UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(Amendment No. 3)
Solicitation/Recommendation Statement
Under Section 14(d)(4) of the Securities Exchange Act of 1934
ZOGENIX, INC.
(Name of Subject Company)
ZOGENIX, INC.
(Name of Person Filing Statement)
Common Stock, $0.001 par value per share
(Title of Class of Securities)
98978L204
(CUSIP Number of Class of Securities)
Stephen J. Farr, Ph.D.
President and Chief Executive Officer
Zogenix, Inc.
5959 Horton Street, Suite 500
Emeryville, CA 94608
(510) 550-8300
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications
on Behalf of the Person Filing Statement)
With copies to:
R. Scott Shean
Cheston J. Larson
Matthew T. Bush
Latham & Watkins LLP
12670 High Bluff Drive
San Diego, California 92130
(858) 523-5400
☐ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
This Amendment No. 3 (this Amendment) amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 filed by Zogenix, Inc., a Delaware corporation, with the United States Securities and Exchange Commission (the SEC) on February 1, 2022 (as amended or supplemented from time to time, the Schedule 14D-9), relating to the tender offer (the Offer) by Zinc Merger Sub, Inc., a Delaware corporation (Purchaser) and a wholly owned subsidiary of UCB S.A., a société anonyme formed under the laws of Belgium (Parent), to purchase all of the outstanding shares of common stock, par value $0.001 per share, of the Company (the Shares), at a purchase price equal to (i) $26.00, net to the seller in cash, without interest and subject to any withholding of taxes required by applicable law, plus (ii) one non-transferable contingent value right per Share (each, a CVR), which CVR represents the right to receive a contingent payment of $2.00, net to the seller in cash, without interest and less any applicable tax withholding, which amount will become payable, if at all, if a specified milestone is achieved on or prior to December 31, 2023, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 1, 2022 (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 filed by Parent and Purchaser with the SEC on February 1, 2022 (as amended or supplemented from time to time, the Schedule TO). The Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B), respectively, to the Schedule 14D-9 and are incorporated herein by reference.
Except to the extent specifically provided in this Amendment, the information set forth in the Schedule 14D-9 remains unchanged. Capitalized terms used, but not otherwise defined, in this Amendment shall have the meanings ascribed to them in the Schedule 14D-9. This Amendment is being filed to reflect certain updates as reflected below.
Explanatory Note:
This supplemental information should be read in conjunction with the Schedule 14D-9 in its entirety. The Company believes that no supplemental disclosure is required under applicable laws and that the Schedule 14D-9 disclosed all material information required to be disclosed therein. However, to avoid the risk that lawsuits may delay or otherwise adversely affect the Offer and to minimize the expense of defending such actions, without admitting any liability or wrongdoing, the Company wishes to voluntarily make certain supplemental disclosures related to the Offer, all of which are set forth below and should be read in conjunction with the Schedule 14D-9. Nothing in these supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. Paragraph and page references used herein refer to the Schedule 14D-9 before any additions or deletions resulting from this supplemental information. If additional, similar complaints are filed, absent new or different allegations that are material, the Company will not necessarily announce such filings. Unless stated otherwise, the new text in the supplemental information is bolded and underlined and any deleted text is bolded and denoted with a strikethrough to highlight the supplemental information being disclosed.
Item 4. The Solicitation or Recommendation.
Item 4 of the Schedule 14D-9 is hereby amended and supplemented as follows:
The eleventh paragraph under the heading entitled Item 4. The Solicitation or RecommendationBackground and Reasons for the Company Boards RecommendationBackground of the Offer on page 15 of the Schedule 14D-9 is amended and supplemented as follows:
On August 25, 2021, the Company entered into a confidentiality agreement with Parent to facilitate further discussions regarding the potential partnership opportunity in the EU and provided Parent access to the virtual data room created by the Company for the same purpose. The confidentiality agreement did not include a standstill provision. The confidentiality agreement with Parent contained terms that were substantially similar to the confidentiality agreement entered into between the Company and Party A. The Company did not enter into any standstill agreements with any potential counterparties to a potential strategic business combination transaction with the Company in connection with the transaction process, including Party B. Other than the confidentiality agreement with Parent and the confidentiality agreement with Party A, the Company did not enter into any confidentiality agreements with any potential counterparties to a potential strategic business combination transaction with the Company in connection with the transaction process, including Party B.
