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Subsequent Event
9 Months Ended
Sep. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events [Text Block]

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13. Subsequent Event

 

On October 17, 2018, the Company entered into the Merger Agreement with Novartis and Merger Sub. Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Novartis.

 

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of Company common stock, par value $0.001 per share (other than such shares owned by the Company, Novartis or Merger Sub immediately prior to the Effective Time (which shares will be canceled) and such shares with respect to which the holder thereof properly exercises appraisal rights (and does not validly withdraw, waive or otherwise lose such rights) under Delaware law), will automatically be converted into the right to receive $24.00 in cash, without interest and less any applicable withholding taxes (the “Merger Consideration”).

 

At the Effective Time, each Company option to purchase shares of Company common stock (a “stock option”) that is outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, will (i) if the exercise price of such stock option is less than the Merger Consideration, be canceled, with the holder of such stock option becoming entitled to receive an amount in cash, without interest, equal to (a) the excess of the Merger Consideration over the exercise price of the stock option, multiplied by (b) the number of shares of Company common stock subject to such stock option as of immediately prior to the Effective Time (subject to any applicable withholding taxes); or (ii) if the exercise price of such stock option is equal to or greater than the Merger Consideration, be canceled without any consideration being payable.

 

Also at the Effective Time, each restricted stock unit of the Company (“RSU”) that is outstanding and not settled immediately prior to the Effective Time, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration multiplied by the number of shares of Company common stock subject to such RSU as of immediately prior to the Effective Time (subject to any applicable withholding taxes).

 

The consummation of the Merger is subject to certain closing conditions, including (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company common stock (the “Stockholder Approval”), (ii) the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and under Section 721 of the Defense Production Act of 1950, as amended, (iii) the receipt of certain other required regulatory approvals, if such approvals are required to complete the merger, and (iv) the absence of any legal restraints that have the effect of preventing the consummation of the Merger.  Moreover, each party’s obligation to consummate the Merger is subject to certain other conditions, including the accuracy of the other party’s representations and warranties in the Merger Agreement (subject to certain materiality qualifiers) and the other party’s compliance in all material respects with its obligations under the Merger Agreement. In addition, Novartis’ and Merger Sub’s obligation to consummate the Merger is subject to the absence of a Company Material Adverse Effect (as defined in the Merger Agreement). Consummation of the Merger is not subject to a financing condition.

 

The Merger Agreement contains customary representations and warranties of each of the Company, Novartis and Merger Sub relating to their respective businesses and certain matters related to the Merger Agreement. The Merger Agreement contains certain covenants, including covenants providing (i) for each of the parties to use reasonable best efforts to cause the transactions under the Merger Agreement to be consummated, (ii) for the Company to carry on its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and completion of the Merger and (iii) for the Company not to engage in certain kinds of transactions during that period.

 

The Merger Agreement obliges the Company to abide by customary “no-shop” restrictions on its ability to solicit alternative takeover proposals from third parties and to provide non-public information to and enter into discussions or negotiations with third parties regarding alternative takeover proposals. Notwithstanding this obligation, prior to the receipt of the Stockholder Approval, if the Company receives an unsolicited alternative takeover proposal that the Company’s Board of Directors determines in good faith (after consultation with the Company’s legal counsel and financial advisor) constitutes, or would reasonably be expected to lead to, a Superior Proposal (as defined in the Merger Agreement and summarized below) and that the failure to take such action would be inconsistent with its fiduciary duties under applicable law, the Company may under certain circumstances furnish information to and engage in discussions or negotiations with the third party making such alternative takeover proposal. A “Superior Proposal” generally is any bona fide written takeover proposal to acquire at least a majority of the outstanding shares of Company common stock or of the assets of the Company, which proposal, in the good faith determination of the Company’s Board of Directors (after consultation with the Company’s legal counsel and financial advisor), (i) is more favorable from a financial point of view to the Company’s stockholders than the transactions under the Merger Agreement, taking into account changes to the Merger Agreement proposed by Novartis in response thereto, and (ii) is reasonably capable of being completed, taking into account all aspects of such proposal.  Prior to the Company entering into a written definitive agreement for, or effecting a change in recommendation of the Company’s Board of Directors in connection with, a Superior Proposal, the Company must provide Novartis with advance written notice of its intention to do so and Novartis will generally have at least four business days after receipt of such notice to negotiate with the Company to make such adjustments in the terms and conditions of the Merger Agreement as would permit the Company’s Board of Directors not to enter into such a definitive agreement or change its recommendation.

 

The Merger Agreement contains certain customary termination rights for the Company and Novartis, including a right to terminate the Merger Agreement if the Merger is not completed by July 17, 2019, (as such date may be extended to April 17, 2020 pursuant to the terms of the Merger Agreement, the “Outside Date”). The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances, including, among others, the Company’s termination of the Merger Agreement to enter into a written definitive agreement for a Superior Proposal or following a change in recommendation of the Company’s Board of Directors, the Company will be obligated to pay Novartis a termination fee of $73.5 million. If the Merger Agreement is terminated due to the Stockholder Approval not being obtained at a meeting of the Company’s stockholders at which a vote is taken, the Company would be required to reimburse Novartis’ reasonable out-of-pocket fees and expenses, up to $5.0 million, and any amounts reimbursed will be deducted from the amount of the termination fee payable by the Company, if any.

 

The Merger Agreement also provides that Novartis will be required to pay the Company a reverse termination fee of $150.0 million under certain specified circumstances, including, among others, the termination of the Merger Agreement if certain required regulatory approvals have not been obtained by the Outside Date or the termination of the Merger Agreement due to certain types of legal restraints on the Merger being imposed.