DEFM14A 1 d411705ddefm14a.htm DEFM14A DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.             )

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to ss. 240.14a-12

CombiMatrix Corporation

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

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Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO    LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

The board of directors of CombiMatrix Corporation, or CombiMatrix, and the board of directors of Invitae Corporation, or Invitae, have each approved an Agreement and Plan of Merger and Reorganization, dated July 31, 2017, or the Merger Agreement, pursuant to which a wholly owned subsidiary of Invitae will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae, which is referred to as the Merger. The approval of CombiMatrix’s stockholders must be obtained before the Merger can be completed. This document is being sent to CombiMatrix stockholders to ask them to vote in favor of the adoption of the Merger Agreement. The approval of Invitae’s stockholders is not required for the issuance of its shares of common stock in the Merger.

Prior to the Merger, Invitae intends to commence an exchange offer for CombiMatrix Series F warrants to acquire shares of CombiMatrix common stock, or the Warrant Exchange Offer. The completion of the Merger is conditioned upon the successful completion of the Warrant Exchange Offer as described in the Merger Agreement.

At the effective time of the Merger, each share of CombiMatrix’s common stock, or CombiMatrix common stock, will be converted into the right to receive a fraction of a share of Invitae common stock, or the Exchange Ratio. It is currently anticipated that, at the closing of the Merger, the Exchange Ratio would be between approximately 0.91 and 0.84 shares of Invitae’s common stock, or Invitae common stock. The Exchange Ratio is determined pursuant to a formula in the Merger Agreement and described in the attached proxy statement/prospectus, and the estimate of the Exchange Ratio is subject to adjustment. For example, the estimated Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in the attached proxy statement/prospectus, the Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. See the sections entitled “The Merger Agreement—Merger Consideration and Exchange Ratio” and “The Merger Agreement—Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” beginning on pages 80 and 84, respectively, of the attached proxy statement/prospectus for additional factors that may affect the Exchange Ratio.

Each outstanding share of CombiMatrix Series F preferred stock will be converted into the right to receive a number of shares of Invitae common stock equal to the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon conversion of one share of Series F preferred stock on the date immediately prior to the Merger. Each in-the-money option to purchase CombiMatrix common stock that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the number of shares of Invitae common stock equal to the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon exercise of such option, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement (which is $9.491 and referred to herein as the Invitae Trailing Average Share Value). Each out-the-money option to purchase CombiMatrix common stock that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration. Each CombiMatrix restricted stock unit outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable


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vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such restricted stock unit by the Exchange Ratio. Immediately after announcement of the Merger, CombiMatrix repurchased half of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016. Upon the closing of the Merger, CombiMatrix will repurchase the remainder of such outstanding and unexercised warrants. All CombiMatrix Series D warrants and Series F warrants that are outstanding and unexercised at the closing of the Merger will be converted into and become warrants to purchase Invitae common stock, and Invitae will assume each such CombiMatrix Series D warrant and Series F warrant (to the extent such Series F warrants are not exchanged in the Warrant Exchange Offer or previously exercised) in accordance with their terms, with the number of underlying shares and exercise price as adjusted for the Exchange Ratio, although Invitae’s obligation to proceed with the Merger is subject to achieving 90% participation in the Warrant Exchange Offer as described in the attached proxy statement/prospectus. Invitae stockholders will continue to own and hold their existing shares of Invitae common stock.

In connection with the Merger and the Warrant Exchange Offer, Invitae expects to issue a maximum of 3,985,812 shares of common stock, including common stock underlying warrants and restricted stock units issuable to CombiMatrix securityholders who, immediately after the Merger, are expected to own approximately 6.9% of the fully-diluted common stock of the combined company, with Invitae securityholders, whose shares of Invitae capital stock will remain outstanding after the Merger, owning approximately 93.1% of the fully-diluted common stock of the combined company. These estimates are based on the assumption that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer and are subject to adjustment.

Invitae’s common stock is listed on the NYSE under the symbol “NVTA.” CombiMatrix’s common stock is listed on the NASDAQ Capital Market under the symbol “CBMX.” CombiMatrix Series F warrants are listed on the NASDAQ Capital Market under the symbol “CBMXW.”

The special meeting of CombiMatrix stockholders will be held on November 10, 2017 at 1:00 pm, local time, at the offices of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660. At the special meeting of CombiMatrix stockholders, CombiMatrix stockholders will be asked to vote on the adoption of the Merger Agreement and certain other matters. The CombiMatrix board of directors unanimously recommends that CombiMatrix stockholders vote “FOR” the Merger Proposal and “FOR” the other related proposals.

This document is a prospectus related to the issuance of shares of Invitae common stock in the Merger and a proxy statement for CombiMatrix to use in soliciting proxies for its special meeting of stockholders. It is an important document containing answers to frequently asked questions and a summary description of the Merger (beginning on page 9), followed by more detailed information about Invitae, CombiMatrix, the proposed Merger, the Merger Agreement and certain other matters. You are urged to read this document carefully and in its entirety. In particular, you should consider the matters discussed in the section entitled “Risk Factors” beginning on page 38 of this proxy statement/prospectus.

Invitae and CombiMatrix are excited about the opportunities the Merger brings to both Invitae’s and CombiMatrix’s stockholders, and thank you for your consideration and continued support.

 

Sean E. George, Ph.D.
President and Chief Executive Officer
Invitae Corporation
  Mark McDonough
President and Chief Executive Officer
CombiMatrix Corporation

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

The accompanying proxy statement/prospectus is dated October 6, 2017 and is first being mailed to stockholders of CombiMatrix on or about October 6, 2017.


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CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of CombiMatrix Corporation:

Notice is hereby given that a Special Meeting of Stockholders of CombiMatrix Corporation, a Delaware corporation, will be held on November 10, 2017 at 1:00 pm, local time, at the offices of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660, to consider and vote upon the following matters, as more fully described in the proxy statement/prospectus accompanying this notice:

 

  1. a proposal to approve and adopt the Agreement and Plan of Merger and Reorganization, dated as of July 31, 2017, by and among Invitae Corporation, Coronado Merger Sub, Inc. and CombiMatrix Corporation, as such agreement may be amended from time to time, and the transactions contemplated thereby, including the merger of Coronado Merger Sub, Inc. with and into CombiMatrix Corporation, with CombiMatrix Corporation surviving as a wholly owned subsidiary of Invitae Corporation. This proposal is referred to as the “Merger Proposal”;

 

  2. a proposal to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger. This proposal is referred to as the “Compensation Proposal”; and

 

  3. a proposal to approve the possible adjournment of the special meeting, including, if necessary or appropriate, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposals. This proposal is referred to as the “Adjournment Proposal.”

The CombiMatrix board of directors has fixed the close of business on September 26, 2017 as the record date for the CombiMatrix special meeting. Only CombiMatrix common stockholders of record at that time are entitled to notice of, and to vote at, the CombiMatrix special meeting, or any adjournment or postponement of the CombiMatrix special meeting. At the close of business on the record date, CombiMatrix had 2,938,982 shares of common stock outstanding and entitled to vote. Holders of CombiMatrix Series F preferred stock are not entitled to vote at the CombiMatrix special meeting.

Approval of the Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of CombiMatrix common stock entitled to vote on the record date for the CombiMatrix special meeting. Approval, on a non-binding advisory basis, of the Compensation Proposal requires that the votes cast in favor of this proposal at the CombiMatrix special meeting exceed the votes cast opposing the proposal, assuming a quorum is present. Approval of the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of CombiMatrix common stock having voting power present in person or represented by proxy at the CombiMatrix special meeting, whether or not a quorum is present.

Invitae intends to commence an exchange offer for Series F warrants to acquire shares of CombiMatrix common stock, which is referred to as the Warrant Exchange Offer. The completion of the Merger is conditioned upon, among other conditions, the successful completion of the Warrant Exchange Offer as described in the Merger Agreement. The terms of the Warrant Exchange Offer are described in the accompanying proxy statement/prospectus, including in the section entitled “The Warrant Exchange Offer.”

Whether or not you plan to attend the special meeting, please vote as soon as possible by the method described below to ensure that your shares are represented and voted in accordance with your wishes. To submit your proxy by mail, please complete, sign, date and return the accompanying proxy card in the enclosed self-addressed, postage-paid envelope. To vote over the Internet or by telephone, please follow the voting


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instructions printed on the proxy card sent to you. For detailed information regarding voting instructions, please refer to the section entitled “Special Meeting of CombiMatrix Stockholders” in the accompanying proxy statement/prospectus. This will not prevent you from voting in person, but it will help to secure a quorum and avoid additional solicitation costs. Any holder of CombiMatrix common stock who is present and entitled to vote at the CombiMatrix special meeting may vote in person instead of by proxy, thereby cancelling any previously submitted proxy. In any event, a proxy may be revoked in writing at any time before the CombiMatrix special meeting in the manner described in the accompanying proxy statement/prospectus. If your shares are held in the name of a bank, broker, or other holder of record, you must obtain a legal proxy, executed in your favor, from the holder of record in order to be able to vote in person at the special meeting.

The CombiMatrix board of directors has determined and believes that each of the proposals outlined above is fair to, in the best interests of, and advisable to CombiMatrix and its stockholders and has approved the proposals. The CombiMatrix board of directors unanimously recommends that the CombiMatrix stockholders vote “FOR” each such proposal.

Before voting your shares, you should read the entire proxy statement/prospectus carefully, including its annexes and the documents incorporated by reference in the proxy statement/prospectus.

By Order of the Board of Directors,

Mark McDonough

President and Chief Executive Officer

Irvine, California

October 6, 2017

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.


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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Invitae and CombiMatrix from documents that each company has filed with the SEC, including certain documents of CombiMatrix attached as annexes to this proxy statement/prospectus and certain documents of Invitae incorporated by reference that have not been included in or delivered with this document. This information is available to you without charge upon your oral or written request. You may read and copy documents incorporated by reference in this document, other than certain exhibits to those documents, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also obtain such documents free of charge through the SEC’s website (www.sec.gov) or by requesting them in writing or by telephone from the appropriate company at the following addresses:

 

Invitae Corporation

   CombiMatrix Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Attn.: Investor Relations

  

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

Attn.: Investor Relations

If you would like to request any documents, please do so by no later than five business days before the date of the CombiMatrix special meeting in order to receive them before the special meeting.

You should rely only on information contained in this proxy statement/prospectus, attached within an annex to this proxy statement/prospectus, or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from the information contained in, attached as an annex to, or incorporated by reference into, this document. You should not assume that the information contained in, attached as an annex to, or incorporated by reference into, this document is accurate as of any date other than the date of this document, the respective dates of the applicable annexes, or the respective dates of the information incorporated by reference into this document. Neither the mailing of this document to CombiMatrix stockholders, nor the issuance by Invitae of common stock in connection with the Merger, will create any implication to the contrary. For a listing of certain documents attached as annexes or incorporated by reference into this document, please see the section entitled “Where You Can Find More Information.

Information on the websites of Invitae or CombiMatrix, or any subsidiary of Invitae or CombiMatrix, is not part of this proxy statement/prospectus. You should not rely on that information in deciding how to vote.

ABOUT THIS DOCUMENT

This proxy statement/prospectus forms a part of a registration statement on Form S-4 (Registration No. 333-220447) filed by Invitae with the Securities and Exchange Commission and constitutes a prospectus of Invitae under Section 5 of the Securities Act, and the rules thereunder, with respect to the shares of Invitae common stock to be issued in the Merger. In addition, it constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder, and a notice of meeting with respect to a special meeting of CombiMatrix stockholders.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this document regarding Invitae has been provided by Invitae and information contained in this document regarding CombiMatrix has been provided by CombiMatrix.


