various topics relating to executive compensation, including selection of our peer group companies, review of our
equity compensation program, competitive assessment of pay levels and analysis of the structure of our executive incentive compensation programs. The Compensation Committee conducted an independence review of Radford and determined that there was no
conflict of interest that would prevent Radford from being objective in its work for the Compensation Committee. In making this determination, the Compensation Committee considered the fees paid to Radford or any affiliate of its parent company Aon
plc, Radfords policies and procedures in place to prevent conflicts of interest, the absence of any Radford advisors who own shares of our common stock, and the absence of any business or material personal relationships between the Radford
lead advisor and our executives.
Peer Group Benchmarking
While the Compensation Committee did not use market benchmarks to determine executive compensation for 2014, the Committee reviewed market
reference data to evaluate the competitiveness of each component of our Named Executive Officers compensation and to determine whether the total compensation paid to each of our Named Executive Officers was reasonable in the aggregate. The
Compensation Committee reviewed two types of market references for this purpose: a select peer group of 20 biotechnology and pharmaceutical companies and the Radford Global Life Sciences survey. The peer group for executive compensation purposes was
chosen based on the following characteristics: comparable stage in key product and corporate development, broadly similar size in market capitalization value and similar growth and performance potential. This peer group was approved by the Board in
July 2013 and includes the following companies:
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ACADIA Pharmaceuticals |
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Enanta |
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Regulus Therapeutics |
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AcelRx Pharmaceuticals |
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Endocyte |
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Sangamo BioSciences |
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Amicus Therapeutics |
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Intercept Pharmaceuticals |
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Synta Pharmaceuticals |
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Anacor Pharmaceuticals |
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KaloBios Pharmaceuticals |
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Threshold Pharmaceuticals |
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ChemoCentryx |
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New Link Genetics |
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Transcept Pharmaceuticals |
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Durata Therapeutics |
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OncoGenex |
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Trius Therapeutics |
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Dyax |
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Orexigen |
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Key Elements of Executive Compensation
Our executive officers compensation includes three primary components: base salary, annual cash incentive awards, and long-term
equity-based incentive awards. Our compensation mix is weighted towards incentive compensation (generally, in excess of 80% of target compensation is incentive-based compensation) in order to best align executive and shareholder interests. Beyond
these three key elements of compensation, we also provide our executive officers a variety of benefits that are available generally to all full-time regular employees.
Base Salary. Our base salaries are designed to attract and retain qualified personnel by providing a consistent cash flow throughout
the year as compensation for performance of day-to-day responsibilities. Base salaries for our executive officers are established based on the scope of their responsibilities, their performance, and their prior relevant background, training and
experience. Salary levels also take into account compensation paid by competing companies for similar positions and the overall market demand for those executive officers at the time of hire. The Compensation Committee reviews each executive
officers salary at the beginning of each year to determine what, if any, changes are appropriate based on the applicable executives contributions and responsibilities over the prior 12 months and any change in competitive market pay
levels.
In January 2014, the Compensation Committee proposed, and the Board adopted, the 2014 base salaries for our executive officers,
including Named Executive Officers. Consistent with market trends, base salary in 2014 for each Named Executive Officer was increased by 3% from the 2013 salary levels that became effective after our initial public offering.
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Name |
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2013 Post-IPO Base Salary (effective September 17, 2013) |
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2014 Base Salary |
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Total% Increase Over 2013 Post-IPO Base Salary |
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Faheem Hasnain |
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$ |
519,500 |
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$ |
535,085 |
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3.0 |
% |
Graham Cooper* |
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$ |
328,500 |
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$ |
337,329 |
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2.7 |
% |
Sheila Gujrathi, M.D. |
|
$ |
370,000 |
|
|
$ |
381,100 |
|
|
|
3.0 |
% |
Marcus F. Boehm, Ph.D. |
|
$ |
308,200 |
|
|
$ |
317,446 |
|
|
|
3.0 |
% |
Robert J. Peach, Ph.D. |
|
$ |
308,200 |
|
|
$ |
317,446 |
|
|
|
3.0 |
% |
* |
Mr. Coopers 2014 Base Salary increase was pro-rated to reflect his hiring in February 2013. |
Cash Incentive Compensation. Our cash incentive program provides annual award opportunities for eligible employees, including all of
our Named Executive Officers. This program is designed to reward participants for executing on our key corporate objectives and, in the case of executive officers other than our CEO, the achievement of individual objectives. While awards are
determined by reference to pre-determined objectives, the final award amounts to executive officers are not guaranteed and can be adjusted in the sole discretion of the Compensation Committee after review of the years accomplishments.
Awards for our executive officers under the 2014 cash incentive program were approved by the Compensation Committee and Board in February 2015
and paid promptly thereafter. In December 2013, the Compensation Committee proposed and the Board approved award targets for our Named Executive Officers other than our CEO at 40% of annual base salary and the award target for our CEO at 50% of
annual base salary. These target incentive award amounts for each participant were determined based upon consideration of the participants potential impact on our operating and financial results and on market pay practices. The award amount
under the program is determined by reference to the award target multiplied by the final payout factor. For each of our Named Executive Officers other than the CEO, the payout factor was determined at a targeted 80% by reference to corporate
performance against objectives and at a targeted 20% by reference to the executive officers achievement of
individual performance goals. Our CEOs payout factor was set at a targeted 100% by reference to corporate performance against objectives. The individual performance goals for our Named
Executive Officers were established by our CEO based on the applicable executives sphere of responsibility within our operations, with categories including strategic leadership, communication, results, performance, collaboration and personnel
development.
Corporate performance objectives for 2014 focused on clinical development execution, progress toward regulatory approval,
and corporate fundraising and development accomplishments. A basic payout factor was set at 100% upon target accomplishment of certain core goals. However, this basic payout factor was eligible for increase in the following two ways: (i) by
outperformance with respect to one or more core goals, with a possible aggregate increase in the payout factor of 30%; and (ii) subject to a minimum performance level in the core goals, accomplishment of stretch goals, with a possible aggregate
increase in the payout factor of 50%. At the time the corporate performance objectives for 2014 were set, the Compensation Committee believed that achievement of the target levels of performance (both core goals and stretch goals) would be difficult
and challenging, but achievable with significant effort and skill.
In February 2015, the Compensation Committee first, and the Board
second, evaluated the achievement of the 2014 corporate performance objectives and determined that incentive awards under our 2014 cash incentive program should be calculated with a 135% payout factor based upon applicable corporate achievements.
Accordingly, our CEOs award under the 2014 cash incentive program was set at 67.5% of his base salary (50% target multiplied by 135% payout factor) and the corporate performance component (with reference to an 80% target) of the awards for
each of our other Named Executive Officers under the 2014 cash incentive program was set at 43% of his or her base salary (40% target multiplied by 135% payout factor and 80% weighting). In addition, based upon input from our CEO, the Compensation
Committee first, and the Board second, evaluated the achievement of the 2014 individual performance goals of our Named Executive Officers other than our CEO. Payout factors for the individual performance goals of such Named Executive Officers (with
reference to a 20% target) were determined to be 130%, 140%, 110% and 110% based on individual performances of Mr. Cooper, Dr. Gujrathi, Dr. Boehm and Dr. Peach, respectively. Finally, based on their exemplary performance, the
Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and $57,213 to Mr. Cooper and Dr. Gujrathi, respectively. The cash incentive awards and discretionary cash awards so paid are set
forth in the table below entitled Summary Compensation Table.
Equity-Based Incentive Awards. The Compensation
Committee administers the equity-based incentive awards, such as stock option grants, that are made to our executive officers, including Named Executive Officers, under our 2013 Stock Plan. Equity-based awards fulfill two key objectives of our
executive compensation program: they serve as a retention tool for securing our leadership team and as an incentive tool for rewarding superior results to the benefit of our stockholders. Equity awards are determined as part of the total
compensation awarded to employees, taking into account base salary and cash incentive plan payout potential.
Prior to implementing the
equity award program for 2014, the Compensation Committee conducted a review of alternative equity award designs, including both option and full value awards. Stock option awards priced at fair market value serve to align our employees and executive
officers interests with the long-term interests of our stockholders by delivering value only if our stock price appreciates above the market price on the date of grant. The Compensation Committee determined that stock options with time-based
vesting continued to be the best equity award design for our executive compensation program as of 2014 due to these pro-growth attributes, our status as a growth-focused biopharmaceutical company without a product approved for marketing and the
practices of other similarly situated companies. The Compensation Committee determined that four (4)-year vesting, with a one (1)-year cliff delivered appropriate retentive and incentive dimensions and would be consistent with market reference
points.
In determining the size of the 2014 equity awards to our executive officers, including Named Executive Officers, the Compensation
Committee considered the highly vested status of our executive officers then-outstanding awards, our corporate performance in 2013 and expected contributions to future corporate performance. The Compensation Committee also considered the
overall share reserve available under our 2013 Stock Plan and the annual equity plan burn rates of market references. In March 2014, the Compensation Committee proposed grants of stock options to our executive officers and this proposal
was adopted by the Board in April 2014. These 2014
stock option grants to our Named Executive Officers are shown in the table below entitled Grants of Plan-Based Awards.
Termination-Based Compensation. Each of our Named Executive Officers is party to an employment agreement. These employment agreements
provide for severance payments and acceleration of vesting of equity-based awards upon termination of employment under the circumstances described below under Employment Agreements with Named Executive Officers. In general, the
employment agreements provide for severance benefits in the form of salary and benefits continuation if an officers employment is terminated without cause or is constructively terminated (as such terms are defined in
the agreements). The agreements generally provide for enhanced benefits, including equity award vesting acceleration, if a termination without cause or constructive termination occurs within one month prior to or twelve months after a change
in control (as defined in the agreements). These agreements are designed both to attract executives, as we compete for talented employees in a marketplace where such protections are routinely offered, and to retain executives and provide
continuity of management in the event of an actual or threatened change in control.