The fourteenth paragraph under the heading entitled Item 4. The Solicitation or RecommendationBackground and Reasons for the Company Boards RecommendationBackground of the Offer on page 16 of the Schedule 14D-9 is amended and supplemented as follows:
On September 15, 2021, the Company Board held a regularly scheduled meeting, with representatives of BofA Securities and Latham & Watkins LLP (Latham), the Companys outside counsel, and members of management present, at which meeting, in addition to general operational updates, the Companys management reviewed with the Company Board future capital needs and capital raising alternatives, including non-dilutive forms of funding such as strategic partnering opportunities in Europe. As part of the discussion, Company management provided an update on the recent interactions with Parent and Party A on partnering opportunities and Party B on strategic opportunities. At the meeting, the Company Board formed a Pricing Committee of the Board (later renamed the Transactions Committee), consisting of Mr. Bock, Mr. Garner, Ms. Loewy, Mr. Mast, Dr. Tannenbaum and Mr. Wiggins, in order to assist the Company Board and provide oversight and feedback to management regarding financing and strategic opportunities. Although the Transactions Committee did not have the express power to veto a transaction, because it was comprised of six of the ten directors of the Company the members of the Transactions Committee, voting unanimously, would have been able to veto any transaction requiring Board approval. Also at this meeting, representatives of BofA Securities provided the Company Board an overview on the state of the biotechnology capital markets and recent mergers and acquisitions activity, as well as an overview of the Companys stockholder communications and engagement activities.
The section entitled Item 4. The Solicitation or RecommendationBackground and Reasons for the Company Boards RecommendationBackground of the Offer of the Schedule 14D-9 is amended and supplemented by inserting the following paragraph at the end of the section on page 23 before the subheading Reasons for the Recommendation of the Company Board:
At no time during its discussions with Parent, Purchaser and its affiliates did any members of Company management discuss or negotiate any potential post-closing employment arrangements following the potential transaction.
The fourth paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Summary of Material Company Financial AnalysesSelected Publicly Traded Companies Analysis on page 34 of the Schedule 14D-9 is amended and supplemented as follows:
Based on BofA Securities review of the enterprise values to PoS Adjusted revenue multiples for the selected companies and on its professional judgment and experience, BofA Securities applied an enterprise value to PoS Adjusted revenue multiple reference range of 1.10x to 2.60x to the Companys managements estimates of fiscal year 2025 PoS Adjusted revenue as reflected in the Financial Projections, to calculate a range of implied enterprise values for the Company. BofA Securities then calculated an implied equity value reference range per Share (rounded to the nearest $0.25) by adding to this range of implied enterprise values an estimate of the net cash of the Company of approximately $395.0 million as of December 31, 2021, as provided by the Companys management, deducting the value of the Convertible Notes as of December 31, 2021 if the resulting equity value per share was below the implied conversion price of the Convertible Notes of $24.28 based on 9.5 million shares underlying the $230 million par value Convertible Notes, as provided by the Companys management, and dividing the result by a number of fully-diluted shares of Zogenix common stock outstanding ranging from 57.472 million to 68.516 million, based on the derived range of implied equity values per share (calculated on a treasury stock method basis, based on equity information provided by the Companys management) including the 9.5 million shares underlying the $230 million par value Convertible Notes if the implied equity value per share was above the implied conversion price of the Convertible Notes of $24.28. This analysis indicated the following approximate implied equity value reference ranges per share of Zogenix common stock, as compared to (i) the Offer Price reflecting the notional value of the CVR (referred to in this Section as Notional Offer Price), (ii) the Offer Price reflecting the net present value of the CVR assuming 64% PoS adjusted CVR payout on March 31, 2023, per the Companys management, discounted to present value as of December 31, 2021 using a discount rate of 10.50%, which was based on an estimate of the Companys weighted average cost of capital, derived using the capital asset pricing model, which took into account, among other things, the risk free rate, the relevant unlevered beta and the historical equity risk premium (referred to in this Section as PoS Adjusted NPV Offer Price) and (iii) the closing price per Share as of January 18, 2022:
The chart in the third paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Summary of Material Company Financial AnalysesSelected Precedent Transactions Analysis on page 35 of the Schedule 14D-9 is amended and supplemented by adding the word Announcement before the word Date in the first column.