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS

     1  

PROSPECTUS SUMMARY

     9  

SELECTED HISTORICAL FINANCIAL DATA OF INVITAE

     20  

SELECTED HISTORICAL FINANCIAL DATA OF COMBIMATRIX

     22  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     24  

COMPARATIVE MARKET PRICES AND DIVIDENDS

     33  

Invitae Common Stock

     33  

CombiMatrix Common Stock

     34  

Dividends

     34  

COMPARATIVE MARKET VALUE OF SECURITIES

     35  

COMPARATIVE PER SHARE DATA

     36  

RECENT DEVELOPMENTS

     37  

RISK FACTORS

     38  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     47  

THE COMBIMATRIX SPECIAL MEETING

     48  

Matters to Be Considered

     48  

Methods of Voting

     48  

Revoking a Proxy

     49  

Broker Non-Votes

     49  

Solicitation of Proxies

     49  

Householding of Proxy Materials

     50  

Record Date

     50  

Quorum

     50  

Vote Required

     50  

Recommendation of the CombiMatrix Board of Directors

     51  

Attending the Special Meeting

     51  

INFORMATION ABOUT THE COMPANIES

     52  

THE MERGER PROPOSAL

     53  

Background of the Merger

     53  

CombiMatrix’s Reasons for the Merger; Recommendation of the CombiMatrix Board of Directors

     64  

Invitae’s Reasons for the Merger

     67  

Board of Directors and Management of Invitae Following Completion of the Merger

     68  

Ownership of Invitae Following the Merger

     68  

Public Trading Markets

     69  

Appraisal Rights

     69  

Regulatory Approvals Required for the Merger

     69  

Opinion of CombiMatrix Financial Advisor

     69  

Summary of Material Financial Analysis

     71  

Interests of Certain CombiMatrix Directors and Officers in the Merger

     76  

THE MERGER AGREEMENT

     80  

Structure

     80  

Completion and Effectiveness of the Merger

     80  

Merger Consideration and Exchange Ratio

     80  

Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis

     84  

Invitae Common Stock

     85  

Procedures for Exchanging CombiMatrix Stock Certificates

     85  

Fractional Shares

     86  

Representations and Warranties

     86  

Covenants; Conduct of Business Pending the Merger

     89  

 

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Non-Solicitation

     90  

Disclosure Documents

     92  

Regulatory Approvals Required for the Merger

     94  

CombiMatrix Stock Options, RSUs and Warrants

     94  

Indemnification and Insurance for CombiMatrix Directors and Officers

     95  

CombiMatrix Transaction Bonus Payout Agreements

     95  

Additional Agreements

     96  

Conditions to the Completion of the Merger

     96  

Termination of the Merger Agreement and Termination Fee

     98  

Amendment

     99  

Expenses

     99  

Special Meeting of CombiMatrix Stockholders

     99  

MATTERS BEING SUBMITTED TO A VOTE OF COMBIMATRIX STOCKHOLDERS

     100  

CombiMatrix Proposal No.  1: Approval and Adoption of the Agreement and Plan of Merger and Reorganization, dated as of July  31, 2017, by and among Invitae Corporation, Coronado Merger Sub, Inc. and CombiMatrix Corporation, as such agreement may be amended from time to time, and the transactions contemplated thereby, including the merger of Coronado Merger Sub, Inc. with and into CombiMatrix Corporation, with CombiMatrix Corporation surviving as a wholly owned subsidiary of Invitae Corporation.

     100  

CombiMatrix Proposal No.  2: The Non-Binding Advisory Merger-Related Compensation Proposal

     100  

CombiMatrix Proposal No.  3: Approval of Possible Adjournment of the CombiMatrix Special Meeting

     101  

THE WARRANT EXCHANGE OFFER

     102  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     103  

ACCOUNTING TREATMENT

     103  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     105  

DESCRIPTION OF INVITAE CAPITAL STOCK

     109  

COMPARISON OF RIGHTS OF INVITAE AND COMBIMATRIX STOCKHOLDERS

     110  

Capitalization

     110  

Voting Rights

     110  

Stockholder Action by Written Consent

     111  

Dividends

     111  

Number of Directors

     111  

Classification of Directors

     112  

Election of Directors

     112  

Removal of Directors

     112  

Vacancies

     113  

Amendments to Certificate of Incorporation

     113  

Amendments to Bylaws

     113  

Annual Meetings of Stockholders

     114  

Special Meetings of Stockholders

     114  

Submission of Stockholder Proposals

     114  

Stockholder Nomination of Director Candidates

     115  

Indemnification and Limitation of Personal Liability of Directors

     116  

Extraordinary Transactions

     116  

LEGAL MATTERS

     118  

EXPERTS

     118  

STOCKHOLDER PROPOSALS

     118  

Invitae

     118  

CombiMatrix

     118  

WHERE YOU CAN FIND MORE INFORMATION

     120  

 

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ANNEX A—MERGER AGREEMENT

     A-1  

ANNEX B—OPINION OF FINANCIAL ADVISOR

     B-1  

ANNEX C—COMBIMATRIX ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

     C-1  

ANNEX D—COMBIMATRIX QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017

     D-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the special meeting of CombiMatrix stockholders and the Merger. Invitae and CombiMatrix urge you to read the remainder of this proxy statement/prospectus carefully. Additional important information is also contained in the annexes to, and in the documents incorporated by reference into, this proxy statement/prospectus.

 

Q: What will happen in the Merger?

 

A: Invitae Corporation, or Invitae, and CombiMatrix Corporation, or CombiMatrix, have entered into an Agreement and Plan of Merger and Reorganization, dated July 31, 2017, or the Merger Agreement. The Merger Agreement contains the terms and conditions of the proposed business combination of Invitae and CombiMatrix. Under the Merger Agreement, Coronado Merger Sub, Inc., a wholly owned subsidiary of Invitae, or Merger Sub, will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae. This transaction is referred to as the Merger. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

Prior to the Merger, Invitae intends to commence an exchange offer for CombiMatrix Series F warrants to acquire shares of CombiMatrix common stock, or the Warrant Exchange Offer. The completion of the Merger is conditioned upon the completion of the Warrant Exchange Offer.

At the effective time of the Merger, each share of CombiMatrix’s common stock, or CombiMatrix common stock, will be converted into the right to receive a fraction of a share of Invitae common stock, or the Exchange Ratio. It is currently anticipated that, at the closing of the Merger, the Exchange Ratio would be between approximately 0.91 and 0.84 shares of Invitae’s common stock, or Invitae common stock. The Exchange Ratio is determined pursuant to a formula in the Merger Agreement and described in this proxy statement/prospectus, and the estimate of the Exchange Ratio is subject to adjustment. For example, the estimated Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus, the Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. See the sections entitled “The Merger Agreement—Merger Consideration and Exchange Ratio” and “The Merger Agreement—Determination of CombiMatrix Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the Exchange Ratio.

 

Q: What will CombiMatrix stockholders receive in the Merger?

 

A:

Each share of CombiMatrix common stock will be converted into the right to receive a fraction of a share of Invitae common stock equal to the Exchange Ratio. Each outstanding share of CombiMatrix Series F preferred stock will be converted into the right to receive a number of shares of Invitae common stock equal the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon

 

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  conversion of one share of Series F preferred stock on the date immediately prior to the Merger. Each in-the-money option to purchase CombiMatrix common stock that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the number of shares of Invitae common stock equal the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon exercise of such option, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the Invitae Trailing Average Share Value. Each out-the-money option to purchase CombiMatrix common stock that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration. Each CombiMatrix restricted stock unit outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such restricted stock unit by the Exchange Ratio. Immediately after announcement of the Merger, CombiMatrix repurchased half of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016, and upon the closing of the Merger, CombiMatrix will repurchase the remainder of such warrants (such warrant repurchase referred to herein as the “CombiMatrix Warrant Repurchase”). All CombiMatrix Series D warrants and Series F warrants that are outstanding and unexercised at the closing of the Merger will be converted into and become warrants to purchase Invitae common stock, and Invitae will assume each such CombiMatrix Series D warrant and Series F warrant (to the extent such Series F warrants are not exchanged in the Warrant Exchange Offer or previously exercised) in accordance with their terms, with the number of underlying shares and exercise price as adjusted for the Exchange Ratio, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus. Invitae stockholders will continue to own and hold their existing shares of Invitae common stock.

In connection with the Merger and the Warrant Exchange Offer, Invitae expects to issue a maximum of 3,985,812 shares of common stock, including common stock underlying warrants and restricted stock units issuable, to CombiMatrix securityholders, who, immediately after the Merger, are expected to own approximately 6.9% of the fully-diluted common stock of the combined company, with Invitae securityholders, whose shares of Invitae capital stock will remain outstanding after the Merger, owning approximately 93.1% of the fully-diluted common stock of the combined company. These estimates are based on the assumption that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer and subject to adjustment.

The total number of shares of Invitae common stock to be issued by Invitae in connection with the Merger and the Warrant Exchange Offer depends primarily upon:

 

    The amount of CombiMatrix’s net cash as of the closing of the Merger; and

 

    The number of CombiMatrix Series F warrants outstanding as of the closing of the Merger, which depends on how many Series F warrants are exercised or exchanged pursuant to the Warrant Exchange Offer.

For illustrative purposes only, the examples below provide two different scenarios showing the effect of the number of Series F warrants either tendered in the Warrant Exchange Offer or exercised on the number of shares of Invitae common stock issued in the Merger, but do not take into account certain other factors. The examples also do not reflect Invitae common stock and restricted stock units issuable to CombiMatrix executive officers and directors under the CombiMatrix transaction bonus plan or issuable upon exercise of the CombiMatrix Series D warrants assumed by Invitae in the Merger. See the sections entitled “The Merger Agreement—Merger Consideration and Exchange Ratio” and “The Merger Agreement—Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the number of shares of Invitae common stock issued in the Merger.

 

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Example 1: All Series F Warrants Tendered

As of September 26, 2017, CombiMatrix had 3,044,195 shares of common stock outstanding (inclusive of common stock underlying Series F preferred stock, restricted stock units, and in-the-money options) and 2,066,976 Series F warrants outstanding. In the event that all Series F warrants are tendered, CombiMatrix currently estimates that net cash at the closing of the Merger will be approximately negative $0.8 million. If there is no change after September 26, 2017 in the number of shares of CombiMatrix common stock outstanding, then subject to adjustment for CombiMatrix’s net cash as of the closing of the Merger (including adjustments for payments to participants in CombiMatrix’s transaction bonus plan), Invitae would issue shares of Invitae common stock with an aggregate value of approximately $26,185,712 million in exchange for all of such outstanding CombiMatrix capital stock. Using the Invitae Trailing Average Share Value of $9.491 per share, Invitae would issue approximately 2,759,005 shares of Invitae common stock for all of such outstanding shares of CombiMatrix common stock, which means that each share of CombiMatrix common stock would be exchanged for 0.91 shares of Invitae common stock at a per share value of $8.60 based on the Invitae Trailing Average Share Value.