Other Compensation. All of our full-time
employees, including our Named Executive Officers, may participate in our health programs, such as medical, dental and vision care coverage, and our 401(k) and life and disability insurance programs. These benefits are designed to provide our
executive officers and eligible employees a competitive total compensation package that enables us to attract and retain qualified personnel.
Compensation Policies and Practices
Equity Grant Practices. The exercise price of each stock option awarded to our executive officers under our 2013 Stock Plan is the
closing price of our common stock on the date of grant. Starting in 2014, the Compensation Committee adopted a policy of attempting to schedule our annual equity awards for ongoing executive officers and employees to occur on or about April 1
of each year. Under our 2013 Stock Plan, we may not reprice or replace options at lower exercise price options without stockholder approval.
Tax Deductibility of Compensation. Section 162(m) of the Internal Revenue Code generally places a limit of $1,000,000 on the
amount of compensation that we may deduct in any one year with respect to our CEO and each of the next three most highly compensated executive officers (excluding the CEO). The Compensation Committee considers the implications of Section 162(m)
in designing our compensation programs. However, to maintain flexibility in compensating our executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all executive
compensation to be deductible. In 2014 we were eligible for transitional relief under Section 162(m) that exempts compensation plans adopted prior to a companys initial public offering from the deduction limit under Section 162(m).
This transitional relief for awards under our 2013 Stock Plan expires upon the earlier of our 2017 annual meeting or upon a material modification of the plan.
Stock Ownership Guidelines. We have not currently adopted stock ownership guidelines for our Named Executive Officers or other
employees.
Policy Regarding Restatements. We do not currently have a formal policy requiring a fixed course of action with respect
to compensation adjustments, or clawbacks, following later restatements of financial results. Under those circumstances, our Board or Compensation Committee would evaluate whether compensation adjustments were appropriate based upon the
facts and circumstances surrounding the restatement, including the requirements of the Sarbanes-Oxley Act of 2002 and any policies adopted pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Assessment of Risk. The Compensation Committee annually reviews the elements of Named Executive Officer compensation to determine
whether any portion of the overall program encourages excessive risk taking. The Compensation Committees current assessment is that although the majority of compensation provided to our Named Executive Officers is performance-based, our
compensation programs do not encourage excessive or unnecessary risk taking. The Compensation Committee believes that the design of these compensation programs encourages our Named Executive Officers to remain focused on both short-term and
long-term strategic goals. Safeguards integrated into the Companys compensation practices include: (1) the balance of short-term and long-
term incentive compensation; (2) the use of time-based vesting criteria in long-term incentive awards to align holders interests with the Companys long-term prospects;
(3) the use of multiple performance metrics in the annual cash incentive plan, each linked to overall Company progress as opposed to narrow targets; (4) the limitation on annual awards under the Companys equity incentive plan; and
(5) the reservation of Compensation Committee discretion to reduce amounts payable under the cash incentive award program.
2014 Summary
Compensation Table
The following table shows for the fiscal years ended December 31, 2014, 2013 and 2012, compensation
awarded to, paid to, or earned by, the Named Executive Officers. Information for Mr. Cooper is provided only for the fiscal years ended December 31, 2014 and 2013 because his employment with the Company began in 2013, and information for
Drs. Boehm and Peach is provided only for the fiscal year ended December 31, 2014 because they were not Named Executive Officers prior to 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position |
|
Fiscal Year |
|
|
Salary |
|
|
Bonus |
|
|
Option Awards(1) |
|
|
Non-Equity Incentive Plan Compensation(2) |
|
|
All Other Compensation |
|
|
Total |
|
|
|
|
|
|
|
|
|
Faheem Hasnain President and Chief Executive Officer |
|
|
2014 2013
2012 |
|
|
$ $ $ |
534,366 451,644
400,000 |
|
|
$ $ $ |
|
|
|
$ $ $ |
3,806,058 3,865,160
4,465 |
|
|
$ $ $ |
361,182 348,233
190,000 |
|
|
$ $
$ |
5,000 5,000
5,000 |
(3)
|
|
$ $ $ |
4,706,606 4,670,037
599,465 |
|
|
|
|
|
|
|
|
|
Graham Cooper(4) Chief Financial Officer |
|
|
2014 2013 |
|
|
$ $ |
336,922 254,767 |
|
|
$ $ |
49,897 |
(6) |
|
$ $ |
1,325,217 1,495,027 |
|
|
$ $ |
180,807 119,707 |
|
|
$ $ |
31,000 24,167 |
(5) |
|
$ $ |
1,923,843 1,893,668 |
|
|
|
|
|
|
|
|
|
Sheila Gujrathi, M.D. Chief Medical Officer |
|
|
2014 2013
2012 |
|
|
$ $ $ |
380,588 364,327
345,000 |
|
|
$ $
$ |
57,213
5,175 |
(6)
(6) |
|
$ $ $ |
1,987,844 2,359,966
1,496 |
|
|
$ $ $ |
207,317 153,180
98,325 |
|
|
$ $
$ |
5,000 7,305
5,000 |
(3)
|
|
$ $ $ |
2,637,962 2,884,778
454,996 |
|
|
|
|
|
|
|
|
|
Marcus F. Boehm, Ph.D. Chief Technology Officer |
|
|
2014 |
|
|
$ |
317,019 |
|
|
$ |
|
|
|
$ |
1,325,217 |
|
|
$ |
165,072 |
|
|
$ |
3,750 |
(3) |
|
$ |
1,811,058 |
|
|
|
|
|
|
|
|
|
Robert J. Peach, Ph.D. Chief Scientific Officer |
|
|
2014 |
|
|
$ |
317,019 |
|
|
$ |
|
|
|
$ |
1,325,217 |
|
|
$ |
165,072 |
|
|
$ |
5,000 |
(3) |
|
$ |
1,812,308 |
|
(1) |
This column represents the aggregate grant date fair value of options granted during 2014, 2013 and 2012 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718,
Compensation-Stock Compensation, or FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts generally reflect the amount that the Company expects to expense in its financial statements over the awards
vesting schedule, and do not correspond to the actual value that will be realized by the Named Executive Officers. For additional information on the valuation assumptions used in the calculation of these amounts for the respective year-end, refer to
note 10 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2014, as filed with the SEC. |
(2) |
Amounts shown represent performance bonuses earned for 2014, 2013 and 2012, as applicable, which were each paid in a cash lump sum in the first quarter of 2015, 2014 and 2013, respectively. |
(3) |
Amount contributed by us to a health savings account on behalf of the executive. This benefit is provided to the Named Executive Officers on the same terms as provided to all of our regular full-time employees in the
United States. For more information regarding these benefits, see below under Perquisites, Health, Welfare and Retirement Benefits. |
(4) |
Mr. Cooper joined as our Chief Financial Officer in February 2013, and his compensation totals for 2013 reflect his February 2013 employment start date. |
(5) |
Represents a commuting benefit paid to the executive ($26,000) and amount contributed by us to a health savings account on behalf of the executive ($5,000). |
(6) |
Amount shown represents bonus amount paid in the sole discretion of our Board of Directors, which amount is in addition to the amount calculated for performance based bonuses shown in the column Non-Equity
Incentive Plan Compensation. |
2014 Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to the Named Executive Officers during the
fiscal year ended December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
|
All Other Option Awards: Number of Securities Underlying Options(2) (#) |
|
|
Exercise or Base Price of Option Awards ($/share) |
|
|
Grant Date Fair Value of Stock
and Option Awards(3) ($) |
|
|
|
|
Threshold ($) |
|
Target ($) |
|
|
Maximum ($) |
|
|
|
Faheem Hasnain |
|
|
1-28-14 |
|
|
|
|
$ |
267,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
|
|
|
|
106,107 |
|
|
$ |
41.51 |
|
|
$ |
3,806,058 |
|
Graham Cooper |
|
|
1-28-14 |
|
|
|
|
$ |
134,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
|
|
|
|
36,945 |
|
|
$ |
41.51 |
|
|
$ |
1,325,217 |
|
Sheila Gujrathi, M.D. |
|
|
1-28-14 |
|
|
|
|
$ |
152,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
|
|
|
|
55,418 |
|
|
$ |
41.51 |
|
|
$ |
1,987,844 |
|
Marcus F. Boehm, Ph.D. |
|
|
1-28-14 |
|
|
|
|
$ |
126,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
|
|
|
|
36,945 |
|
|
$ |
41.51 |
|
|
$ |
1,325,217 |
|
Robert J. Peach, Ph.D. |
|
|
1-28-14 |
|
|
|
|
$ |
126,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
|
|
|
|
36,945 |
|
|
$ |
41.51 |
|
|
$ |
1,325,217 |
|
(1) |
Represents the annual performance-based bonus each Named Executive Officer is eligible to receive based on (i) the individuals target bonus, as a percentage of base salary, (ii) a Company-based
performance factor and (iii) for our Named Executive Officers other than our CEO, an individual performance factor. There is no maximum bonus percentage or amount established for the Named Executive Officers. Annual performance-based bonuses
for 2014 awarded in early 2015 were as follows: $361,182 for Mr. Hasnain; $180,807 for Mr. Cooper, $207,317 for Dr. Gujrathi and $165,072 for each of Drs. Boehm and Peach. Additionally, based on their exemplary performance, the
Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and $57,213 to Mr. Cooper and Dr. Gujrathi, respectively. |
(2) |
These options vest at the rate of 25% of the total number of shares subject to the option on the first anniversary of the date of grant and 1/48th of the total number of shares subject to the option on each monthly
anniversary thereafter, provided that the option holder continues to provide services to us through such dates. |
(3) |
This column represents the aggregate grant date fair value of options granted during 2014 in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts generally
reflect the amount that the Company expects to expense in its financial statements over the awards vesting schedule, and do not correspond to the actual value that will be realized by the Named Executive Officers. For additional information on
the valuation assumptions used in the calculation of these amounts, refer to note 10 to the consolidated financial statements included in our annual report on Form 10-K for the year ended
December 31, 2014, as filed with the SEC. |
Narrative Disclosure Relating to Summary Compensation Table and Grants of Plan-Based
Awards Table
Annual Base Salary
The compensation of our Named Executive Officers is generally determined and approved by our Compensation Committee, which recommends its
decisions to our Board of Directors. Our Board of Directors, without members of management present, ultimately approves all compensation decisions for our Named Executive Officers. Base salaries for our Named Executive Officers in 2014 were as
follows.
|
|
|
|
|
Name |
|
2014 Base Salary |
|
Faheem Hasnain |
|
$ |
535,085 |
|
Graham Cooper |
|
$ |
337,329 |
|
Sheila Gujrathi, M.D. |
|
$ |
381,100 |
|
Marcus F. Boehm, Ph.D. |
|
$ |
317,446 |
|
Robert J. Peach, Ph.D. |
|
$ |
317,446 |
|
Annual Performance-Based Bonus Opportunity
In addition to base salaries, our Named Executive Officers are eligible to receive annual performance-based cash bonuses, which are designed to
provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals.