The fourth paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Summary of Material Company Financial AnalysesSelected Precedent Transactions Analysis on pages 35 and 36 of the Schedule 14D-9 is amended and supplemented as follows:
Based on BofA Securities review of the enterprise values to PoS Adjusted revenue multiples
for the selected transactions and on its professional judgment and experience, BofA Securities applied an enterprise value to PoS Adjusted revenue multiple reference range of 1.50x to 4.50x to the Companys managements estimates of fiscal
year 2025 PoS Adjusted revenue as reflected in the Financial Projections, and PoS Adjusted revenue multiple reference range of 1.25x to 4.00x to the Companys managements estimates of fiscal year 2026 PoS Adjusted revenue as reflected in
the Financial Projections, to calculate ranges of implied enterprise values for the Company. BofA Securities then calculated implied equity value per Share reference ranges (rounded to the nearest $0.25) for the Company by adding to the ranges of
implied enterprise values an estimate of the net cash of the Company of approximately $395.0 million as of December 31, 2021, as provided by the Companys management, deducting the
value of the Convertible Notes as of December 31, 2021 if the resulting equity value per Share was below the implied conversion price of the Convertible Notes of $24.28$24.21 based on 9.5 million
shares underlying the $230 million par value Convertible Notes, as provided by the Companys management, and dividing the results by a number of fully-diluted shares of Zogenix common stock outstanding ranging from
57.867 million to 69.919 million, based on the derived range of implied equity values per share (calculated on a treasury stock method basis, based on equity information
provided by the Companys management) including the 9.5 million shares underlying the $230 million par value Convertible Notes if the implied equity value per share was above the implied conversion price of the Convertible Notes of
$24.28$24.21.
The fourth paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Summary of Material Company Financial AnalysesDiscounted Cash Flow Analysis on page 36 of the Schedule 14D-9 is amended and supplemented as follows:
BofA Securities performed a
discounted cash flow analysis of the Company to calculate a range of implied present values per Share utilizing estimates of the standalone, PoS adjusted, unlevered, after-tax free cash flows the Company was
expected to generate over the period from January 1, 2022 through calendar year 2040 based on the Financial Projections. BofA Securities calculated a terminal value for the Company by applying an assumed perpetuity growth rate range of negative
30% to negative 20%, reflecting guidance provided by the Companys management, to the terminal year cash flows of the Company provided in the Financial Projections. The cash flows, the terminal value, and the estimated benefits from the
Companys NOLs as of December 31, 2021 and from the Companys future losses over the period from calendar year 2021 through calendar year 2023, as provided by the Companys management, were discounted to December 31, 2021,
utilizing mid-year discounting convention, and using discount rates ranging from 9.00% to 12.00%, which were based on an estimate of the Companys weighted average cost of capital, derived using the
capital asset pricing model, which took into account, among other things, the risk free rate, the relevant unlevered beta and the historical equity risk premium. BofA Securities then calculated implied per share equity value reference
ranges (rounded to the nearest $0.25) for the Company by (i) adding to this range of present values the net cash of the Company of approximately $395.0 million as of December 31, 2021,
and an estimate of net cash proceeds to be received by the Company in connection with a future equity financing assumed to occur in the first quarter of 2022, as reflected in the Financial Projections, (ii) deducting from the result the value
of the Convertible Notes as of December 31, 2021 if the resulting equity value per share was below the implied conversion price of the Convertible Notes of $24.28$24.21 based on 9.5 million shares
underlying the $230 million par value Convertible Notes, as provided by the Companys management, and (iii) dividing the result by a number of fully-diluted shares of Zogenix common stock outstanding ranging from
65.573 million to 75.562 million, based on the derived range of implied equity values per share (calculated on a treasury stock method basis, based on equity information
provided by the Companys management) including the 9.5 million shares underlying the $230 million par value Convertible Notes if the implied equity value per share was above the implied conversion price of the Convertible Notes of
$24.28$24.21.
The third paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Other Factors on page 37 of the Schedule 14D-9 is amended and supplemented by replacing BofA Securities reviewed certain publicly available equity research analyst price targets with the following language:
BofA Securities reviewed certain publicly available price targets by nine Wall Street equity research analysts
The first sentence of the fourth paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinion of the Companys Financial AdvisorsOpinion of BofA Securities, Inc.Other Factors on page 37 of the Schedule 14D-9 is amended and supplemented by inserting the words twenty-one after the words the premia paid in.
The second paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinions of the Companys Financial AdvisorsOpinion of SVB Leerink LLCSummary of Financial Analyses by SVB Leerink LLCSVB Leerink Analysis of Consideration on page 42 of the Schedule 14D-9 is amended and supplemented as follows:
Solely for purposes of the financial analyses summarized below, the term illustrative assumed per Share consideration refers to an aggregate assumed implied per Share value of the consideration of $27.11 per Share, equal, on a per Share basis, to $26.00 in cash plus the estimated net present value of one CVR of $1.11, based on the midpoint of the range of discount rates, as set forth above. However, there can be no assurance that the conditions triggering the CVR payment will be satisfied, and if triggered, when such conditions will be satisfied. SVB Leerinks analysis of the consideration proposed to be paid assumed fully diluted Shares outstanding (using the treasury method) equal to 69.66 million Shares, as provided by the Company, based upon the implied per Share value of the consideration of $27.11 per Share.