In the Warrant Exchange Offer, holders of CombiMatrix Series F warrants may exchange their outstanding CombiMatrix Series F warrants for shares of Invitae common stock with a value calculated to represent at least $2.90 per Series F warrant, or an aggregate value of approximately $6 million in Invitae common stock if all 2,066,976 Series F warrants were tendered (based on the number of Series F warrants outstanding as of September 26, 2017). Using the Invitae Trailing Average Share Value of $9.491, each CombiMatrix Series F warrant is exchangeable for 0.3056 shares of Invitae common stock, and a total of 631,668 shares Invitae common stock would be issued in connection with the Warrant Exchange Offer.

Example 2: All Series F Warrants Exercised

If all of the CombiMatrix Series F warrant holders exercised their warrants and purchased CombiMatrix common stock at the exercise price of $5.17, based on the number of shares of common stock outstanding as of September 26, 2017, CombiMatrix would have approximately 5.1 million shares of common stock outstanding and no Series F warrants outstanding at the closing of the Merger. In addition, CombiMatrix would have realized approximately $10,686,266 in cash from the Series F warrants exercised, which CombiMatrix is required to preserve and include in the calculation of net cash pursuant to the Merger Agreement. The Merger Agreement also requires Invitae to issue additional shares of Invitae common stock to reflect the increase in CombiMatrix net cash resulting from warrant exercises. Using the Invitae Trailing Average Share Value, Invitae would be required to issue an additional 1,024,173 shares of Invitae common stock, or a total of 3,783,178 shares of Invitae common stock for the approximately 5.1 million shares of CombiMatrix common stock then outstanding. This would mean that each share of CombiMatrix common stock would be entitled to be exchanged for 0.74 shares of Invitae common stock, which using the Invitae Trailing Average Share Value, would have a value of $7.02 per share.

Pursuant to the Merger Agreement, however, Invitae and CombiMatrix have agreed on a minimum per share value of Invitae common stock, notwithstanding the result of the calculation above, for which each share of CombiMatrix common stock would be exchanged equal to $8.25, subject to net cash adjustments. Using this minimum per share value and assuming a net cash adjustment of negative $0.25 per share of CombiMatrix common stock, which CombiMatrix expects in the event that all Series F warrants are exercised, each share of CombiMatrix common stock would be exchangeable for 0.84 shares of Invitae common stock, or a total of 4,307,676 shares of Invitae common stock, which using the Invitae Trailing Average Share Value, would have a value of $8.00 per share.

 

Q: When do you expect to complete the Merger?

 

A:

The Merger is expected to be completed as soon as possible once all the conditions to the Merger, including obtaining the approval of CombiMatrix stockholders and completion of the Warrant Exchange Offer, are

 

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  fulfilled. While the exact timing cannot be predicted and no assurances can be given as to when it will occur, the Merger is currently expected to be completed in the fourth quarter of 2017.

 

Q: Why am I receiving this document?

 

A: We are delivering this document to you because it is a proxy statement being used by the CombiMatrix board of directors to solicit proxies of CombiMatrix stockholders in connection with the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger. This document is also a prospectus that is being delivered to CombiMatrix stockholders because, in connection with the Merger, Invitae will issue Invitae common stock in exchange for CombiMatrix capital stock in the Merger.

This proxy statement/prospectus contains important information about the Merger, the Merger Agreement and important information to consider in connection with an investment in Invitae common stock. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares voted by proxy without attending the special meeting. Your vote is important and we encourage you to submit your proxy as soon as possible.

 

Q: Where can I find more information about Invitae and CombiMatrix?

 

A: You can find more information about Invitae and CombiMatrix from reading this document and the various sources described in this proxy statement/prospectus in the section entitled “Where You Can Find More Information.”

 

Q: What am I voting on?

 

A: Invitae is proposing to acquire CombiMatrix. CombiMatrix stockholders are being asked to vote to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. In the Merger, Merger Sub will merge into CombiMatrix. CombiMatrix would be the surviving entity in the Merger and would become a wholly owned subsidiary of Invitae.

CombiMatrix is also seeking your approval of two additional related proposals. The first is to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger. The second is a proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in favor of approval of the above proposals.

Invitae stockholders are not voting on any matter because the approval of Invitae stockholders is not required for the issuance of its shares of common stock in the Merger.

 

Q: What is the Exchange Ratio and how is it calculated at the closing of the Merger?

 

A: As a result of the Merger, holders of CombiMatrix common stock will receive a number of shares of Invitae common stock equal to the fraction of a share of Invitae common stock represented by the Exchange Ratio. Holders of CombiMatrix Series F preferred stock will receive, for each share of CombiMatrix Series F preferred stock held by them, a number of shares of Invitae common stock equal the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon conversion of one share of Series F preferred stock on the date immediately prior to the Merger. CombiMatrix stockholders will receive a cash payment instead of any fractional shares.

The Merger consideration is calculated at the closing of the Merger using the definition of “Exchange Ratio” set forth in the Merger Agreement. This definition calculates the Merger consideration based on the greater of two exchange ratio calculations. The first method of calculation values CombiMatrix at $27,000,000 in the aggregate, with adjustments for net cash, restricted stock unit settlements, option exercises, Series F preferred stock conversions and warrant exercises (other than Series D warrants, Series F

 

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warrants exchanged in the Warrant Exchange Offer and terminated options). The second method of calculation imputes an $8.25 per share valuation, with adjustments thereafter for net cash and any new share issuances after the date of the Merger Agreement. The purpose of the second calculation is to provide a “floor” price per share of Merger consideration in the event that certain Series F warrants are exercised or are not tendered, both of which would cause dilution to existing CombiMatrix common stockholders.

The “net cash” calculation, as defined in the Merger Agreement for the purpose of calculating the Exchange Ratio, includes all current assets, less all current liabilities (including amounts payable pursuant to CombiMatrix’s executive severance plan) and capital lease obligations of CombiMatrix, less all transaction-related expenses including amounts owed to CombiMatrix’s strategic advisors, accountants and attorneys, less amounts owed to repurchase certain of CombiMatrix’s common stock warrants, less amounts payable under CombiMatrix’s transaction bonus plan that was adopted on December 2, 2015, and less $250,000 stipulated for working capital purposes.

 

Q: How is the Merger consideration impacted by the tendering and exercise of Series F warrants?

 

A: The per share value of the Merger consideration payable to the holders of the CombiMatrix common stock will be reduced to the extent that more shares are outstanding as of the closing of the Merger. Therefore, to the extent that CombiMatrix Series F warrants are exercised prior to closing and/or are not tendered in the Exchange Offer, the per share value of the Merger consideration will reduced. For a table showing the impact of such warrant exercises and tenders on the per share value of the Merger consideration and additional discussion of the foregoing, see the section entitled “The Merger Agreement—Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis.”

 

Q: Will the value of the Merger consideration change between the date of this proxy statement/prospectus and the time the Merger is completed?

 

A: Yes. CombiMatrix stockholders will receive Merger consideration in the form of shares of Invitae common stock based upon the Exchange Ratio; therefore, the value of the Merger consideration will fluctuate between the date of this proxy statement/prospectus and the completion of the Merger based upon the market value of Invitae common stock. Any fluctuation in the market price of Invitae common stock after the date of this proxy statement/prospectus will change the value of the Invitae common stock that CombiMatrix stockholders will receive.

 

Q: Are there risks associated with the Merger that I should be aware of?

 

A: Yes. You should consider the risk factors set out in the section entitled “Risk Factors” in this proxy statement/prospectus.

 

Q: When and where will the CombiMatrix special meeting be held?

 

A: The CombiMatrix special meeting will be held at the offices of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660 on November 10, 2017 at 1:00 pm, local time.

 

Q: What constitutes a quorum for the purpose of the special meeting of CombiMatrix stockholders?

 

A: The representation (in person or by proxy) of holders of at least a majority in voting power of all issued and outstanding shares of CombiMatrix common stock entitled to vote at the special meeting constitutes a quorum for action at the special meeting. All shares of CombiMatrix common stock present in person or represented by proxy, including abstentions, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the special meeting.

 

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Q: What vote is required to approve the proposals presented at the special meeting of CombiMatrix stockholders?

 

A: Approval of the Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of CombiMatrix common stock entitled to vote on the record date for the CombiMatrix special meeting.

Approval, on a non-binding advisory basis, of the Compensation Proposal requires that the votes cast in favor of this proposal at the CombiMatrix special meeting exceed the votes cast opposing the proposal, assuming a quorum is present.

Approval of the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of CombiMatrix common stock entitled to vote and having voting power present in person or represented by proxy at the CombiMatrix special meeting, whether or not a quorum is present.

 

Q: What will happen if the CombiMatrix stockholders do not vote to adopt the Merger Proposal?

 

A: Approval of the Merger Proposal by the CombiMatrix stockholders is required in order for the Merger to occur. If the Merger is not completed, CombiMatrix stockholders will not receive the Merger consideration. Instead, CombiMatrix will remain an independent public company and its shares of common stock will continue to be listed and traded on the NASDAQ Capital Market. If the Merger is not completed because the CombiMatrix stockholders do not approve the Merger Proposal, CombiMatrix will still be required to pay certain Merger-related expenses.

 

Q: What will happen if the CombiMatrix stockholders do not vote to adopt the Compensation Proposal?

 

A: The vote on the Compensation Proposal is a vote separate and apart from the vote to approve the Merger Agreement. CombiMatrix stockholders may vote for this proposal and against the Merger Proposal, or vice versa. CombiMatrix stockholders also may abstain from this proposal and vote on the Merger Proposal, or vice versa. The vote to approve, on an advisory basis, the Compensation Proposal is not binding on CombiMatrix, the CombiMatrix board of directors or the compensation committee of the CombiMatrix board of directors. The Merger-related named executive officer compensation to be paid in connection with the Merger is based on contractual arrangements with the named executive officers and accordingly the outcome of this advisory vote will not affect the obligation to make these payments.

 

Q: What percentage of CombiMatrix common stock is owned by CombiMatrix directors, executive officers and their affiliates?

 

A: As of the record date for the CombiMatrix special meeting, directors and executive officers of CombiMatrix and their affiliates have the right to vote 41,759 shares of CombiMatrix common stock, or approximately 1.42% of the outstanding CombiMatrix common stock entitled to vote at the CombiMatrix special meeting.

 

Q: How does the CombiMatrix board of directors recommend that I vote?

 

A: The CombiMatrix board of directors unanimously recommends that the CombiMatrix stockholders vote “FOR” each of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal.

 

Q: How do I vote if I am a stockholder of record of CombiMatrix?

 

A: If you are a stockholder of record of CombiMatrix as of the record date for the CombiMatrix special meeting, you may vote in person by attending the CombiMatrix special meeting or, to ensure your shares are represented at the meeting, you may vote by completing, signing and returning the enclosed proxy card in the postage-paid envelope provided. You may also vote over the Internet or by telephone according to the voting instructions printed on the proxy card sent to you.

 

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If you hold CombiMatrix shares in the name of a bank or broker, please see the discussion below.

 

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

 

A: If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in street name), you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank or broker. Please note that you may not vote shares held in street name by returning the proxy card directly to CombiMatrix or by voting in person at the CombiMatrix special meeting unless you provide a “legal proxy,” which you must obtain from your bank or broker. Further, brokers who hold shares of CombiMatrix common stock on behalf of their customers may not give a proxy to CombiMatrix to vote those shares on the proposals unless they have received voting instructions from their customers.

 

Q: What will happen if I fail to vote or abstain from voting?

 

A: The failure to vote or abstention from voting of a CombiMatrix stockholder with respect to the Merger Proposal will have the same effect as a vote against that proposal, as it requires the affirmative vote of holders of a majority of the outstanding shares of CombiMatrix common stock. Failing to vote or abstaining from voting will not impact the Compensation Proposal. Failing to vote will not impact the Adjournment Proposal but abstaining from voting will have the same effect as a vote against the Adjournment Proposal.