The annual performance-based bonus each Named Executive Officer is eligible to receive is based on (i) the individuals target
bonus, as a percentage of base salary, (ii) a company-based performance factor, or CPF, and (iii) an individual performance factor, or IPF, except that the CEO does not have an IPF. The actual performance-based bonus paid, if any, is
calculated by multiplying the executives annual base salary, target bonus percentage, percentage attainment of the CPF and percentage attainment of the IPF. There is no maximum bonus percentage or amount established for the Named Executive
Officers and, as a result, the bonus amounts vary from year to year based on corporate and individual performance. At the end of the year, the Committee recommends and our Board of Directors approves the extent to which we achieved the CPF. The
extent to which each individual executive (other than the CEO) achieves his or her IPF is determined based on our CEOs review and recommendation to the Committee, and the Committee recommends and our Board of Directors makes the final
decisions with respect to each IPF. Additionally, the Committee has the discretion to determine the weighting of each of the goals that comprise the CPF and IPF. Our Board of Directors may award a bonus in an amount above or below the amount
resulting from the calculation described above, based on other factors that the Board determines, in its sole discretion, are material to our corporate performance and provide appropriate incentives to our executives, for example based on events or
circumstances that arise after the original CPF and IPF goals are set. Our Board of Directors exercised this discretion in awarding the bonuses for 2012 and 2014 performance, and the amount awarded discretionarily is shown in the Bonus
column of the Summary Compensation Table.
Pursuant to their employment agreements and as modified by our Board of Directors, each Named
Executive Officer has a target bonus represented as a percentage of base salary, or a target bonus percentage, each of which is set forth below:
|
|
|
|
|
Name |
|
2014 Target Bonus |
|
Faheem Hasnain |
|
|
50 |
% |
Graham Cooper |
|
|
40 |
% |
Sheila Gujrathi, M.D. |
|
|
40 |
% |
Marcus F. Boehm, Ph.D. |
|
|
40 |
% |
Robert J. Peach, Ph.D. |
|
|
40 |
% |
The CPF and IPF goals are determined by the Board and communicated to the Named Executive Officers each year,
prior to or shortly following the beginning of the year to which they relate. The CPF is composed of several goals that relate to our annual corporate goals and various business accomplishments which vary from time to time depending on our overall
strategic objectives, but relate generally to achievement of clinical, regulatory and discovery milestones for clinical development candidates and performance against our business development goals. The IPF is composed of factors that relate to each
Named Executive Officers ability to drive his or her own performance and the performance of his or her direct employee reports towards reaching our corporate goals. The proportional emphasis placed on each goal within the CPF and IPF may vary
from time to time depending on our overall strategic objectives and the Boards subjective determination of which goals have more impact on our performance.
For 2014, the CPF goals were weighted at 100% for Mr. Hasnain and weighted at a targeted 80%
for the balance of the management team. CPF goals established and achieved included various financing and drug development activities and objectives. The IPF goals were weighted at a targeted 20% and varied among the non-CEO members of the
management team, with categories including strategic leadership, communication, results, performance, collaboration and personnel development. The Board approved the recommendation of its Compensation Committee for a 2014 CPF achievement of 135%.
Mr. Hasnains bonus, weighted 100% on CPF goals determined to be 135% achieved, resulted in a performance-based bonus of $361,182. A CPF rate of 108% (135% achievement at the target 80% weighting), combined with IPF achievements of 130%,
140%, 110% and 110% (at the target 20% weighting) based on individual performances of Mr. Cooper, Dr. Gujrathi, Dr. Boehm and Dr. Peach, respectively, resulted in a total cash incentive bonus of $180,807 for Mr. Cooper,
$207,317 for Dr. Gujrathi and $165,072 for each of Drs. Boehm and Peach. Additionally, based on their exemplary performance, the Compensation Committee recommended and the Board approved additional discretionary cash awards of $49,897 and
$57,213 to Mr. Cooper and Dr. Gujrathi, respectively.
Long-Term Incentive Compensation
Our long-term, equity-based incentive awards are designed to align the interests of our Named Executive Officers and our other employees,
non-employee directors and consultants with the interests of our stockholders. Because vesting is based on continued service, our equity-based incentives also encourage the retention of our Named Executive Officers through the vesting period of the
awards.
We use stock options as the primary incentive for long-term compensation to our Named Executive Officers because they are able to
profit from stock options only if our stock price increases relative to the stock options exercise price. We generally provide initial grants in connection with the commencement of employment of our Named Executive Officers and annual
retention grants thereafter.
Prior to May 2013, we granted all stock options pursuant to our 2008 Stock Plan (the 2008 Plan),
the terms of which are described below under Equity Compensation Plans and Other Benefit Plans2008 Stock Plan. All options granted under the 2008 Plan were granted at no less than the fair market value of our common stock on the
date of grant of each award. Beginning in May 2013, all stock options have been granted pursuant to our 2013 Stock Incentive Plan (the 2013 Plan), the terms of which are described below under Equity Compensation Plans and Other
Benefits Plans2013 Stock Incentive Plan. All options granted under the 2013 Plan are granted at the fair market value of our common stock on the date of grant.
All of our stock option grants typically vest over a four-year period and may be granted with an early exercise feature allowing the holder to
exercise and receive unvested shares of our stock, so that the employee may exercise and have a greater opportunity for gains on the shares to be taxed at long-term capital gains rates rather than ordinary income rates.
See Outstanding Equity Awards at Fiscal Year End for option awards made to our Named Executive Officers during the last fiscal
year.
Vesting Acceleration
With
respect to shares of stock acquired by our Named Executive Officers pursuant to options granted prior to our initial public offering in May 2013 under our 2008 Stock Plan, as well as restricted stock awards granted to our Named Executive Officers
prior to our initial public offering outside of our 2008 Stock Plan, in the event of any corporate transaction such as a merger, reorganization or sale or transfer of all or substantially all of our assets or capital stock, in each case resulting in
our stockholders immediately prior to such transaction holding 50% or less of the voting power of the surviving entity (unless such transaction is a sale of securities, the primary purpose of which is to generate financing, or is effected only for
the purpose of changing our domicile), then, as of immediately prior to such transaction: (i) 50% of the unvested time-based shares will vest; (ii) 75% of the unvested shares subject to a milestone which has been achieved as of such
termination will vest, with the remaining 25% vesting during continued employment in equal monthly portions over six months, unless a lesser time otherwise remains on the original vesting schedule; and (iii) provided that the transaction
results in our pre-initial public offering investors receiving a return of at least five times on their pre-initial public offering investment, 75% of the unvested shares
subject to any milestone will vest, with the remaining 25% vesting during continued employment in equal monthly portions over six months, unless a lesser time otherwise remains on the original
vesting schedule.
In the event of termination without cause or a constructive termination surrounding a change in control,
the vesting of outstanding stock options and restricted shares held by our Named Executive Officers may accelerate. Please see Employment Agreements with Named Executive Officers for a discussion of such accelerated vesting
arrangements.
Employment Agreements with Named Executive Officers
In September 2013, we entered into amended and restated employment agreements with each of our Named Executive Officers, which agreements
provide that their employment is at will and may be terminated at any time by the executive or by us with or without cause and without notice. The employment agreements are substantially the same other than differences in base salary, target annual
bonus percentages and severance. The employment agreements for Mr. Hasnain, Dr. Gujrathi, Mr. Cooper and Drs. Boehm and Peach provided for an annual base salary of $519,500, $370,000, $328,500, $308,200 and $308,200, respectively.
Early in 2014, our Board of Directors approved a merit increase of 3% to base salaries of all employees, including our Named Executive Officers. Additionally, the target annual bonuses were set in the September 2013 agreements at 50% of annual base
salary for Mr. Hasnain and 30% of the respective base salaries for each of the other Named Executive Officers (subsequently increased to 40% by our Board of Directors commencing for 2014).
Pursuant to each agreement, and subject to the Named Executive Officers execution of a general release of all claims against us, if the
Named Executive Officers employment with us is terminated by us without cause or the Named Executive Officers employment with us is constructively terminated pursuant to a material reduction in compensation or
responsibilities, a relocation of principal office or a material breach by us of the employment agreement, then the Named Executive Officer is entitled to receive (i) a lump sum cash payment of an amount equal to base salary payable for a
period of (a) 12 months in the case of Mr. Hasnain and (b) nine months in the case of each of our other Named Executive Officers, and (ii) if the Named Executive Officer elects to continue health insurance coverage under COBRA,
reimbursement for the same portion of monthly premiums we pay for active employees over (a) a 12-month period in the case of Mr. Hasnain and (b) a nine-month period in the case of each of our other Named Executive Officers.