The chart in the third paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinions of the Companys Financial AdvisorsOpinion of SVB Leerink LLCSummary of Financial Analyses by SVB Leerink LLCPublicly Traded Company Analysis of SVB Leerink on page 43 of the Schedule 14D-9 is amended and supplemented by inserting the following three additional columns:
Enterprise Value(mm) |
Wall St Consensus Revenue |
EV/2022E Net Revenue |
EV/2023E Net Revenue |
|||||||||||||||||
2022E | 2023E | |||||||||||||||||||
Insmed, Inc. |
$ | 2,683 | $ | 271 | $ | 365 | 9.9x | 7.3x | ||||||||||||
Amicus Therapeutics, Inc. |
$ | 2,626 | $ | 380 | $ | 500 | 6.9x | 5.2x | ||||||||||||
Aurinia Pharmaceuticals, Inc. |
$ | 2,237 | $ | 191 | $ | 401 | 11.7x | 5.6x | ||||||||||||
Global Blood Therapeutics, Inc. |
$ | 1,644 | $ | 302 | $ | 506 | 5.4x | 3.2x | ||||||||||||
Pharming Group NV |
$ | 576 | $ | 226 | $ | 246 | 2.6x | 2.3x | ||||||||||||
Rigel Pharmaceuticals, Inc. |
$ | 322 | $ | 100 | $ | 147 | 3.2x | 2.2x | ||||||||||||
75th Percentile |
$ | 2,529 | | 9.1x | 5.5x | |||||||||||||||
Median |
$ | 1,940 | | 6.2x | 4.2x | |||||||||||||||
25th Percentile |
$ | 843 | | 3.8x | 2.6x |
The second paragraph under the heading entitled Item 4. The Solicitation or RecommendationOpinions of the Companys Financial AdvisorsOpinion of SVB Leerink LLCSummary of Financial Analyses by SVB Leerink LLCSelected Precedent Transaction Analysis of SVB Leerink on page 44 of the Schedule 14D-9 is amended and supplemented by replacing the chart and the sentence following the words The results of this analysis are as follows: with the following:
($ in millions) |
Target | Acquiror | Transaction Enterprise Value |
EV/ FY+1 Revenue |
EV/ FY+2 Revenue | |||||
February 2021 | GW Pharmaceuticals, Inc. |
Jazz Pharmaceuticals, Inc. |
$6,742 | 6.1x | 4.2x | |||||
January 2015 | NPS Pharmaceuticals, Inc. |
Shire plc | $5,135 | 10.5x | 7.1x | |||||
August 2020 | Aimmune Therapeutics, Inc. |
Nestlé Health Science S.A. |
$2,410 | 13.6x | 5.6x | |||||
September 2021 | Kadmon Holdings, Inc. |
Sanofi S.A. | $1,931 | NM | 11.9x | |||||
July 2016 | Relypsa, Inc. | Galenica Group / Vifor Pharma Group |
$1,431 | 13.5x | 8.2x | |||||
May 2020 | Portola Pharmaceuticals, Inc. |
Alexion Pharmaceuticals, Inc. |
$1,418 | 6.0x | 6.2x | |||||
March 2015 | Hyperion Therapeutics plc |
Horizon Therapeutics plc |
$949 | 6.5x | 5.7x | |||||
September 2019 | Dova Pharmaceuticals, Inc. |
Swedish Orphan Biovitrum AB |
$860 | 13.5x | 9.2x |
December 2021 | EUSA Pharma Ltd. |
Recordati | $845 | NA | 5.0x | |||||
September 2016 | Raptor Pharmaceuticals Corp. |
Horizon Therapeutics plc |
$772 | 4.4x | 3.8x | |||||
May 2014 | Chelsea Therapeutics International, Ltd. |
H. Lundbeck A/ S |
$551 | 6.6x | 3.2x | |||||
May 2020 | Stemline Therapeutics, Inc. |
Menarini Group | $502 | 3.3x | 2.3x | |||||
75th Percentile: Median: 25th Percentile: |
12.7x 6.5x |
7.4x 5.6x 4.1x |
NM denotes EV/Revenue multiples greater than 20.0x, which are excluded from analysis. NA denotes data not publicly available.