 

Q: What will happen if I return my proxy card without indicating how to vote?

 

A: If you return your signed proxy card without indicating how to vote on any particular proposal, the CombiMatrix stock represented by your proxy will be voted on that proposal consistent with the recommendation of CombiMatrix’s board of directors.

 

Q: Can I change my vote after I have returned a proxy or voting instruction card?

 

A: Yes. You can change your vote at any time before your shares are voted at the CombiMatrix special meeting. You can do this in one of three ways:

 

    enter a new vote over the Internet or by telephone, or by signing and returning a replacement proxy card;

 

    provide written notice of the revocation to CombiMatrix’s Corporate Secretary at its principal executive office, 300 Goddard, Suite 100, Irvine, California 92618; or

 

    attend the special meeting and vote in person, but your attendance alone will not revoke any proxy that you have previously given.

If you choose either of the first two methods, you must submit your notice of revocation or your new signed proxy to CombiMatrix’s Corporate Secretary to be received no later than the beginning of the special meeting. If your shares are held in street name by your bank or broker, you should contact your broker to change your vote.

 

Q: Do I have dissenter’s rights or appraisal rights?

 

A: Holders of shares of CombiMatrix capital stock will not be entitled to any appraisal rights under the Delaware General Corporation Law, or the DGCL, in connection with the Merger.

 

Q: Should I send in my stock certificates now?

 

A: No. CombiMatrix stockholders SHOULD NOT send in any stock certificates now. If the Merger is approved, transmittal materials with instructions will be provided to CombiMatrix stockholders under separate cover and the stock certificates should be sent at that time in accordance with such instructions.

 

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Q: Will CombiMatrix be required to submit the proposal to adopt the Merger Agreement to its stockholders even if the board of directors has withdrawn, modified or qualified its recommendation?

 

A: Yes. Unless the Merger Agreement is terminated before the special meeting, CombiMatrix is required to submit the Merger Proposal to its stockholders even if CombiMatrix’s board of directors has withdrawn or modified its recommendation.

 

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

 

A: Each of Invitae and CombiMatrix intends the Merger, together with the Warrant Exchange Offer, to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. In general, and subject to the qualifications and limitations set forth in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger,” if the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the material U.S. federal income tax consequences to U.S. Holders of CombiMatrix capital stock will be as follows:

 

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

 

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

 

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

 

    the holding period of the shares of Invitae common stock received by a CombiMatrix stockholder in the Merger will include the holding period of the shares of CombiMatrix stock surrendered in exchange therefor.

Tax matters are very complicated, and the tax consequences of the Merger to a particular CombiMatrix stockholder will depend on such stockholder’s circumstances. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of federal, state, local and non-U.S. income and other tax laws. For more information, please see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q: Who can help answer my questions?

 

A: If you have any questions about the Merger or if you need additional copies of this proxy statement/prospectus, you should contact CombiMatrix’s proxy solicitor:

ADVANTAGE PROXY, INC.

PO Box 13581

Des Moines, WA 98198

Telephone: (877) 870-8565 (toll free); (206) 870-8565 (collect)

Email: ksmith@advantageproxy.com

 

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PROSPECTUS SUMMARY

The following is a summary which highlights selected information contained in this document. It may not contain all of the information that is important to you. You are urged to carefully read this entire document and the other documents which are attached as annexes to this proxy statement/prospectus or incorporated herein by reference in order to fully understand the Merger and related transactions, including the sections entitled “Where You Can Find More Information” on page 120 and “Risk Factors” on page 38.

The Companies

Invitae Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Invitae’s goal is to aggregate most of the world’s hereditary genetic tests into a single service with higher quality, faster turnaround time and lower pricing than many single gene tests today. Invitae was founded on four core principles: patients should own and control their own genetic information; healthcare professionals are fundamental in ordering and interpreting genetic information; driving down the price of genetic information will increase its clinical and personal utility; and genetic information is more valuable when shared. Invitae utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Invitae currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. Invitae’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions, as well as recently acquired capabilities in preimplantation and carrier screening for inherited disorders. Invitae now provides comprehensive genetic information for every stage of life, from preconception through adult diagnostics.

Invitae common stock is currently listed on the New York Stock Exchange under the symbol “NVTA.”

CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

CombiMatrix is a family health-focused clinical molecular diagnostic laboratory specializing in pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders. CombiMatrix strives to provide best-in-class clinical laboratory support to healthcare professionals, allowing them to maximize the clinical utility of their patients’ test results and to optimize patient care. CombiMatrix’s testing focuses on advanced technologies, including single nucleotide polymorphism, or SNP, chromosomal microarray analysis, next-generation sequencing, fluorescent in situ hybridization, or FISH, and high resolution chromosome analysis (also referred to as karyotyping). CombiMatrix’s approach to testing is to offer sophisticated technology along with high quality clinical support to its ordering physicians and their patients. CombiMatrix also owns a one-third minority interest in Leuchemix, Inc., a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

CombiMatrix was originally incorporated in October 1995 as a California corporation. In September 2000, CombiMatrix was reincorporated as a Delaware corporation. In August 2007, CombiMatrix became publicly

 



 

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traded on NASDAQ under the symbol “CBMX,” where it is currently listed and traded. The CombiMatrix Series F warrants are listed on NASDAQ under the symbol “CBMXW.” Following completion of the Merger, the CombiMatrix common stock and the CombiMatrix Series F warrants will cease trading on NASDAQ and CombiMatrix will file the appropriate forms with the Securities and Exchange Commission to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Coronado Merger Sub, Inc.

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Coronado Merger Sub, Inc., or Merger Sub, is a wholly owned subsidiary of Invitae and was formed solely for the purpose of carrying out the Merger. In the Merger, Merger Sub will merge with and into CombiMatrix and Merger Sub will cease to exist. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Merger.

The Merger Agreement (See page 80)

A copy of the Merger Agreement is attached as Annex A to this document. Invitae and CombiMatrix encourage you to read the entire Merger Agreement carefully because it is the principal document governing the Merger.

Structure of the Merger (See page 80)

Subject to the terms and conditions of the Merger Agreement and in accordance with the DGCL, at the effective time of the Merger, Merger Sub will be merged with and into CombiMatrix, with CombiMatrix surviving the Merger and becoming a wholly owned subsidiary of Invitae. The effect of the Merger will be that CombiMatrix will be acquired by Invitae and shares of CombiMatrix common stock and Series F warrants will no longer be publicly traded.

Reasons for the Merger (See pages 64 and 67)

CombiMatrix’s board of directors believes that the businesses of CombiMatrix and Invitae are complementary and that a combination of CombiMatrix with Invitae presents a compelling strategic opportunity to enhance value for CombiMatrix stockholders. In reaching its decision to approve the Merger Agreement and ancillary agreements and the Merger and to recommend that CombiMatrix stockholders vote “FOR” the Merger Proposal, the CombiMatrix board of directors, with the assistance of CombiMatrix’s management and financial and legal advisors, considered and analyzed a number of factors and a number of potential risks, including those reviewed by the CombiMatrix board of directors at the meetings described in this proxy statement/prospectus in the section entitled “The Merger Proposal—Background of the Merger” and those discussed in more detail in the section entitled “The Merger Proposal—CombiMatrix’s Reasons for the Merger; Recommendation of CombiMatrix’s Board of Directors.”

Invitae’s board of directors concluded that the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents and the transactions contemplated thereby or undertaken in connection therewith are advisable and in the best interests of Invitae and its stockholders because, among other factors, the transaction provides Invitae with a unique opportunity to expand its business by acquiring a clinical molecular diagnostic laboratory whose focus is on pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis and pediatric developmental disorders, as well as to expand its technologies and sample handling capabilities.

 



 

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Consideration to be received in the Merger (See page 80)

Upon completion of the Merger:

 

    each share of CombiMatrix common stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix common stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a fraction of a share of Invitae common stock equal to the Exchange Ratio;

 

    each share of CombiMatrix Series F preferred stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix Series F preferred stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a number of shares of Invitae common stock equal the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon conversion of one share of Series F preferred stock on the date immediately prior to the Merger;

 

    each CombiMatrix restricted stock unit, or RSU, outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix RSU by the Exchange Ratio;

 

    each in-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock underlying such CombiMatrix stock option by the Exchange Ratio, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement (which is $9.491 and referred to herein as the Invitae Trailing Average Share Value);

 

    each out-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration; and

 

    although Invitae’s obligation to proceed with the Merger is subject to achieving 90% participation in the Warrant Exchange Offer as described in this proxy statement/prospectus, each outstanding CombiMatrix Series D warrant and Series F warrant to purchase shares of CombiMatrix common stock (other than those Series F warrants exchanged in the Warrant Exchange Offer or previously exercised) will be assumed by Invitae and will be converted into a warrant to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to account for the Exchange Ratio.

The Exchange Ratio is determined pursuant to a formula described in more detail in the Merger Agreement and in this proxy statement/prospectus, and the estimate of the Exchange Ratio is subject to adjustment. For example, the estimated Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Exchange Ratio would be reduced to 0.84, representing

 



 

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$8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus, the Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. The “net cash” calculation, as defined in the Merger Agreement for the purpose of calculating the Exchange Ratio, includes all current assets, less all current liabilities (including amounts payable pursuant to CombiMatrix’s executive severance plan) and capital lease obligations of CombiMatrix, less all transaction-related expenses including amounts owed to CombiMatrix’s strategic advisors, accountants and attorneys, less amounts owed to repurchase certain of CombiMatrix’s common stock warrants, less amounts payable under CombiMatrix’s transaction bonus plan that was adopted on December 2, 2015, and less $250,000 stipulated for working capital purposes. See the sections entitled “The Merger Agreement—Merger Consideration and Exchange Ratio” and “The Merger Agreement— Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the Exchange Ratio.

Based on the closing price of Invitae common stock on the NYSE on September 29, 2017, the latest practicable date before the date of this document, the estimated Exchange Ratio represented $8.49 in value for each share of CombiMatrix common stock or preferred stock. Invitae will not issue any fractional shares of Invitae common stock in the Merger. Holders of CombiMatrix common stock, preferred stock, restricted stock units or stock options who would otherwise be entitled to a fractional share of Invitae common stock will receive a cash payment in lieu of fractional shares. Shares of Invitae common stock outstanding before the Merger is completed will remain outstanding and will not be exchanged, converted or otherwise changed in the Merger.

Material U.S. Federal Income Tax Consequences of the Merger (See page 105)

Invitae and CombiMatrix intend the Merger, together with the Warrant Exchange Offer, to qualify as a reorganization within the meaning of Section 368(a) of the Code. In general, and subject to the qualifications and limitations set forth in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger,” if the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the material U.S. federal income tax consequences to U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) of CombiMatrix capital stock will be as follows:

 

    a CombiMatrix stockholder will not recognize gain or loss upon the exchange of CombiMatrix stock for Invitae common stock pursuant to the Merger, except with respect to cash received in lieu of a fractional share of Invitae common stock as described below;

 

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

 

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

 

    the holding period of the shares of Invitae common stock received by a CombiMatrix stockholder in the Merger will include the holding period of the shares of CombiMatrix stock surrendered in exchange therefor.

 



 

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Tax matters are very complicated, and the tax consequences of the Merger to a particular CombiMatrix stockholder will depend on such stockholder’s circumstances. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the tax consequences of the Merger to you, including the applicability and effect of federal, state, local and non-U.S. income and other tax laws.