Pursuant to each employment agreement, and subject to the Named Executive Officers execution of a general release of all claims against
us, if one month prior to, or 12 months following the occurrence of, a change in control such as a change in the majority composition of the Board of Directors or a merger, reorganization or sale or transfer of all or substantially all
of our assets or capital stock, in each case resulting in our stockholders immediately prior to such transaction holding 50% or less of the voting power of the surviving entity, the Named Executive Officers employment is terminated by us
without cause or is constructively terminated pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement, then the Named Executive
Officers is entitled to receive the following: (i) a lump sum cash payment of an amount equal to (a) base salary payable for a period of 24 months and two times target annual bonus in the case of Mr. Hasnain and (b) base salary
payable for a period of 12 months and one times target annual bonus in the case of each of our other Named Executive Officers; (ii) if the Named Executive Officer elects to continue health insurance coverage under COBRA, reimbursement for the
same portion of monthly premiums as we pay for active employees over (a) a 24-month period in the case of Mr. Hasnain and (b) a 12-month period in the case of our other Named Executive Officers (or in either case, if applicable, such
lesser period as is available under COBRA); and (iii) the full vesting of all outstanding stock options, restricted shares and any other equity-based compensation. If any payment or benefit received by any Named Executive Officer pursuant to a
change in control where a definitive agreement is entered into on or prior to March 31, 2015 had constituted a parachute payment under Section 280G of the Internal Revenue Code and had become subject to excise tax under
Section 4999 of such Code, we would have paid a gross-up payment equal to the excise tax with respect to the parachute payment as well as all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the
employment agreement (including that the total amount of gross-up payments for all benefitted executives is capped at 1.5% of transaction value ). The timing of any payments to our Named Executive Officers under their respective employment
agreements is subject to applicable requirements of Section 409A of the Code and the related Treasury Regulations.
Compensation Recovery Policies
The Board of Directors and the Compensation Committee have not determined whether they would attempt to recover bonuses from our executive
officers if the performance objectives that led to the bonus determination were to be restated, or found not to have been met to the extent originally believed by the Board of Directors or the Compensation Committee. However, as a public company
subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the
federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. In addition, we will comply with the
requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will adopt a compensation recovery policy once final regulations on the subject have been adopted.
Equity Compensation Plans and Other Benefits Plans
2008 Stock Plan
General Our
2008 Stock Plan was initially adopted by our Board of Directors in November 2008 and approved by our stockholders in January 2009 and was last amended on April 18, 2013. The purpose of the 2008 Stock Plan is to offer selected persons an
opportunity to acquire a proprietary interest in our success, by acquiring shares of our common stock. Effective upon completion of our initial public offering in May 2013, our 2008 Stock Plan was terminated for purposes of future grants and no
shares of our common stock remain available for future issuance of new awards under the 2008 Stock Plan.
Our 2008 Stock Plan permitted
the direct award or sale of shares and for the grant of nonstatutory stock options and restricted stock to our employees, directors and consultants and any of our parents or subsidiaries employees and consultants. Incentive stock
options, within the meaning of Section 422 of the Internal Revenue Code, could also be granted but only to our employees and our parents or subsidiaries employees.
Share reserveAs of December 31, 2014, options to purchase a total of 387,693 shares of common stock were outstanding under
the 2008 Stock Plan. Shares originally reserved for issuance under our 2008 Stock Plan but which were not issued or subject to outstanding awards on the effective date of our 2013 Stock Plan, which is described below, and shares subject to
outstanding awards under our 2008 Stock Plan on the effective date of our 2013 Stock Plan that are subsequently forfeited or terminated for any reason before being exercised or settled, including shares subject to vesting restrictions that are
subsequently forfeited, will become available for award under our 2013 Stock Plan. However, shares that have actually been issued under the 2008 Stock Plan, upon exercise of an award, will not be returned to the 2008 Stock Plan and will not become
available for future distribution thereunder, except that if unvested shares of restricted stock are repurchased by us at their original purchase price, such shares will become available for future grant under the 2013 Stock Plan.
AdministrationOur Board of Directors or a committee appointed thereby administers the 2008 Stock Plan. Subject to the provisions
of our 2008 Stock Plan and, in the case of a committee, the specific duties delegated to such committee by the Board, and subject to the approval of any relevant authorities, the administrator has the authority in its discretion to take the
following actions: (i) determine fair market value of our common stock; (ii) select recipients of awards under the 2008 Stock Plan; (iii) determine and modify or amend the number of shares, terms and conditions and forms of agreement
related to awards under the 2008 Stock Plan; (iv) prescribe, amend and rescind rules and regulations related to the 2008 Stock Plan; (v) construe and interpret terms of the 2008 Stock Plan and awards; (vi) authorize any person to
execute on our behalf any instrument required to effect the grant of an award and (vii) institute an option exchange program. All actions of the administrator will be final and binding on all persons.
Stock optionsPrior to our initial public offering in May 2013, the administrator could grant incentive and/or nonstatutory stock
options under our 2008 Stock Plan; provided that incentive stock options are only granted to employees. The exercise price of options granted under the plan must be equal to or greater than 100% of the fair market value of our common stock on the
date of grant. The term of an option may not exceed ten years; provided, however, that an incentive stock option held by an optionee who owns more than 10% of the total combined voting
power of all classes of our stock, our parent or any of our subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair
market value of our common stock on the grant date. The exercise price for an option may be paid in cash or check. In addition, the administrator may allow for payment by surrender of shares, promissory note, cashless exercise, or other forms of
payment as may be permitted by our Board of Directors. Subject to the provisions of our 2008 Stock Plan, the administrator determines the remaining terms of the options (e.g., exercisability and vesting). The administrator may permit an optionee to
exercise his or her option as to shares that have not vested. The optionee may exercise his or her option, to the extent vested, following termination of the optionees service for the period specified in the award agreement, such period to be
three months (or twelve months in the case of termination due to death or disability) unless otherwise specified. For California optionees only, to the extent required by California law, such period will be no less than thirty days. However, in no
event may an option be exercised later than the expiration of its term.
Restricted sharesPrior to our initial public
offering in May 2013, restricted shares could be offered either alone, in addition to, or in tandem with other awards granted under the 2008 Stock Plan and/or cash awards made outside of the 2008 Stock Plan. The administrator will advise the offeree
in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of shares that such person will be entitled to purchase, the price to be paid (if any), and the time within which such person must
accept such offer. Unless the administrator determines otherwise, we will have a repurchase option to purchase the shares for the original purchase price within 90 days of the termination of the holders services.
Transferability/Forfeiture Unless determined otherwise by the administrator, the 2008 Stock Plan generally does not allow for
options to be transferred in any manner other than by will or the laws of descent and distribution. Notwithstanding the foregoing, for California optionees only, to the extent permitted by the administrator, an option may be transferred to a
revocable trust or as permitted by Rule 701 of the Securities Act. Shares awarded or sold under the 2008 Stock Plan or received upon the exercise of options may be subject to certain forfeiture conditions, rights to repurchase, rights of first
refusal and other transfer restrictions as the administrator may determine and as set forth in the applicable award agreement.
Adjustments In the event that any dividend or other distribution (whether in the form of cash, shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of our shares or other securities, or other change in our corporate structure affecting
the shares occurs, the administrator will adjust the number and class of shares that may be delivered under the 2008 Stock Plan and/or the number, class, and price of shares covered by each outstanding award.
Corporate transactionIf we are a party to a merger or consolidation, and in the event of a change in control, outstanding awards
under the 2008 Stock Plan will be treated as the administrator determines, including, without limitation, that each award be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor
corporation. The administrator will not be required to treat all awards similarly in the transaction. Notwithstanding the foregoing, in the event of a change in control in which the successor corporation does not assume or substitute for the award,
the optionee will fully vest in and have the right to exercise his or her outstanding awards, including shares as to which such award would not otherwise be vested or exercisable, and restrictions on all of the participants restricted stock
will lapse. In addition, if an award is not assumed or substituted in the event of a merger or change in control, the administrator will notify the optionee in writing or electronically that the award will be fully vested and exercisable for a
period of time determined by the administrator in its sole discretion, and any award not assumed or substituted for will terminate upon the expiration of such period for no consideration, unless otherwise determined by the administrator. Pursuant to
the 2008 Stock Plan, a change in control results from: (i) a merger or reorganization immediately after which persons who were not our stockholders immediately prior to such transaction own 50% or more of the voting power of the
surviving entity and any direct or indirect parent thereof; (ii) a sale, transfer or other disposition of all or substantially all of our assets or our stockholders approve a plan of complete liquidation of us; or (iii) the aggregation by
any person of 50% or more of the combined voting power of our outstanding securities (unless such transaction is an initial public offering or sale of securities, the primary purpose of which is to generate financing, or is effected only for the
purpose of changing our state of incorporation or creating a holding company).
Plan terminationOur Board terminated in the 2008 Stock Plan for purposes of future
grants in connection with our initial public offering in May 2013, and no shares of common stock remain available for future issuance of new awards under the 2008 Stock Plan.
2013 Stock Incentive Plan
General
Our 2013 Stock Incentive Plan, or the 2013 Stock Plan, was adopted by our Board of Directors in April 2013 and the plan became effective in May 2013 concurrent with our initial public offering.
The 2013 Stock Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code
to employees and the granting of nonstatutory stock options to employees, non-employee directors, advisors and consultants. The 2013 Stock Plan also provides for the grants of restricted stock, stock appreciation rights, stock unit and cash-based
awards to employees, non-employee directors, advisors and consultants.