The second bullet under the heading entitled Item 4. The Solicitation or RecommendationOpinions of the Companys Financial AdvisorsOpinion of SVB Leerink LLCSummary of Additional Factors Observed by SVB Leerink LLC on page 45 of the Schedule 14D-9 is amended and supplemented as follows:
| one-year forward stock price targets for the Shares as reflected in nine publicly available Wall Street research analysts reports published within the 120 days prior to January 18, 2022, which indicated a target stock price range of approximately $17.00 to $62.00 per Share. The reviewed stock price targets for the Shares are summarized below: |
Analyst |
Price Target ($) | |
Analyst A | 62.00 | |
Analyst B | 55.00 | |
Analyst C | 43.00 | |
Analyst D | 35.00 | |
Analyst E | 34.00 | |
Analyst F | 33.00 | |
Analyst G | 32.00 | |
Analyst H | 22.00 | |
Analyst I | 17.00 |
Item 8. Additional Information.
Item 8 of the Schedule 14D-9 is hereby amended and supplemented by deleting the sentence under the heading Item 8. Additional InformationLegal Proceedings on page 56 of the Schedule 14D-9 and replacing it with the following paragraphs:
Several complaints related to the merger have been filed through February 25, 2022. The complaints are captioned: Wang v. Zogenix, Inc., Case No. 1:22-cv-00900, which was filed by a purported Zogenix stockholder in the United States District Court for the Southern District of New York on February 2, 2022; Barman v. Zogenix, Inc., Case No. 4:22-cv-00719, which was filed by a purported Zogenix stockholder in the United States District Court for the Northern District of California on February 3, 2022; Ciccotelli v. Zogenix, Inc., Case No. 1:22-cv-00172, which was filed by a purported Zogenix stockholder in the United States District Court for the District of Delaware on February 7, 2022 (the Ciccotelli Action); Finuliar v. Zogenix, Inc., Case No. 1:22-cv-01051, which was filed by a purported Zogenix stockholder in the United States District Court for the Southern District of New York on February 7, 2022 (the Finuliar Action); Hansen v. Zogenix, Inc., Case No. 1:22-cv-00679, which was filed by a purported Zogenix stockholder in the United States District Court for the Eastern District of New York on February 7, 2022; Eiden v. Zogenix, Inc., Case No. 1:22-cv-01108, which was filed by a purported Zogenix stockholder in the United States District Court for the Southern District of New York on February 8, 2022; Wheeler v. Zogenix, Inc., Case No. 1:22-cv-00183, which was filed by a purported Zogenix stockholder in the United States District Court for the District of Delaware on February 9, 2022; Justice v. Zogenix, Inc., Case No. 2:22-cv-00545, which was filed by a purported Zogenix stockholder in the United States District Court for the Eastern District of Pennsylvania on February 10, 2022; Wilhelm v. Zogenix, Inc., Case No. 1:22-cv-00185, which was filed by a purported Zogenix stockholder in the United States District Court for the District of Delaware on February 10, 2022; and Kelly v. Zogenix, Inc., Case No. 1:22-cv-01184, which was filed by a purported Zogenix stockholder in the United States District Court for the Southern District of New York on February 11, 2022 (collectively, the Complaints). The Complaints name as defendants the Company and members of the Company Board, and the complaint in the Ciccotelli Action also names Parent and Purchaser as defendants.
The Complaints generally allege that the defendants violated Section 14(d), 14(e) and 20(a) of the Securities Exchange Act of 1934, as well as Rules 14a-9 and 14d-9 promulgated thereunder. Specifically, one or more of the Complaints allege that the Schedule 14D-9 fails to disclose material information and/or materially misrepresents information concerning the sales process leading up to the merger, potential conflicts of interest of BofA Securities and Zogenix insiders, the Companys financial projections, the financial analyses of BofA Securities, and the financial analyses of SVB Leerink. The complaint in the Finuliar Action also asserts state law claims against the members of the Company Board alleging that they breached their fiduciary duty of candor/disclosure by causing or permitting the Schedule 14D-9 to be filed. The relief sought in one or more of the Complaints includes enjoining the consummation of the merger, enjoining defendants from filing any amendment to the Schedule 14D-9 unless certain allegedly material information is included, directing defendants to disseminate an amended Schedule 14D-9 that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements therein not misleading, declaring that defendants violated Sections 14(d), 14(e), and 20(a) of the Exchange Act and Rules 14a-9 and 14d-9 promulgated thereunder, rescinding, to the extent already consummated, the merger and awarding rescissory damages, directing defendants to account for all alleged damages suffered as a result of defendants alleged wrongdoing, awarding the plaintiffs their respective costs and disbursements, and granting other and further equitable relief as the Court may deem just and proper.
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.
Zogenix, Inc. | ||
By: | /s/ Stephen J. Farr | |
Name: | Stephen J. Farr. Ph.D. | |
Title: | President and Chief Executive Officer |
Dated: February 25, 2022