Accounting Treatment (See page 103)

Invitae prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The Merger will be accounted for using the acquisition method of accounting in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, “Business Combinations,” and, accordingly, will result in the recognition of CombiMatrix assets acquired and liabilities assumed at fair value. As discussed in the section entitled “Accounting Treatment,” based upon the terms of the exchange and other factors, such as the composition of the combined company’s board and senior management and the size of the parties and the business purpose for the Merger, Invitae is considered to be the acquirer of CombiMatrix for accounting purposes. This means that Invitae will recognize and measure the assets acquired and liabilities assumed at their fair values at the acquisition date. Acquisition-related costs, which include advisory, legal, accounting, valuation, and other professional or consulting fees, will be expensed in the period incurred. As of the date of this proxy statement/prospectus, the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed are preliminary and have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations on the type of information that can be exchanged between Invitae and CombiMatrix at this time. Until the Merger is complete, all the relevant information will not be known. Differences between preliminary estimates and the final acquisition accounting will occur.

Opinion of CombiMatrix Financial Advisor (See page 69)

Pursuant to an engagement letter dated April 20, 2016, as amended, CombiMatrix retained Torreya Capital, or Torreya, to act as financial advisor in connection with the Merger and to render an opinion to the CombiMatrix board of directors as to the fairness, from a financial point of view, to the stockholders of CombiMatrix of the total Merger consideration. Torreya rendered to CombiMatrix’s board of directors at its meetings on July 28, 2017 and July 30, 2017, Torreya’s oral opinion, subsequently confirmed by delivery of a written opinion dated July 30, 2017, that, as of such dates, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth therein, the consideration to be paid in the Merger and in the proposed Warrant Exchange Offer pursuant to the Merger Agreement was fair, from a financial point of view, to CombiMatrix’s stockholders, as more fully described below in the section entitled “The Merger Proposal—Opinion of CombiMatrix Financial Advisor.

The full text of the written opinion of Torreya, dated July 30, 2017, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. CombiMatrix encourages CombiMatrix stockholders to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Torreya. The summary of the written opinion of Torreya set forth herein is qualified by reference to the full text of such opinion. Torreya’s analyses and opinion were prepared for and addressed to the CombiMatrix board of directors and are directed only to the fairness, from a financial point of view, of the aggregate transaction value to be paid in the Merger. Torreya’s opinion is not a recommendation to any stockholder as to how to vote with respect to the proposed Merger or to take any other action in connection with the Merger or otherwise.

 



 

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Interests of Certain CombiMatrix Directors and Officers in the Merger (See page 76)

In considering whether to approve the proposals set forth in this proxy statement/prospectus to be voted on at the CombiMatrix special meeting, including the Merger Proposal, you should recognize that some of the members of management and of the CombiMatrix board of directors may have interests in the Merger that differ from, or are in addition to, their interests as CombiMatrix stockholders. These interests include:

 

    the rights of certain of CombiMatrix’s executive officers to receive payments or other benefits, including the conversion of certain stock options and restricted stock unit awards, acceleration of the vesting of certain equity awards, and severance payments due upon termination of employment in connection with the Merger;

 

    the rights of certain of CombiMatrix’s executive officers and directors to receive payments pursuant to the CombiMatrix Transaction Bonus Plan in connection with the Merger;

 

    the consulting agreements entered into between Invitae and Messrs. McDonough and Burell providing for their continued service to CombiMatrix following the closing of the Merger; and

 

    the continued indemnification of CombiMatrix’s directors and officers after the completion of the Merger for acts or omissions that occurred in their capacity as directors or officers prior to the closing of the Merger.

These interests are further described in the section entitled “The Merger Proposal—Interests of Certain CombiMatrix Directors and Officers in the Merger.”

Board of Directors of Invitae Following Completion of the Merger (See page 68)

Upon completion of the Merger, the board of directors of Invitae will continue to consist of the current five members, namely, Eric Aguiar, M.D., Geoffrey S. Crouse, Sean George, Ph.D. (Invitae’s President and Chief Executive Officer), Christine M. Gorjanc, and Randal W. Scott, Ph.D. (Invitae’s Executive Chairman).

Regulatory Approvals Required for the Merger (See page 69)

Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock and restricted stock units and the filing of this proxy statement/prospectus with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

Conditions that Must Be Satisfied or Waived for the Merger to Occur (See page 96)

Invitae and CombiMatrix currently expect to complete the Merger in the fourth quarter of 2017. However, as more fully described in this document and in the Merger Agreement, the obligations of Invitae and CombiMatrix to complete the Merger depend on a number of conditions being satisfied or, where legally permissible, waived, including the following, as applicable:

 

    the effectiveness of the registration statements for the issuance of shares of Invitae common stock in the Merger and the Warrant Exchange Offer;

 



 

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    the approval by the CombiMatrix stockholders of the Merger Proposal;

 

    the completion of the Warrant Exchange Offer with a minimum required participation by holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement (which Warrant Exchange Offer may be completed at the same time as the Merger is completed), so long as Invitae has offered shares with a value of at least $2.90 per CombiMatrix Series F warrant (based on the Invitae Trailing Average Share Value);

 

    CombiMatrix shall have repurchased all of its Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants;

 

    the Transaction Bonus Payout Agreements entered into by and among CombiMatrix, Invitae and each of CombiMatrix’s directors and executives concurrently with the Merger Agreement remain in full force and effect;

 

    the consulting agreements entered into between Invitae and each of Mark McDonough (CombiMatrix’s President and Chief Executive Officer) and Scott Burell (CombiMatrix’s Chief Financial Officer) remain in full force and effect and become effective immediately upon the closing of the Merger;

 

    the absence of any legal restraint or prohibition on the completion of the Merger or Warrant Exchange Offer or related transactions;

 

    the expiration or termination of any applicable waiting periods under the HSR Act;

 

    receipt of NYSE listing approval for the shares of Invitae common stock to be issued in the Merger and the Warrant Exchange Offer;

 

    the receipt of certain required consents;

 

    the accuracy of the respective representations and warranties of CombiMatrix and Invitae, subject to a materiality standard described in the section of this document entitled “Summary of the Merger Agreement”;

 

    the performance by CombiMatrix and Invitae in all material respects of their respective obligations under the Merger Agreement; and

 

    no material adverse effect of CombiMatrix or Invitae shall have occurred that is continuing.

Termination of the Merger Agreement (See page 98)

The Merger Agreement may be terminated without completing the Merger, whether before or after the meeting of the CombiMatrix stockholders, as follows:

 

    by mutual written consent of CombiMatrix and Invitae;

 

    by either Invitae or CombiMatrix, if:

 

    the Merger has not been completed by January 31, 2018 (subject to certain exceptions);

 

    if a governmental entity has enjoined or prohibited the Merger; or

 

    if the CombiMatrix stockholders do not approve the Merger Proposal (subject to certain exceptions);

 

    by Invitae, if:

 

    CombiMatrix’s board of directors fails to recommend or withdraws or modifies its recommendation that CombiMatrix stockholders vote to adopt and approve the Merger Proposal, fails to include such recommendation in the proxy statement/prospectus, enters into an agreement relating to an alternative acquisition proposal, breaches its obligation under the Merger Agreement not to solicit alternative acquisition proposals, or approves, endorses or recommends an alternative acquisition proposal; or

 



 

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    CombiMatrix materially breaches the terms of the Merger Agreement and is unable to cure within 30 days of receiving written notice from Invitae (or by January 31, 2018, if earlier); or

 

    by CombiMatrix, if:

 

    Invitae materially breaches the terms of the Merger Agreement and is unable to cure within 30 days of receiving written notice from CombiMatrix (or by January 31, 2018, if earlier).

Expenses and Termination Fees (See pages 99 and 98)

Generally, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring those expenses, except that Invitae and CombiMatrix will each pay one-half of the filing fees and expenses, other than attorneys’ and accountants’ fees and expenses, incurred in connection with the filing, printing and mailing of this document and the offering documents for the Warrant Exchange Offer, as well as any filing fees and expenses, other than attorneys’ and accountants’ fees and expenses, pursuant to the HSR Act and any fees and expenses, other than attorneys’ and accountants’ fees and expenses, of the exchange agent. Following termination of the Merger Agreement under specified circumstances, CombiMatrix may be required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid), and reimburse Invitae’s reasonably incurred transaction expenses up to a maximum of $400,000, and Invitae may be required to reimburse CombiMatrix’s reasonably incurred transaction expenses up to a maximum of $400,000.

No Appraisal Rights (See page 69)

Under Delaware law, neither the holders of CombiMatrix capital stock nor the holders of Invitae common stock are entitled to appraisal rights in connection with the Merger.

Comparison of Stockholder Rights (See page 110)

Both Invitae and CombiMatrix are incorporated under the laws of the State of Delaware, and accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. If the Merger is completed, CombiMatrix stockholders will become stockholders of Invitae, and their rights will be governed by the DGCL, the amended and restated certificate of incorporation, as amended, of Invitae and the amended and restated bylaws of Invitae. Therefore, CombiMatrix stockholders will have different rights as stockholders once they become Invitae stockholders. The rights of Invitae stockholders contained in the amended and restated certificate of incorporation, as amended, and amended and restated bylaws differ from the rights of CombiMatrix stockholders, as more fully described in the section entitled “Comparison of Rights of Invitae and CombiMatrix Stockholders” in this proxy statement/prospectus.

Risk Factors (See page 38)

Both Invitae and CombiMatrix are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective stockholders, including the following risks:

 

    The completion of the proposed Merger is subject to a number of conditions that are outside the control of Invitae and CombiMatrix, and there can be no assurance that the proposed Merger will be completed in a timely manner or at all. If the Merger is not consummated, Invitae’s and CombiMatrix’s businesses could suffer materially and their respective stock prices could decline.

 

    The proposed Merger could disrupt the business of Invitae and/or CombiMatrix and harm their respective financial condition.

 



 

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    Neither the Merger Exchange Ratio nor the amount that will be offered to CombiMatrix Series F warrant holders in the Warrant Exchange Offer is adjustable based on the market price of Invitae common stock so the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

 

    The results of operations of Invitae after the Merger may be affected by factors different from those currently affecting the results of operations of CombiMatrix.

 

    The principal form of Merger consideration is shares of Invitae common stock, the price of which is volatile and could fluctuate substantially, whether before or after the consummation of the Merger.

 

    CombiMatrix stockholders will generally have a reduced ownership and voting interest in Invitae after the Merger and will exercise less influence over management.

 

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

 

    Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

 

    Sales of substantial amounts of Invitae common stock in the open market by former CombiMatrix stockholders could depress Invitae’s share price.

 

    The anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

 

    CombiMatrix may not be able to meet its cash requirements beyond August 2018 without obtaining additional capital from external sources and its current outstanding warrants issued in connection with various past preferred stock financings may prevent it from issuing new securities. If CombiMatrix is unable to raise additional capital through future financings or from external sources, it may not be able to continue as a going concern.

 

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

 

    Some CombiMatrix executive officers and directors have interests in the Merger that are different from yours.

 

    During the pendency of the Merger, CombiMatrix may not be able to enter into a business combination with another party at a favorable price (subject to certain exceptions) because of restrictions in the Merger Agreement, which could adversely affect its business.

 

    Certain provisions of the Merger Agreement limit CombiMatrix’s ability to pursue an alternative transaction and may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

 

    The shares of Invitae common stock to be received by CombiMatrix stockholders as a result of the Merger will have different rights from the shares of CombiMatrix common stock.