Share ReserveAs of December 31, 2014, options to
purchase a total of 1,539,006 shares of common stock were outstanding under the 2013 Stock Plan. In addition, 360,301 shares of common stock were reserved for future issuance as of December 31, 2014, plus any future increases in the number of
shares of common stock reserved for issuance pursuant to the evergreen provision of the 2013 Stock Plan. Under the evergreen provision of the 2013 Stock Plan, an additional 1,260,656 shares of common stock became available for future grant on
January 1, 2015.
Administration The Compensation Committee of our Board of Directors, or our Board of Directors acting
as a committee, administers the 2013 Stock Plan, including the determination of the recipient of an award, the number of shares or amount of cash subject to each award, whether an option is to be classified as an incentive stock option or
nonstatutory option, and the terms and conditions of each award, including the exercise and purchase prices and the vesting or duration of the award.
At the discretion of our Board of Directors, our Compensation Committee may consist of two or more non-employee directors. To the extent
required by our Board of Directors, the composition of our Compensation Committee may satisfy the requirements for plans intended to qualify for exemption under Rule 16b-3 of the Exchange Act and Section 162(m) of the Internal Revenue Code. Our
Board of Directors may appoint one or more separate committees of our Board of Directors, each consisting of one or more members of our Board of Directors, to administer our 2013 Stock Plan with respect to employees who are not subject to
Section 16 of the Exchange Act. Subject to applicable law, our Board of Directors may also authorize one or more officers to designate employees, other than employees who are subject to Section 16 of the Exchange Act, to receive awards
under our 2013 Stock Plan and/or determine the number of such awards to be received by such employees subject to limits specified by our Board of Directors. In this regard, our Board of Directors has established a Non-Management Stock Option
Committee, currently composed of Messrs. Hasnain and Cooper, to which authority has been delegated to grant, without any further action required by the Board or the Compensation Committee, stock options to non-management employees, particularly new
employees, within specified limits approved by the Compensation Committee.
Authorized sharesUnder our 2013 Stock Plan, the
aggregate number of shares of our common stock authorized for issuance may not exceed (i) 1,093,333 plus (ii) the sum of number of shares subject to outstanding awards under the 2008 Stock Plan as of the 2013 Stock Plans effective
date that are subsequently forfeited or terminated for any reason before being exercised or settled, plus the number of shares subject to vesting restrictions under the 2008 Stock Plan on the 2013 Stock Plans effective date that are
subsequently forfeited, plus the number of shares reserved but not issued or subject to outstanding grants under the 2008 Stock Plan as of the 2013 Stock Plans effective date. In addition, the number of shares that have been authorized for
issuance under the 2013 Stock Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2014 and ending on (and including) January 1, 2023, in an amount equal to the lesser of (i) four percent
of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (ii) another amount determined by our Board of Directors. Under this provision, an additional 733,984 shares of common stock became
available for future grant on January 1, 2014 and an additional 1,260,656 shares of common stock became available for future grant on January 1, 2015. Shares subject to awards granted under the 2013 Stock Plan that are forfeited or
terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2013 Stock Plan. Shares withheld to satisfy the grant, exercise price or
tax
withholding obligation related to an award will again become available for issuance under the 2013 Stock Plan. However, shares that have actually been issued shall not again become available
unless forfeited. No more than 8,000,000 shares may be delivered upon the exercise of incentive stock options granted under the 2013 Stock Plan plus, to the extent allowable under applicable tax law, any shares that again become available for
issuance under the 2013 Stock Plan. During any time when the tax deduction limitations of Section 162(m) of the Internal Revenue Code apply to awards under the 2013 Stock Plan, and options or stock appreciation rights are intended to qualify as
performance-based compensation under Section 162(m), no person may receive options or stock appreciation rights in any calendar year for an aggregate of more than 1,333,333 shares, and no more than two times this amount in the first
year of employment.
Types of Awards
Stock optionsA stock option is the right to purchase a certain number of shares of stock, at a certain exercise price, in the
future. Under our 2013 Stock Plan, incentive stock options and nonstatutory options must be granted with an exercise price of at least 100% of the fair market value of our common stock on the date of grant. Incentive stock options granted to any
holder of more than 10% of our voting shares must have an exercise price of at least 110% of the fair market value of our common stock on the date of grant. No incentive stock option can be granted to an employee if as a result of the grant, the
employee would have the right in any calendar year to exercise for the first time one or more incentive stock options for shares having an aggregate fair market value in excess of $100,000. The stock option agreement specifies the date when all or
any installment of the option is to become exercisable. We expect that 1/4th of the total number of shares subject to the options will vest and become exercisable 12 months after the vesting commencement date for options granted, and the remaining
options will vest and become exercisable at a rate of 1/48th of the total number of shares subject to the options each month thereafter. Each stock option agreement sets forth the term of the options, provided that the term of an incentive stock
option is prohibited from exceeding ten years (five years in the case of an incentive stock option granted to any holder of more than 10% of our voting shares), and the extent to which the optionee will have the right to exercise the option
following termination of the optionees service with us. Payment of the exercise price may be made in cash or, if provided for in the stock option agreement evidencing the award, (i) by surrendering, or attesting to the ownership of,
shares which have already been owned by the optionee, (ii) by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to us in payment of the aggregate exercise price,
(iii) by delivery of an irrevocable direction to a securities broker or lender to pledge shares and to deliver all or part of the loan proceeds to us in payment of the aggregate exercise price, (iv) by a net exercise
arrangement, (v) by delivering a full-recourse promissory note or (vi) by any other form that is consistent with applicable laws, regulations and rules.
Restricted stockRestricted stock is a share award that may be subject to vesting conditioned upon continued service, the
achievement of performance objectives or the satisfaction of any other condition as specified in a restricted stock agreement. Participants who are granted restricted stock awards generally have all of the rights of a stockholder with respect to
such stock, other than the right to transfer such stock prior to vesting. Subject to the terms of the 2013 Stock Plan, our Compensation Committee will determine the terms and conditions of any restricted stock award, including any vesting
arrangement, which will be set forth in a restricted stock agreement to be entered into between us and each recipient. Restricted stock may be awarded for such consideration as our Compensation Committee may determine, including without limitation
cash, cash equivalents, full-recourse promissory notes, future services or services rendered prior to the award, without cash payment by the recipient.
Stock unitStock units give recipients the right to acquire a specified number of shares of stock (or cash amount) at a future
date upon the satisfaction of certain conditions, including any vesting arrangement, established by our Compensation Committee and as set forth in a stock unit agreement. Unlike restricted stock, the stock underlying stock units will not be issued
until the stock units have vested and are settled, and recipients of stock units generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied and the award is settled. At our Compensation Committees
discretion, stock units may provide for the right to dividend equivalents. Our Compensation Committee may elect to settle vested stock units in cash or in common stock or in a combination of cash and common stock. Subject to the terms of the 2013
Stock Plan, our Compensation Committee will determine the terms and conditions of any stock unit award, which will be set forth in a stock unit agreement to be entered into between us and each recipient.
Stock appreciation rightsStock appreciation rights typically will provide for
payments to the recipient based upon increases in the price of our common stock over the exercise price of the stock appreciation right. The exercise price of a stock appreciation right will be determined by our Compensation Committee, which shall
not be less than the fair market value of our common stock on the date of grant. Our Compensation Committee may elect to pay stock appreciation rights in cash or in common stock or in a combination of cash and common stock.
Cash-based awardsA cash-based award is denominated in cash. The Compensation Committee may grant cash-based awards in such number
and upon such terms as it shall determine. Payment, if any, will be made in accordance with the terms of the award, and may be made in cash or in shares of common stock, as determined by the Compensation Committee.
Performance-based awardsAwards under our 2013 Stock Plan may be made subject to the attainment of performance criteria. Awards of
restricted stock, stock units or cash-based awards that are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code will be subject to the attainment of one or more pre-established
performance goals, including cash flows, earnings per share, earnings before interest, taxes and amortization, return on equity, total stockholder return, share price performance, return on capital, return on assets or net assets, revenue, income or
net income, operating income or net operating income, operating profit or net operating profit, operating margin or profit margin, return on operating revenue, return on invested capital, market segment shares, costs, expenses, initiation or
completion of research activities, initiation or completion of clinical studies or other development programs, other milestones with respect to research activities or clinical studies or other development programs, regulatory body approval for
commercialization of a product or implementation or completion of critical projects, and other milestones with respect to commercialization of a product. The maximum aggregate number of shares that may be subject to restricted stock or stock unit
awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is 1,333,333 shares, and no more than two times this amount in the first year of employment. The maximum aggregate amount
of cash that may be payable under cash-based awards intended to qualify as performance-based compensation under this tax rule granted to any individual in any calendar year is $10,000,000.
Other Plan Features
Under the 2013 Stock
Plan:
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Unless the agreement evidencing an award expressly provides otherwise, no award granted under the plan may be transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to shares
issued under such award), other than by will or the laws of descent and distribution, provided, however, that an incentive stock option may be transferred or assigned only to the extent consistent with Section 422 of the Internal Revenue Code.
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In the event of a recapitalization, stock split or similar capital transaction, our Compensation Committee will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2013
Stock Plan, the limitations regarding the total number of shares underlying awards given to an individual participant in any calendar year, the number of shares that can be issued as incentive stock options, the number of shares subject to
outstanding awards and the exercise price under each outstanding option or stock appreciation right. |
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If we are involved in a merger or other reorganization, outstanding awards will be subject to the agreement or merger or reorganization. Such agreement will provide for (i) the continuation of the outstanding
awards by us, if we are the surviving corporation, (ii) the assumption or substitution of the outstanding awards by the surviving corporation or its parent or subsidiary, (iii) immediate vesting, exercisability and settlement of the
outstanding awards followed by their cancellation, or (iv) settlement of the intrinsic value of the outstanding awards (whether or not vested or exercisable) in cash, cash equivalents, or equity (including cash or equity subject to deferred
vesting and delivery consistent with the vesting restrictions applicable to such award or the underlying shares) followed by cancellation of such awards. |
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The administrator of the 2013 Stock Plan may modify, extend or renew outstanding awards or may accept the cancellation of outstanding awards (to the extent not previously exercised), whether or not granted under the
2013 Stock Plan, in return for the grant of new awards for the same or a different number of shares and at the same or a different exercise price, or in return for the grant of a different award for the same or a different number of shares, all
without stockholder approval. However, no modification of an award shall, without the consent of the individual participant, materially impair his or her rights or obligations under such award. |
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Our Board of Directors may amend or terminate the plan at any time, subject to stockholder approval where required by applicable law. Any amendment or termination may not materially impair the rights of holders of
outstanding awards without their consent. No incentive stock option may be granted after the tenth anniversary of the earlier of (i) the date the 2013 Stock Plan was adopted by our Board of Directors, or (ii) the date the plan was approved
by our stockholders. |
2013 Employee Stock Purchase Plan
GeneralOur Board of Directors adopted, and our stockholders approved, the Employee Stock Purchase Plan, or ESPP, in April 2013.
The ESPP became effective concurrently with our initial public offering in May 2013. However, our Board has not yet commenced an offering under the ESPP. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and the
purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in our success by purchasing common stock from us at favorable terms and to pay for their purchases through payroll deductions. Our Board
of Directors believes that establishing an ESPP will enable us to attract, retain and motivate valued employees. As of December 31, 2014, a total of 343,496 shares of common stock have been reserved for issuance under the ESPP plus any future
increases in the number of shares of common stock reserved for issuance pursuant to the evergreen provision of the ESPP. Previously, the evergreen provision of the ESPP provided that the number of shares reserved for issuance under the ESPP would
automatically increase by an amount equal the least of (i) one percent of the outstanding shares of stock on such date or (ii) such other lesser amount the Board of Directors determines. However, our Board of Directors has adopted an
amendment to the evergreen provision of the ESPP, which is subject to stockholder approval at the 2015 annual meeting. The amended evergreen provision of the ESPP provides that the annual increase of shares reserved for issuance under the ESPP shall
be equal to the least of: (i) 1% of the outstanding shares on such date; (ii) 320,000 shares of common stock; or (iii) such lesser amount as determined by the Board of Directors. No annual increase shall be added more than ten years
after the ESPPs effective date. Under the evergreen provision of the ESPP, an additional 315,164 shares of common stock became available for future grant on January 1, 2015.
AdministrationExcept as noted below, our ESPP is administered by a committee of our Board of Directors. The committee has full
power and authority, subject to the provisions of the ESPP, necessary for the proper administration of the plan. The committee may adopt such rules, guidelines and forms as it deems appropriate to implement the ESPP, including sub-plans, which the
committee may establish for the purpose of facilitating participation by non-US employees and compliance with foreign laws. Our Board of Directors may, in its sole discretion, at any time, resolve to administer the ESPP.
EligibilityEach of our employees and of each present or future subsidiary, as designated by the committee, whose customary
employment is more than five months per calendar year and more than 20 hours per week, and who is employed on the day preceding the start of any offering period will be eligible to participate in the ESPP when it is implemented. The ESPP permits an
eligible employee to purchase common stock through payroll deductions (and by cash or check if permitted by the committee), which may not be less than 1% nor more than 15% of the employees eligible compensation. No participant may purchase
stock under the ESPP if immediately after electing to purchase stock, the participant would own stock (including stock such employee may purchase under the ESPP or other outstanding options) representing 5% or more of the total combined voting power
or value of all classes of our or any parent or subsidiary companys stock. No participant may purchase more than such number of shares as may be determined by the committee with respect to a single offering period, or purchase period, if
applicable. In addition, no participant may accrue, under the ESPP and all similar purchase plans of ours or of our parent or subsidiary companies, a right to purchase shares of our stock having a fair market value in excess of $25,000 (determined
at the time the right is granted) for each calendar year. Participants may withdraw their accumulated payroll deductions prior to the end of the offering period, or purchase period, if applicable, in
accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment with us.
Offering Periods and Purchase PriceOur ESPP will be implemented through a series of offerings of purchase rights to eligible
employees. Under the ESPP, except as noted below, the committee may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will
accumulate, without interest. On the last day of the purchase period, i.e., the purchase date, accumulated payroll deductions will be used to purchase common stock for employees participating in the offering.
The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than the lesser of
(i) 85% of the fair market value per share of our common stock on the purchase date, or (ii) 85% of the fair market value per share of our common stock on the last trading day preceding the offering date. The committee will determine the
purchase period and the purchase price of shares that may be purchased pursuant to each offering.
Reset FeatureThe committee
may specify that if the fair market value of a share of our common stock on any purchase date within a particular offering period is less than or equal to the fair market value on the start date of that offering period, then the offering period will
automatically terminate and the employee in that offering period will automatically be transferred and enrolled in a new offering period, which will begin on the next day following such purchase date.
Changes to Capital StructureIn the event that there is a specified type of change in our capital structure, such as a stock
split, appropriate adjustments will be made to (a) the number of shares reserved under the ESPP, (b) the individual and aggregate participant share limitations described in the ESPP and (c) the price of shares that any participant has
elected to purchase.
Corporate ReorganizationImmediately before a corporate reorganization such as a merger or sale of
substantially all of the Company, the offering period and any purchase period then in progress shall terminate and stock will be purchased with the accumulated payroll deductions, unless the ESPP is assumed by the surviving corporation or its parent
corporation under the plan of merger or consolidation.
Amendment and TerminationOur Board of Directors will have the right
to amend, suspend or terminate the ESPP at any time. Any increase in the aggregate number of shares of stock to be issued under the ESPP is subject to stockholder approval. Any other amendment is subject to stockholder approval only to the extent
required under applicable law or regulation.
Perquisites, Health, Welfare and Retirement Benefits
Our Named Executive Officers are eligible to participate in all of our employee benefit plans, including our medical, dental, vision, group life and disability
insurance plans, in each case on the same basis as other employees.
Except as described below, we currently have no plans that provide
for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans
and nonqualified defined contribution plans.
We do not provide perquisites or personal benefits to our Named Executive Officers.
401(k) Plan
All of our full-time
employees in the United States, including our Named Executive Officers, are eligible to participate in our 401(k) plan, which is a retirement savings defined contribution plan established in accordance with Section 401(a) of the Code. Pursuant
to our 401(k) plan, employees may elect to defer their eligible compensation into the plan on a pre-tax basis, up to the statutorily prescribed annual limit of $17,500 in 2014 (additional salary
deferrals not to exceed $5,500 are available to those employees 50 years of age or older) and to have the amount of this reduction contributed to our 401(k) plan. In general, eligible
compensation for purposes of the 401(k) plan includes an employees wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with us to the extent the amounts
are includible in gross income, and subject to certain adjustments and exclusions required under the Code. The 401(k) plan currently does not offer the ability to invest in our securities. In 2014 we did not offer employer matching or make other
employer contributions to our 401(k) plan.