 

    The fairness opinion that CombiMatrix has obtained from its financial advisor has not been, and is not expected to be, updated to reflect any changes in circumstances that may have occurred since the signing of the Merger Agreement.

 

    The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is illustrative only and the actual financial condition and results of operations after the Merger may differ materially.

 

    If the Merger is not completed, Invitae and CombiMatrix will have incurred substantial expenses without realizing the expected benefits of the Merger.

 



 

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    Any litigation relating to the Merger could require Invitae or CombiMatrix to incur significant costs and suffer management distraction, as well as delay and/or enjoin the Merger.

These risks and other risks are discussed in greater detail in the section entitled “Risk Factors” in this proxy statement/prospectus. Invitae and CombiMatrix encourage you to read and consider all of these risks carefully.

The Warrant Exchange Offer (See page 102)

As of September 26, 2017, there were outstanding Series F warrants held by the public warrant holders of CombiMatrix to acquire upon exercise a total of 2,066,976 shares of CombiMatrix common stock at an exercise price of $5.17 per share. In the Merger Agreement, Invitae and CombiMatrix agreed that Invitae would conduct an exchange offer, or Warrant Exchange Offer, whereby holders of CombiMatrix’s Series F warrants may elect to exchange their outstanding Series F warrants for shares of Invitae’s common stock. Invitae and CombiMatrix expect that the Warrant Exchange Offer will be commenced following the registration statement on Form S-4 registering such exchange offer being declared effective by the SEC.

In the Warrant Exchange Offer, holders of CombiMatrix Series F warrants may elect to exchange their outstanding CombiMatrix Series F warrants for a number of shares of Invitae common stock equal to the quotient (rounded to the nearest ten-thousandth) obtained by dividing $2.90 per warrant by a fixed price of $9.491 per share of Invitae common stock. Because the value of the transaction is based on a fixed price per share of Invitae common stock, the overall value of the Warrant Exchange Offer consideration potentially to be received by CombiMatrix’s Series F warrant holders will fluctuate based on the market price of Invitae common stock between now and completion of the Warrant Exchange Offer.

The completion of the Warrant Exchange Offer is expected to be conditioned, among other things, on the participation in the Warrant Exchange Offer of holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement. If the Warrant Exchange Offer is completed, the CombiMatrix Series F warrants held by warrant holders that did not participate in the Warrant Exchange Offer will, in accordance with the terms of the warrant agreement governing the terms of the Series F warrants, be assumed by Invitae, in accordance with their terms, and converted into warrants to purchase the number of shares of Invitae common stock as such warrant holder would have received in the Merger had the warrants been exercised for shares of CombiMatrix common stock immediately prior to the completion of the Merger. Invitae does not currently intend to list such warrants for trading on any exchange.

The Warrant Exchange Offer is expected to be completed at or immediately prior to the completion of the Merger, if the conditions to the Warrant Exchange Offer are satisfied. The completion of the Merger is conditioned upon the completion of the Warrant Exchange Offer on the terms and conditions set forth in the Merger Agreement and described in this document.

The CombiMatrix Special Meeting (See page 48)

The CombiMatrix special meeting will be held at the offices of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660, on November 10, 2017 at 1:00 pm, local time. At the CombiMatrix special meeting, CombiMatrix stockholders will be asked to:

 

    approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. This proposal is referred to as the “Merger Proposal;”

 

    approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger. This proposal is referred to as the “Compensation Proposal”; and

 



 

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    approve the possible adjournment of the special meeting, including, if necessary or appropriate, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposals. This proposal is referred to as the “Adjournment Proposal.”

The CombiMatrix board of directors has fixed the close of business on September 26, 2017 as the record date for the CombiMatrix special meeting. Only CombiMatrix common stockholders of record at that time are entitled to notice of, and to vote at, the CombiMatrix special meeting, or any adjournment or postponement of the CombiMatrix special meeting. As of the record date, there were 2,938,982 shares of CombiMatrix common stock outstanding and entitled to vote at the CombiMatrix special meeting. Holders of CombiMatrix Series F preferred stock are not entitled to vote at the CombiMatrix special meeting.

Each share of CombiMatrix common stock outstanding on the record date entitles the holder to one vote on each matter to be voted upon by stockholders at the special meeting. Approval of the Merger Proposal requires the affirmative vote of a majority of the outstanding shares of CombiMatrix common stock entitled to vote on the record date for the CombiMatrix special meeting, assuming that a quorum is present. Approval, on a non-binding advisory basis, of the Compensation Proposal requires that the votes cast in favor of this proposal at the CombiMatrix special meeting exceed the votes cast opposing the proposal, assuming a quorum is present. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of CombiMatrix common stock entitled to vote and having voting power present in person or represented by proxy at the CombiMatrix special meeting, whether or not a quorum is present. Failing to vote or abstaining from voting with respect to the Merger Proposal will have the same effect as a vote against the Merger Proposal. Failing to vote or abstaining from voting will not impact the Compensation Proposal. Failing to vote will not impact the Adjournment Proposal but abstaining from voting will have the same effect as a vote against the Adjournment Proposal.

As of the record date for the CombiMatrix special meeting, directors and executive officers of CombiMatrix and their affiliates have the right to vote 41,759 shares of CombiMatrix common stock, or approximately 1.42% of the outstanding CombiMatrix common stock entitled to vote at the CombiMatrix special meeting.

The CombiMatrix board of directors believes that the Merger is in the best interests of CombiMatrix and its stockholders and has unanimously approved and adopted the Merger Agreement and the transactions it contemplates. For a discussion of the factors considered by the CombiMatrix board of directors in reaching its decision to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, see the section entitled “The Merger Proposal—CombiMatrix’s Reasons for the Merger; Recommendation of the CombiMatrix Board of Directors.” The CombiMatrix board of directors unanimously recommends that the CombiMatrix stockholders vote “FOR” each of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal.

 



 

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SELECTED HISTORICAL FINANCIAL DATA OF INVITAE

Set forth below are highlights from Invitae’s consolidated financial data as of and for the periods indicated. The historical consolidated financial data presented below for each of the five fiscal years through the period ended December 31, 2016 are derived from the selected financial data included in Invitae’s Annual Report on Form 10-K for the year ended December 31, 2016. The historical consolidated financial data for the six months ended June 30, 2017 are derived from the unaudited condensed consolidated financial statements included in Invitae’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

Invitae’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP on the same basis as its audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of those unaudited condensed consolidated financial statements. Invitae’s historical results are not necessarily indicative of the results that may be expected in any future period, and the results for the six months ended June 30, 2017 are not necessarily indicative of results to be expected for the full year ending December 31, 2017 or any other period.

 



 

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The selected historical consolidated financial data below should be read in conjunction with the section entitled “Risk Factors” and Invitae’s audited annual and unaudited condensed consolidated financial statements and related notes that have been incorporated into this document by reference. See the section entitled “Where You Can Find More Information.

 

    Six Months
Ended
June 30,

2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Consolidated Statements of Operations Data:

           

Revenue

  $ 24,674     $ 25,048     $ 8,378     $ 1,604     $ 148     $ —    

Costs and operating expenses:

           

Cost of revenue

    19,819       27,878       16,523       5,624       667       —    

Research and development

    21,362       44,630       42,806       22,063       16,039       5,557  

Selling and marketing

    24,092       28,638       22,479       8,669       2,431       —    

General and administrative

    14,813       24,085       16,047       12,600       5,764       3,004  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

    80,086       125,231       97,855       48,956       24,901       8,561  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (55,412     (100,183     (89,477     (47,352     (24,753     (8,561

Other income (expense), net

    (540 )     348       (94     (79     (26     2  

Interest expense

    (1,389     (421     (211     (61     (59     (43
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before taxes

    (57,341     —         —         —         —         —    

Income tax benefit

    (1,856     —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (55,485   $ (100,256   $ (89,782   $ (47,492   $ (24,838   $ (8,602
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (55,485   $ (100,256   $ (89,782   $ (47,492   $ (24,989   $ (9,014
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.30   $ (3.02   $ (3.18   $ (56.14   $ (36.13   $ (14.18
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing net loss per common share, basic and diluted

    42,808,175       33,176,305       28,213,324       846,027       691,731       635,705  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     As of
June 30,

2017
    As of December 31,  
       2016     2015     2014     2013     2012  
     (unaudited)     (in thousands)  

Consolidated Balance Sheet Data:

            

Cash and cash equivalents

   $ 27,673     $ 66,825     $ 73,238     $ 107,027     $ 43,070     $ 21,801  

Working capital

     66,551       87,047       120,433       102,020       41,577       21,043  

Total assets

     139,208       130,651       156,676       128,778       53,103       25,973  

Capital lease obligations

     3,997       1,575       3,164       3,535       2,001       1,215  

Debt

     38,975       12,102       7,040       —         —         —    

Convertible preferred stock

     —         —         —         202,305       86,574       36,755  

Accumulated deficit

     (330,703     (275,218     (174,962     (85,180     (37,688     (12,850

Total stockholders’ equity (deficit)

     67,164       99,074       138,376       (83,576     (37,280     (12,759

 



 

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SELECTED HISTORICAL FINANCIAL DATA OF COMBIMATRIX

Set forth below are highlights from CombiMatrix’s consolidated financial data as of and for the periods indicated. The historical consolidated financial data presented below for each of the five fiscal years through the period ended December 31, 2016 are derived from the consolidated financial statements included in CombiMatrix’s Annual Reports on Form 10-K for the five years ended December 31, 2016 included as Annex C to this proxy statement/prospectus. The historical consolidated financial data for the six months ended June 30, 2017 are derived from the unaudited interim financial statements included in CombiMatrix’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 included as Annex D to this proxy statement/prospectus.

CombiMatrix’s unaudited interim financial statements have been prepared in accordance with U.S. GAAP on the same basis as its audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of those unaudited interim consolidated financial statements. CombiMatrix’s historical results are not necessarily indicative of the results that may be expected in any future period, and the results for the six months ended June 30, 2017 are not necessarily indicative of results to be expected for the full year ending December 31, 2017 or any other period.

The selected historical consolidated financial data below should be read in conjunction with the section entitled “Risk Factors” and CombiMatrix’s audited annual and unaudited interim consolidated financial statements and related notes that are included within Annex C and Annex D attached to this document. See the section entitled “Where You Can Find More Information.