2014 Outstanding Equity Awards at Fiscal Year-End
The following table shows for the fiscal year ended December 31, 2014 certain information regarding outstanding equity awards at fiscal year-end for the
Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
Grant Date |
|
|
Number of securities underlying unexercised options (exercisable) (#) |
|
|
Number of securities underlying unexercised options (unexercisable) (#) |
|
|
Option exercise price ($/share) |
|
|
Option expiration date |
|
|
Number of shares or units that have not vested (#) |
|
|
Market value of shares or units that have not vested(1) ($) |
|
Faheem Hasnain |
|
|
11-19-10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,963 |
(2) |
|
$ |
1,465,587 |
|
|
|
|
11-19-10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,927 |
(2) |
|
$ |
2,931,297 |
|
|
|
|
1-25-12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,436 |
(3) |
|
$ |
665,964 |
|
|
|
|
4-18-13 |
|
|
|
55,557 |
(4) |
|
|
77,776 |
(4) |
|
$ |
8.10 |
|
|
|
4-18-23 |
|
|
|
|
|
|
|
|
|
|
|
|
7-17-13 |
|
|
|
50,825 |
(4) |
|
|
92,675 |
(4) |
|
$ |
18.77 |
|
|
|
7-17-23 |
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
106,107 |
(4) |
|
$ |
41.51 |
|
|
|
4-3-24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graham Cooper |
|
|
2-15-13 |
|
|
|
48,885 |
(4) |
|
|
57,780 |
(4) |
|
$ |
5.10 |
|
|
|
2-15-23 |
|
|
|
|
|
|
|
|
|
|
|
|
2-15-13 |
|
|
|
19,996 |
(5) |
|
|
20,004 |
(5) |
|
$ |
5.10 |
|
|
|
2-15-23 |
|
|
|
|
|
|
|
|
|
|
|
|
7-17-13 |
|
|
|
17,709 |
(4) |
|
|
32,291 |
(4) |
|
$ |
18.77 |
|
|
|
7-17-23 |
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
36,945 |
(4) |
|
$ |
41.51 |
|
|
|
4-3-24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheila Gujrathi, M.D. |
|
|
6-29-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,903 |
(6) |
|
$ |
1,580,747 |
|
|
|
|
6-29-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,987 |
(6) |
|
$ |
2,448,607 |
|
|
|
|
1-25-12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,818 |
(3) |
|
$ |
222,723 |
|
|
|
|
4-18-13 |
|
|
|
11,114 |
(4) |
|
|
15,552 |
(4) |
|
$ |
8.10 |
|
|
|
4-18-23 |
|
|
|
|
|
|
|
|
|
|
|
|
7-17-13 |
|
|
|
45,829 |
(4) |
|
|
83,571 |
(4) |
|
$ |
18.77 |
|
|
|
7-17-23 |
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
55,418 |
(4) |
|
$ |
41.51 |
|
|
|
4-3-24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcus F. Boehm, Ph.D. |
|
|
7-30-09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
(7) |
|
$ |
612,550 |
|
|
|
|
4-7-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363 |
(3) |
|
$ |
44,471 |
|
|
|
|
4-7-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,668 |
(8) |
|
$ |
1,429,447 |
|
|
|
|
1-25-12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,637 |
(3) |
|
$ |
200,549 |
|
|
|
|
4-18-13 |
|
|
|
11,114 |
(4) |
|
|
15,552 |
(4) |
|
$ |
8.10 |
|
|
|
4-18-23 |
|
|
|
|
|
|
|
|
|
|
|
|
7-17-13 |
|
|
|
17,529 |
(4) |
|
|
31,971 |
(4) |
|
$ |
18.77 |
|
|
|
7-17-23 |
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
36,945 |
(4) |
|
$ |
41.51 |
|
|
|
4-3-24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Peach, Ph.D. |
|
|
7-30-09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
(7) |
|
$ |
612,550 |
|
|
|
|
4-7-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363 |
(3) |
|
$ |
44,471 |
|
|
|
|
4-7-11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,668 |
(8) |
|
$ |
1,429,447 |
|
|
|
|
1-25-12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,637 |
(3) |
|
$ |
200,549 |
|
|
|
|
4-18-13 |
|
|
|
11,114 |
(4) |
|
|
15,552 |
(4) |
|
$ |
8.10 |
|
|
|
4-18-23 |
|
|
|
|
|
|
|
|
|
|
|
|
7-17-13 |
|
|
|
17,529 |
(4) |
|
|
31,971 |
(4) |
|
$ |
18.77 |
|
|
|
7-17-23 |
|
|
|
|
|
|
|
|
|
|
|
|
4-3-14 |
|
|
|
|
|
|
|
36,945 |
(4) |
|
$ |
41.51 |
|
|
|
4-3-24 |
|
|
|
|
|
|
|
|
|
(1) |
The market value of stock awards is based on the closing market price of our common stock of $122.51 per share on December 31, 2014. |
(2) |
Represents the remaining unvested shares subject to a restricted stock award of common stock granted outside of our 2008 Stock Plan. This award was
initially for an aggregate of 143,562 shares which commenced vesting upon the fulfillment of two milestones (71,781 shares for each milestone). The first milestone was the dosing of the first patient in our first clinical trial for a product
candidate other than RPC1063 for multiple sclerosis (the First Milestone). The second milestone was the dosing of the first patient in our first pivotal study for a product candidate (with any Phase 3 clinical study satisfying this
requirement) (the Second Milestone). Upon achievement of the First Milestone and the Second Milestone, 50% of the shares subject thereto vested, |
|
respectively, with 1/72nd of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions,
and any unvested shares will vest on November 19, 2015. |
(3) |
Represents shares acquired upon the early exercise of time-based options to purchase shares of common stock granted under our 2008 Stock Plan, which shares are subject to a right of repurchase at the original exercise
price paid for such shares if the executive terminates employment before the shares have vested. Vesting is at the rate of 25% of the shares on the one-year anniversary of the grant date and 1/48th of the shares each month thereafter for three
years. |
(4) |
These options vest at the rate of 25% of the total number of shares subject to the option on the first anniversary of the date of grant and 1/48th of the total number of shares subject to the option on each monthly
anniversary thereafter, provided that the option holder continues to provide services to us through such dates. |
(5) |
Represents an option granted under our 2008 Stock Plan subject to performance-based vesting. Commencement of vesting was subject to the Second Milestone. The shares vested 25% upon the achievement of the Second
Milestone and 1/48th of the shares vest each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of control transactions. |
(6) |
Represents the remaining unvested 53,332 shares which were subject to milestone-based vesting (26,666 shares for each of two milestones, i.e., the First Milestone and the Second Milestone). Upon achievement of the First
Milestone and the Second Milestone, 25% of the shares subject thereto vested, respectively, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of
control transactions, and any unvested shares will vest on June 13, 2016. |
(7) |
Represents shares subject to a restricted stock award of common stock granted outside of our 2008 Stock Plan for an aggregate of 20,000 shares which commenced vesting upon the fulfillment of a milestone (i.e., the First
Milestone). Upon achievement of the First Milestone, 25% of the shares vested immediately, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in connection with certain corporate or change of
control transactions, and any unvested shares will vest on November 19, 2015. |
(8) |
Represents the remaining unvested shares acquired upon the early exercise of options to purchase shares of common stock granted under our 2008 Stock Plan for an aggregate of 23,333 shares which were subject to
milestone-based vesting (i.e., the Second Milestone). Upon achievement of the Second Milestone, 25% of the shares vested immediately, with 1/48th of the shares vesting each month thereafter. The shares are subject to acceleration of vesting in
connection with certain corporate or change of control transactions, and any unvested shares will vest on November 19, 2015. |
2014 Option Exercises and Stock Vested
The following table includes certain information with respect to options exercised and stock that vested for each of our Named Executive
Officers during the fiscal year ended December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
Name |
|
Number of Shares Acquired on Exercise (#) |
|
|
Value Realized on Exercise(1) ($) |
|
|
Number of Shares Acquired on Vesting (#) |
|
|
Value Realized on Vesting(2) ($) |
|
Faheem Hasnain |
|
|
|
|
|
|
|
|
|
|
111,181 |
|
|
$ |
6,497,446 |
|
Graham Cooper |
|
|
50,000 |
|
|
$ |
2,809,877 |
|
|
|
|
|
|
|
|
|
Sheila Gujrathi, M.D. |
|
|
|
|
|
|
|
|
|
|
40,848 |
|
|
$ |
2,552,115 |
|
Marcus F. Boehm, Ph.D. |
|
|
|
|
|
|
|
|
|
|
17,851 |
|
|
$ |
1,105,630 |
|
Robert J. Peach, Ph.D. |
|
|
|
|
|
|
|
|
|
|
17,851 |
|
|
$ |
1,105,630 |
|
(1) |
Represents the difference between the exercise price of the option and the market price of the shares, multiplied by the number of shares for which the option was exercised. |
(2) |
Represents the number of shares acquired on vesting of restricted stock awards multiplied by the market value of the underlying shares on the vesting date. |
Potential Payments Upon a Termination or a Change in Control
Our Named Executive Officers are eligible to receive severance and change in control benefits under the terms of their employment agreements
described above under Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards TableEmployment Agreements with Named Executive Officers. Additionally, stock options granted to our Named Executive Officers
are subject to the change in control provisions set forth in the 2013 Plan and the 2008 Plan, as applicable and as further described above under Narrative Disclosure to Summary Compensation Table and Grant of Plan Based Awards
TableEquity Compensation Plans and Other Benefit Plans. The tables below reflect the amount of compensation and benefits payable to each Named Executive Officer in the event of (i) an involuntary termination without
cause or a constructive termination pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement, and (ii) an involuntary termination
without cause or a constructive termination pursuant to a material reduction in compensation or responsibilities, a relocation of principal office or a material breach by us of the employment agreement within one month prior to or within
12 months following a change in control. The amounts shown assume that the applicable triggering event occurred on December 31, 2014, and therefore are estimates of the amounts that would be paid to the Named Executive Officers upon the
occurrence of such triggering event.
As described above under Narrative Disclosure to Summary Compensation Table and Grant of Plan
Based Awards TableEmployment Agreements with Named Executive Officers, if any payment or benefit received by any Named Executive Officer pursuant to a change in control where a definitive agreement for such change in control transaction
is entered into on or prior to March 31, 2015 had constituted a parachute payment under Section 280G of the Internal Revenue Code and had become subject to excise tax under Section 4999 of such Code, we would have paid a
gross-up payment equal to the excise tax with respect to the parachute payment as well as all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the employment agreements (including that the total amount of
gross-up payments for all benefitted executives is capped at 1.5% of transaction value). Because no change in control occurred prior to March 31, 2015, the rights to the gross-up payments referenced below have expired. However, we are
presenting the gross-up payments because the values shown below assume that the triggering event occurred on December 31, 2014.