 

    Six Months
Ended
June 30,

2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Consolidated Statements of Operations Data:

           

Revenues:

           

Diagnostic services

  $ 7,972     $ 12,696     $ 9,941     $ 7,893     $ 6,204     $ 4,975  

Clinical trial support services

    —         —         —         —         —         195  

Royalties

    56       173       147       149       163       180  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    8,028       12,869       10,088       8,042       6,367       5,350  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

           

Cost of services

    3,140       5,787       5,444       4,432       3,527       2,702  

Research and development

    170       493       466       725       1,011       1,400  

Sales and marketing

    2,038       4,569       4,979       4,349       2,764       2,596  

General and administrative

    3,519       6,013       5,540       7,176       5,206       5,378  

Patent amortization and royalties

    50       100       100       114       254       266  

Impairment of cost-basis investment

    —         —         97       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    8,917       16,962       16,626       16,796       12,762       12,342  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

    (889     (4,093     (6,538     (8,754     (6,395     (6,992
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expenses):

           

Interest income

    11       22       16       23       5       1  

Interest expense

    (10     (69     (79     (84     (356     (179

Warrant derivative gains (charges)

    —         —         —         152       2,804       (2,357

Warrant modification charge

    —         —         —         (44     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

    1       (47     (63     47       2,453       (2,535
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (888   $ (4,140   $ (6,601   $ (8,707   $ (3,942   $ (9,527
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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    Six Months
Ended
June 30,

2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Series A convertible preferred stock dividends

  $ —       $ —       $ —       $ —       $ (247   $ (123

Series C convertible preferred stock dividends

    —         —         —         —         (27     —    

Deemed dividend from issuing Series A convertible preferred stock

    —         —         —         —         —         (617

Deemed dividend from issuing Series B convertible preferred stock

    —         —         —         —         (417     —    

Deemed dividend from issuing Series C convertible preferred stock

    —         —         —         —         (1,213     —    

Deemed dividend from issuing Series D convertible preferred stock

    —         —         —         —         (6,367     —    

Deemed dividend from issuing Series F convertible preferred stock and warrants

    —         (1,877     —         —         —         —    

Deemed dividend paid for right to repurchase Series E convertible preferred stock

    —         (656     —         —         —         —    

Deemed dividend from issuing and modifying Series E convertible preferred stock and warrants

    —         890       (1,058     —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (888   $ (5,783   $ (7,659   $ (8,707   $ (12,213   $ (10,267
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share attributable to common stockholders

  $ (0.31   $ (3.27   $ (9.22   $ (11.84   $ (46.49   $ (141.44
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average common shares outstanding

    2,838,521       1,768,090       830,835       735,305       262,731       72,588  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     As of
June 30,

2017
    As of December 31,  
       2016     2015     2014     2013     2012  
     (unaudited)     (in thousands)  

Consolidated Balance Sheet Data:

            

Cash, cash equivalents and short-term investments

   $ 3,022     $ 3,727     $ 3,901     $ 5,240     $ 14,036     $ 2,372  

Working capital surplus (deficit)

     5,597       6,062       5,417       6,642       13,927       (1,442

Total assets

     8,119       8,478       7,922       8,632       16,832       5,180  

Total liabilities

     2,167       1,984       2,066       1,512       2,168       5,905  

Convertible preferred stock

     —         —         —         —         —         394  

Accumulated deficit

     (103,534     (102,589     (96,806     (89,147     (80,440     (68,227

Total stockholders’ equity (deficit)

     5,952       6,494       5,856       7,120       14,664       (1,119

 



 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined balance sheet as of June 30, 2017 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 and the six months ended June 30, 2017 are based on the separate historical consolidated financial statements of Invitae and CombiMatrix after giving effect to the Merger.

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 combines the balance sheet of Invitae as of June 30, 2017 with the balance sheet of CombiMatrix as of June 30, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 combines Invitae’s results of operations for the year ended December 31, 2016 with CombiMatrix’s results of operations for the year ended December 31, 2016. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2017 combines Invitae’s results of operations for the six months ended June 30, 2017 with CombiMatrix’s results of operations for the six months ended June 30, 2017.

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 assumes the Merger and related events had been consummated on June 30, 2017. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 and the six months ended June 30, 2017 give pro forma effect to the Merger and related events as if they had been consummated on January 1, 2016, the beginning of Invitae’s 2016 fiscal year. The historical financial information has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined entity’s consolidated results. The unaudited pro forma condensed combined statements of operations do not include the impact of any operating synergies that may result from the Merger.

The Merger will be accounted for as an acquisition by Invitae, and Invitae was determined to be the accounting acquirer. See the section entitled “Accounting Treatment” for more information. In summary, Invitae has concluded that Invitae is the accounting acquirer based on its evaluation of the facts and circumstances of the acquisition. The purpose of the Merger is for Invitae to acquire the business of CombiMatrix so that Invitae can expand its products and services offerings. Invitae is the larger of the two entities and will be the operating company within the combining companies. Invitae’s board members will continue to hold all of the seats on the Invitae board of directors and CombiMatrix stockholders do not have any board appointment rights. Invitae’s senior management will be continuing as the senior management of the combined company.

The completion of the Merger is subject to various closing conditions, including, among others, (i) approval by the CombiMatrix stockholders of the Merger Proposal, (ii) completion of the Warrant Exchange Offer (which may be completed at the same time as the Merger is completed), which requires the participation by holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement, (iii) the accuracy of the representations and warranties of CombiMatrix and Invitae, (iv) the performance by CombiMatrix and Invitae in all material respects of their respective obligations under the Merger Agreement, (v) the effectiveness of the registration statements for the issuance of shares of Invitae common stock in the Merger and Warrant Exchange Offer, (vi) the repurchase by CombiMatrix of all of its outstanding Series A, Series B, Series C, Series E and PIPE warrants, and (vii) receipt of NYSE listing approval for the shares of Invitae common stock to be issued in the Merger and Warrant Exchange Offer.

The unaudited pro forma condensed combined financial statements assume that (i) the Merger Proposal is approved by 100% of the CombiMatrix stockholders, (ii) none of the CombiMatrix Series A, Series B, Series C, Series D, Series E, Series F or PIPE warrants are exercised; and (iii) all other Merger-related transactions (e.g., the outstanding CombiMatrix Series F preferred stock is converted into Invitae common stock; the outstanding CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants are repurchased; and the Warrant

 



 

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Exchange Offer for CombiMatrix Series F warrants is accepted by 100% of such warrant holders) are consummated.

The unaudited pro forma condensed combined financial statements are presented for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily indicative of what Invitae’s financial position or results of operations actually would have been had Invitae completed the Merger with CombiMatrix as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. You should read this information together with the following:

 

    the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

    the separate historical unaudited financial statements of Invitae as of and for the six months ended June 30, 2017 included in Invitae’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are incorporated by reference into this document;

 

    the separate historical audited consolidated financial statements of Invitae as of and for the year ended December 31, 2016 included in Invitae’s Annual Report on Form 10-K for the year ended December 31, 2016, which are incorporated by reference into this document;

 

    the separate historical unaudited consolidated financial statements of CombiMatrix as of and for the six months ended June 30, 2017 included in CombiMatrix’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are attached to this document as Annex D; and

 

    the separate historical audited consolidated financial statements of CombiMatrix as of and for the year ended December 31, 2016 included in CombiMatrix’s Annual Report on Form 10-K for the year ended December 31, 2016, which are attached to this document as Annex C.

The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Invitae. Invitae believes these accounting policies are similar in most material respects to those of CombiMatrix. Upon completion of the Merger, or as more information becomes available, Invitae will perform a more detailed review of the CombiMatrix accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

JUNE 30, 2017

(in thousands)

 

     Invitae
(Historical)
    CombiMatrix
(Historical)
    Pro Forma
Adjustments
   

Note No.

   Pro Forma
Combined
 

Assets

           

Current assets:

           

Cash and cash equivalents

   $ 27,673     $ 3,022     $ (459   (A)    $ 30,236  

Marketable securities

     47,699       —         —            47,699  

Accounts receivable

     2,556       4,006       —            6,562  

Prepaid expenses and other current assets

     8,278       538       —            8,816  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

     86,206       7,566       (459        93,313  
  

 

 

   

 

 

   

 

 

      

 

 

 

Property and equipment, net

     27,664       523       —            28,187  

Restricted cash

     4,997       —         —            4,997  

Intangible assets, net

     6,467       —         19,154     (B)      25,621  

Goodwill

     13,477       —         16,493     (A)(C)      29,970  

Other assets

     397       30       —            427  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 139,208     $ 8,119     $ 35,188        $ 182,515  
  

 

 

   

 

 

   

 

 

      

 

 

 

Liabilities and stockholders’ equity

           

Current liabilities:

           

Accounts payable

   $ 5,123     $ 716     $ —          $ 5,839  

Accrued liabilities

     12,715       1,204       4,313     (E)(F)      18,232  

Capital lease obligation, current portion

     1,817       —         —            1,817  

Debt, current portion

     —         49       —            49  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

     19,655       1,969       4,313          25,937  
  

 

 

   

 

 

   

 

 

      

 

 

 

Capital lease obligation, net of current portion

     2,180       72       —            2,252  

Debt, net of current portion

     38,975       —         —            38,975  

Other long-term liabilities

     11,234       126       5,850     (G)      17,210  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     72,044       2,167       10,163          84,374  
  

 

 

   

 

 

   

 

 

      

 

 

 

Stockholders’ equity:

           

Preferred stock

     —         —         —            —    

Common stock

     4       15       (12   (H)(I)      7  

Accumulated other comprehensive loss

     (38     —         —            (38

Additional paid-in capital

     397,901       109,471       (77,409   (H)(I)      429,963  

Accumulated deficit

     (330,703     (103,534     102,446     (D)(H)(I)      (331,791
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     67,164       5,952       25,025          98,141  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and stockholder’s equity

   $ 139,208     $ 8,119     $ 35,188        $ 182,515  
  

 

 

   

 

 

   

 

 

      

 

 

 

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousands, except per share data)

 

     Invitae
(Historical)
    CombiMatrix
(Historical)
    Pro Forma
Adjustments
   

Note
No.

   Pro Forma
Combined
 

Revenue:

           

Test revenue

   $ 25,048     $ 12,696     $ —          $ 37,744  

Other revenue

     —         173       —            173  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total revenue

     25,048       12,869       —            37,917  
  

 

 

   

 

 

   

 

 

      

 

 

 

Costs and operating expenses:

           

Costs of revenue

     27,878       5,787       759     (J)      34,424  

Research and development

     44,630       493       4     (J)      45,127  

Selling and marketing

     28,638       4,569       1,708     (J)      34,915  

General and administrative

     24,085       6,113       37     (J)      30,235  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total costs and operating expenses

     125,231       16,962       2,508          144,701  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (100,183     (4,093     (2,508        (106,784

Other income (expense), net

     348       22       —            370  

Interest expense

     (421     (69     —            (490
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss before taxes

     (100,256     (4,140     (2,508        (106,904

Income tax benefit

     —         —         —            —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss

   $ (100,256   $ (4,140   $ (2,508      $ (106,904
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share, basic and diluted

   $ (3.02          $ (2.92
  

 

 

          

 

 

 

Shares used in computing net loss per share, basis and diluted

     33,176,305         3,476,733     (I)      36,653,038  
  

 

 

          

 

 

 

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(in thousands, except per share data)

 

     Invitae
(Historical)
    CombiMatrix
(Historical)
    Pro Forma
Adjustments
   

Note
No.

   Pro Forma
Combined
 

Revenue:

           

Test revenue

   $ 23,287     $ 7,972     $ —          $ 31,259  

Other revenue

     1,387       56       —            1,443  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total revenue

     24,674       8,028       —            32,702  
  

 

 

   

 

 

   

 

 

      

 

 

 

Costs and operating expenses:

           

Costs of revenue

     19,819       3,140       379     (J)      23,338  

Research and development

     21,362       170       2     (J)      21,534  

Selling and marketing

     24,092       2,038       855     (J)      26,985  

General and administrative

     14,813       3,569       (378   (J)(K)      18,004  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total costs and operating expenses

     80,086       8,917       858          89,861  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (55,412     (889     (858        (57,159

Other income (expense), net

     (540     11       —            (529

Interest expense

     (1,389     (10     —            (1,399
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss before taxes

     (57,341     (888     (858        (59,087

Income tax benefit

     (1,856     —         —            (1,856
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss

   $ (55,485   $ (888   $ (858      $ (57,231
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share, basic and diluted

   $ (1.30          $ (1.24
  

 

 

          

 

 

 

Shares used in computing net loss per share, basis and diluted

     42,808,175         3,476,733     (I)      46,284,908  
  

 

 

          

 

 

 

 



 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Description of Transaction and Basis of Presentation

Description of Transaction

On July 31, 2017, Invitae Corporation, (“Invitae”) entered into an Agreement and Plan of Merger and Reorganization (“Merger Agreement”) with CombiMatrix Corporation, (“CombiMatrix”), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Coronado Merger Sub, Inc., a wholly owned subsidiary of Invitae, will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae (the “Merger”). The CombiMatrix Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Invitae is considered to be the acquiring company for accounting purposes in this transaction.