Involuntary Termination not Involving a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Earned But Unpaid Base Salary(1) |
|
|
Accrued Vacation(2) |
|
|
Cash Severance(3) |
|
|
Benefit Continuation(4) |
|
|
Total |
|
Faheem Hasnain |
|
$ |
26,754 |
|
|
$ |
15,028 |
|
|
$ |
535,085 |
|
|
$ |
24,578 |
|
|
$ |
601,445 |
|
Graham Cooper |
|
$ |
16,866 |
|
|
$ |
(6,189 |
) |
|
$ |
252,997 |
|
|
$ |
12,672 |
|
|
$ |
276,346 |
|
Sheila Gujrathi, M.D. |
|
$ |
19,055 |
|
|
$ |
26,702 |
|
|
$ |
285,825 |
|
|
$ |
12,672 |
|
|
$ |
344,254 |
|
Marcus F. Boehm, Ph.D. |
|
$ |
15,872 |
|
|
$ |
24,757 |
|
|
$ |
238,085 |
|
|
$ |
13,365 |
|
|
$ |
292,079 |
|
Robert J. Peach, Ph.D. |
|
$ |
15,872 |
|
|
$ |
4,001 |
|
|
$ |
238,085 |
|
|
$ |
16,299 |
|
|
$ |
274,257 |
|
Involuntary Termination Following a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Earned But Unpaid Base Salary(1) |
|
|
Accrued Vacation(2) |
|
|
Cash Severance(5) |
|
|
Benefit Continuation(6) |
|
|
Vesting Acceleration(7) |
|
|
Gross-up(8) |
|
|
Total |
|
Faheem Hasnain |
|
$ |
26,754 |
|
|
$ |
15,028 |
|
|
$ |
1,605,255 |
|
|
$ |
49,157 |
|
|
$ |
43,798,834 |
|
|
$ |
5,236,776 |
|
|
$ |
50,722,804 |
|
Graham Cooper |
|
$ |
16,866 |
|
|
$ |
(6,189 |
) |
|
$ |
472,261 |
|
|
$ |
16,896 |
|
|
$ |
25,399,483 |
|
|
$ |
2,372,750 |
|
|
$ |
28,272,067 |
|
Sheila Gujrathi, M.D. |
|
$ |
19,055 |
|
|
$ |
26,702 |
|
|
$ |
533,540 |
|
|
$ |
16,896 |
|
|
$ |
25,215,748 |
|
|
$ |
2,811,002 |
|
|
$ |
28,622,943 |
|
Marcus F. Boehm, Ph.D. |
|
$ |
15,872 |
|
|
$ |
24,757 |
|
|
$ |
444,424 |
|
|
$ |
17,820 |
|
|
$ |
13,465,549 |
|
|
$ |
1,746,814 |
|
|
$ |
15,715,236 |
|
Robert J. Peach, Ph.D. |
|
$ |
15,872 |
|
|
$ |
4,001 |
|
|
$ |
444,424 |
|
|
$ |
21,732 |
|
|
$ |
13,465,549 |
|
|
$ |
1,570,057 |
|
|
$ |
15,521,635 |
|
(1) |
Represents all accrued but unpaid salary as of December 31, 2014. |
(2) |
Represents all accrued but unpaid vacation as of December 31, 2014. |
(3) |
Represents a lump sum cash payment of an amount equal to base salary payable for a period of (i) 12 months in the case of Mr. Hasnain and (ii) nine months in the case of each of our other Named Executive
Officers. |
(4) |
Represents a lump sum cash payment to cover COBRA payments in an amount equal to the reimbursement for the same portion of monthly premiums we pay for active employees over (i) a 12-month period in the case of
Mr. Hasnain and (ii) a nine-month period in the case of each of our other Named Executive Officers. |
(5) |
Represents a lump sum cash payment of an amount equal to (i) base salary payable for a period of 24 months and two times target annual bonus in the case of Mr. Hasnain and (ii) base salary payable for a
period of 12 months and one times target annual bonus in the case of each of our other Named Executive Officers. |
(6) |
Represents a lump sum cash payment to cover COBRA payments in an amount equal to the reimbursement for the same portion of monthly premiums we pay for active employees over (i) a 24-month period in the case of
Mr. Hasnain and (ii) a 12-month period in the case of each of our other Named Executive Officers. |
(7) |
Value of equity acceleration is based on the sum of (i) in the case of stock options, the difference between the closing price of our common stock on December 31, 2014 ($122.51) and the option exercise price,
multiplied by the number of options for which vesting was subject to acceleration, and (ii) in the case of restricted stock, the closing price of our common stock on December 31, 2014 ($122.51) multiplied by the number of shares that were
subject to acceleration. |
(8) |
Represents the sum of (i) the excise tax with respect to the parachute payment and (ii) all taxes with respect to such gross-up payment, subject to the applicable limits set forth in the employment
agreement. The rights of each of our Named Executive Officers to the gross-up payments presented expired on March 31, 2015. |
Director Compensation
The following describes the compensation policy for non-employee directors in effect during 2014:
|
|
|
Annual retainer: $35,000. |
|
|
|
Annual Board Chair retainer: $25,000. |
|
|
|
Annual Audit Committee Chair/member fees: $15,000 and $7,500, respectively. |
|
|
|
Annual Compensation Committee Chair/member fees: $15,000 and $7,500, respectively. |
|
|
|
Annual Nominating and Corporate Governance Committee Chair/member fees: $7,000 and $3,500, respectively. |
|
|
|
Initial equity award upon joining the Board: option to purchase 18,800 shares of our common stock, vesting monthly over three years, with vesting acceleration in the event of a change in control (as defined in our 2013
Stock Plan) during the period of Board service. |
|
|
|
Annual equity award thereafter at the annual meeting: option to purchase 9,400 shares of our common stock, vesting monthly over one year, with vesting acceleration in the event of a change in control (as defined in our
2013 Stock Plan) during the period of Board service. |
In March 2015, the Board of Directors approved the following changes
to the compensation policy for non-employee directors:
|
|
|
Annual retainer: increased to $40,000. |
|
|
|
Annual Board Chair retainer: increased to $30,000. |
|
|
|
Annual Nominating and Corporate Governance Committee Chair/member fees: increased to $10,000 and $5,000, respectively. |
|
|
|
We also reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance at Board and committee meetings. |
|
|
|
Directors who are also employees do not receive cash or equity compensation for service on our Board of Directors in addition to the compensation payable for their service as our employees. |
|
|
|
The following table shows certain information with respect to the compensation of our non-employee directors who served during any part of the fiscal year ended December 31, 2014: |
We also reimburse our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance
at Board and committee meetings.
Directors who are also employees do not receive cash or equity compensation for service on our Board of
Directors in addition to the compensation payable for their service as our employees.
The following table shows certain information with respect to the compensation of our
non-employee directors who served during any part of the fiscal year ended December 31, 2014:
2014 Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees Earned or Paid in Cash |
|
|
Option Awards (1) |
|
|
Total |
|
William H. Rastetter, Ph.D. |
|
$ |
82,000 |
|
|
$ |
204,638 |
|
|
$ |
286,638 |
|
Kristina Burow |
|
$ |
53,500 |
|
|
$ |
204,638 |
|
|
$ |
258,138 |
|
Doug Cole, M.D.(2) |
|
$ |
16,394 |
|
|
|
|
|
|
$ |
16,394 |
|
Mary Lynne Hedley, Ph.D.(3) |
|
$ |
29,741 |
|
|
$ |
623,024 |
|
|
$ |
652,765 |
|
Richard A. Heyman, Ph.D.(4) |
|
$ |
16,530 |
|
|
$ |
613,068 |
|
|
$ |
629,598 |
|
Erle T. Mast |
|
$ |
42,500 |
|
|
$ |
204,638 |
|
|
$ |
247,138 |
|
Amir Nashat, Sc.D (5) |
|
$ |
19,878 |
|
|
$ |
204,638 |
|
|
$ |
224,516 |
|
Mary Szela(4) |
|
$ |
16,530 |
|
|
$ |
613,068 |
|
|
$ |
629,598 |
|
S. Edward Torres |
|
$ |
57,500 |
|
|
$ |
204,638 |
|
|
$ |
262,138 |
|
(1) |
This column represents the aggregate grant date fair value of options granted during 2014 computed in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. These amounts
generally reflect the amount that the Company expects to expense in its financial statements over the awards vesting schedule, and do not correspond to the actual value that will be realized by the non-employee directors. For additional
information on the valuation assumptions used in the calculation of these amounts, refer to note 10 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2014, as filed with the
SEC. The aggregate number of shares underlying outstanding option awards as of December 31, 2014 for each non-employee director were as follows: 28,200 for Dr. Rastetter; 28,200 for Ms. Burow; 18,800 for Dr. Cole; 20,190 for
Dr. Hedley; 18,800 for Dr. Heyman; 28,200 for Mr. Mast; 28,200 for Mr. Nashat; 18,800 for Ms. Szela; and 28,200 for Mr. Torres. |
(2) |
Mr. Cole did not stand for re-election at our 2014 annual meeting. |
(3) |
Dr. Hedley was appointed to our Board of Directors in April 2014. |
(4) |
Dr. Heyman and Ms. Szela were appointed to our Board of Directors in July 2014. |
(5) |
Mr. Nashat resigned from our Board of Directors in July 2014. |
Transactions with Related Persons
In addition to the cash and equity compensation arrangements of our directors and Named Executive Officers discussed above under the section
entitled Executive Compensation, the following is a description of transactions since January 1, 2014 to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors,
executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with or immediate family members of any of the foregoing, had or will have a direct or indirect material interest. We believe the terms obtained or
consideration we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arms length transactions with unrelated
parties.
Director Affiliations
Some of our directors are or were affiliated with and serve or served on our Board of Directors as representatives of entities which
beneficially own or owned 5% or more of our common stock at the time, as indicated in the table below:
|
|
|
Director |
|
Principal Stockholder |
Kristina Burow |
|
ARCH Venture Fund VII, L.P. and affiliates |
Doug Cole, M.D. |
|
Flagship Ventures Fund 2007, L.P. |
S. Edward Torres |
|
Lilly Ventures Fund I, LLC |
Third Amended and Restated Investors Rights Agreement
We are party to a third amended and restated investors rights agreement with certain holders who purchased shares of our Series A
preferred stock and Series B preferred stock prior to our May 2013 initial public offering. All such preferred stock was converted into shares of common stock in connection with our initial public offering. These holders include certain of our
executive officers and directors and entities with which certain of our directors are affiliated. This agreement provides that the holders of common stock issuable upon conversion of our preferred stock or exercise of our warrants to purchase common
stock or any other common stock acquired have the right to demand that we file a registration statement or request that their shares of common stock be covered by a registration statement that we are otherwise filing. The provisions of the
investors rights agreement, other than those relating to registration rights, terminated upon completion our initial public offering in May 2013.
Indemnification Agreements
We
have entered into indemnification agreements with our directors and officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify these individuals to the fullest extent permitted by Delaware law.
Related Party Transaction Policy
We have a written related party transaction policy pursuant to which our executive officers, directors, holders of more than 5% of any class of
our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the prior consent of our Audit Committee, or
other independent members of our Board of Directors in the event it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer,
director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting
any such proposal, our Audit Committee is to consider the relevant facts and circumstances available and deemed relevant to our Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms
generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related partys
interest in the transaction. All of the transactions described above were entered into prior to the adoption of such policy.
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