The completion of the Merger is subject to various closing conditions, including, among others, (i) approval by the CombiMatrix stockholders of the Merger Proposal, (ii) completion of the Warrant Exchange Offer (which may be completed at the same time as the Merger is completed), which requires the participation by holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement, (iii) the accuracy of the representations and warranties of CombiMatrix and Invitae, (iv) the performance by CombiMatrix and Invitae in all material respects of their respective obligations under the Merger Agreement, (v) the effectiveness of the registration statements for the issuance of shares of Invitae common stock in the Merger and Warrant Exchange Offer, (vi) the repurchase by CombiMatrix of all of its Series A, Series B, Series C, Series E and PIPE warrants, and (vii) receipt of NYSE listing approval for the shares of Invitae common stock to be issued in the Merger and Warrant Exchange Offer.

The unaudited pro forma condensed combined financial statements assume that (i) the Merger Proposal is approved by 100% of the CombiMatrix stockholders, (ii) none of the CombiMatrix Series A, Series B, Series C, Series D, Series E, Series F or PIPE warrants are exercised, and (iii) all other Merger-related transactions (e.g., the CombiMatrix Series F preferred stock is converted into Invitae common stock; the CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants are repurchased; and the Warrant Exchange Offer for CombiMatrix Series F warrants is accepted by 100% of such warrant holders) are consummated.

Basis of Presentation

The accompanying unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the Securities and Exchange Commission (SEC) and are intended to show how the Merger might have affected the historical financial statements if the Merger had been completed on January 1, 2016 for the purposes of the condensed combined statements of operations, and as of June 30, 2017 for purposes of the condensed combined balance sheet. Both Invitae and CombiMatrix’s historical audited and unaudited financial statements were prepared in accordance with U.S. GAAP and are presented in thousands of U.S. dollars. The historical CombiMatrix financial statements included within the unaudited pro forma condensed combined balance sheet and statements of operations include certain reclassifications that were made to conform CombiMatrix’s financial statement presentation to that of Invitae.

The unaudited pro forma condensed combined statements of operations also include certain acquisition accounting adjustments, including items expected to have a continuing impact on the results of the combined company, such as increased amortization expense on acquired intangible assets. The unaudited pro forma condensed combined statements of operations do not include the impacts of any operating synergies that may result from the Merger or any related restructuring costs that may be contemplated.

 



 

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Based on the terms of the Merger, Invitae is deemed to be the acquiring company for accounting purposes and the transaction represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations.

The proposed transaction is accounted for using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets and liabilities of CombiMatrix, including identifiable intangible assets, are recorded based on their estimated fair values as of the date of the closing of the proposed transaction. Goodwill is calculated as the difference between the estimated acquisition consideration and fair values of identifiable net assets acquired. Invitae has not completed a full, detailed valuation analysis necessary to determine the fair values of CombiMatrix’s identifiable assets to be acquired and liabilities to be assumed. As of the date of this proxy statement/prospectus, the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations on the type of information that can be exchanged between Invitae and CombiMatrix at this time. Until the Merger is complete, all the relevant information will not be known. Differences between preliminary estimates and the final acquisition accounting will occur. For purposes of these unaudited pro forma combined condensed financial statements, the acquisition consideration is estimated assuming the 30-day trailing average closing price of $9.49 for Invitae’s common stock on July 31, 2017, the date the Merger Agreement was executed, assuming that the transaction closed on July 31, 2017. Total consideration transferred as of this date is estimated to be $31.5 million. Total acquisition consideration is estimated to be $31.0 million, which excludes post-combination expense of $488,000. The pro forma adjustments described below were developed based on Invitae’s management’s assumptions and estimates, including assumptions relating to the consideration paid and the fair value of the identifiable assets acquired and liabilities assumed from CombiMatrix. The amounts of the acquisition consideration, assets acquired and liabilities assumed that will be used in acquisition accounting will be based on their respective fair values as determined at the time of closing, and may differ significantly from these preliminary estimates.

2. Preliminary Purchase Price

The estimated preliminary consideration for the acquisition is as follows (in thousands):

 

Estimated fair value of total acquisition consideration transferred

   $ 31,465  

Less: post-combination share-based expense attributable to outstanding and unexercised stock options and outstanding restricted stock units

     (488
  

 

 

 

Estimated total acquisition consideration

   $ 30,977  
  

 

 

 

The fair value of the total acquisition transferred is calculated using the closing price of Invitae’s common stock on July 31, 2017. Invitae will issue approximately 2,845,100 shares of common stock in exchange for CombiMatrix’s (i) common stock, (ii) outstanding and unexercised in-the-money stock options and outstanding restricted stock. Invitae will also issue approximately 631,633 shares of common stock in exchange for CombiMatrix’s Series F warrants.

The estimated fair values of outstanding in-the-money stock options and restricted stock units is approximately $33,000 and $1.1 million, respectively, of which $25,000 and $463,000, respectively, will be recognized as expenses immediately upon the closing of the transaction.

 



 

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The fair value of the assets acquired and liabilities assumed, assuming the Merger has closed on June 30, 2017, are summarized below (in thousands):

 

Cash and cash equivalents

   $ 2,563  

Accounts receivable, net

     4,006  

Fixed assets

     523  

Other assets

     568  

Intangible assets

     19,154  

Total liabilities

     (6,480

Deferred tax liability

     (5,850
  

 

 

 

Estimated total purchase price of net assets acquired

     14,484  

Excess of acquisition consideration over fair value of net assets acquired

     16,493  
  

 

 

 

Estimated total acquisition consideration

   $ 30,977  
  

 

 

 

The application of the acquisition method of accounting is dependent upon the completion of a full, detailed valuation analysis that has yet to be completed. The estimated values of the assets acquired and liabilities assumed will remain preliminary until after closing of the transaction, at which time Invitae management will determine the fair values of assets acquired and liabilities assumed. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after completion of the transaction and will be based on the fair values of the assets acquired and liabilities assumed as of the transaction closing date. The final amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements for the reasons described in Note 1.

3. Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the acquisition consideration exchanged and to adjust amounts related to the tangible and intangible assets and liabilities of CombiMatrix to a preliminary estimate of their fair values, and to reflect the impact on the statements of operations of the proposed transaction as if the companies had been combined during the periods presented therein. The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:

 

  (A) To reflect the repurchase of CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants as a condition of the consummation of the Merger.

 

  (B) To reflect the estimated fair value of CombiMatrix intangible assets acquired, which includes the following:

 

Intangible Asset    Estimated Useful Life (Years)  

Trade name

     3  

Patent licensing agreement

     10  

Technology

     5  

Customer relationships

     10  

 

  (C) To reflect goodwill, which is calculated as the difference between the fair value of the consideration paid and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed.

 

  (D) To reflect estimated transaction costs at June 30, 2017 that are expected to be incurred prior to the transaction closing and that have not yet been incurred (see note 4).

 

  (E) To reflect the assumed transaction bonus payable by Invitae in the amount of $2,618,000 to certain executives of CombiMatrix following the consummation of the Merger.

 



 

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  (F) To reflect the assumed severance payments payable by Invitae in the amount of $530,000 to certain executives of CombiMatrix following their termination after the consummation of the Merger.

 

  (G) To reflect the deferred tax liability related to the acquired intangible assets.

 

  (H) To reflect the elimination of CombiMatrix’s historical equity consisting of common stock, paid-in capital, and accumulated deficit.

 

  (I) To reflect the issuance of Invitae common stock in the Merger, including the fair value of post-combination expense in relation to stock options, restricted stock units and warrants (see note 2).

 

  (J) To reflect the amortization of intangibles acquired.

 

  (K) To reflect the elimination of transaction costs recorded in the historical statements of operations in the amount of $396,000 as these are directly attributable to the transaction and non-recurring.

4. Non-recurring Transaction Costs

Invitae and CombiMatrix have incurred, and Invitae will continue to incur, certain non-recurring transaction expenses in connection with the proposed Merger. Non-recurring transaction expenses incurred by Invitae and CombiMatrix were $396,000 during the six months ended June 30, 2017 and are reflected as an adjustment to reduce general and administrative expenses in the pro forma condensed combined statement of operations as they are non-recurring and directly attributable to the Merger. Neither Invitae nor CombiMatrix incurred any transaction costs related to this Merger in the year ended December 31, 2016. The pro forma condensed combined balance sheet as of June 30, 2017 includes an adjustment of $600,000 to accrued liabilities and accumulated deficit for transaction expenses expected to be incurred by Invitae subsequent to June 30, 2017. These transaction expenses are not reflected in the pro forma condensed combined statement of operations for the six months ended June 30, 2017, as they are not expected to have a continuing impact on operations. Estimated transaction expenses of CombiMatrix, which had not been incurred as of June 30, 2017, are expected to be $565,000 and have been included in assumed liabilities as of June 30, 2017 in the unaudited pro forma condensed combined balance sheet.

The transaction bonus costs are not reflected in the pro forma condensed combined statement of operations for the year ended December 31, 2016 and the six months ended June 30, 2017, as these costs will not impact Invitae’s consolidated statement of operations in the periods following the acquisition date.

 



 

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COMPARATIVE MARKET PRICES AND DIVIDENDS

CombiMatrix stockholders are advised to obtain current market quotations for Invitae common stock and CombiMatrix common stock. The market price of Invitae common stock and CombiMatrix common stock will fluctuate between the date of this document and the effective date of the Merger. No assurance can be given concerning the market price of Invitae common stock or CombiMatrix common stock before or after the effective date of the Merger.

Invitae Common Stock

Invitae common stock is listed on the NYSE under the symbol “NVTA.” Prior to February 12, 2015, there was no public market for Invitae’s common stock. Invitae’s fiscal year ends on December 31 of each year. The following table shows the high and low reported intraday sales prices per share of Invitae common stock as reported on the NYSE.

 

     Sales Price Per
Share
 
     High      Low  

Fiscal year ended December 31, 2015

     

First Quarter

   $ 22.35      $ 16.30  

Second Quarter

   $ 17.43      $ 10.50  

Third Quarter

   $ 15.48      $ 6.58  

Fourth Quarter

   $ 10.10      $ 6.46  

Fiscal year ended December 31, 2016

     

First Quarter

   $ 11.25      $ 5.66  

Second Quarter

   $ 11.85      $ 7.14  

Third Quarter

   $ 9.84      $ 7.22  

Fourth Quarter

   $ 9.50      $ 5.76  

Fiscal year ended December 31, 2017

     

First Quarter

   $ 11.30      $ 7.95  

Second Quarter

   $ 11.88      $ 8.17  

On July 31, 2017, the date of the public announcement of the Merger Agreement, the high and low sales prices of shares of Invitae common stock as reported on the NYSE were $9.56 and $9.26, respectively. On September 29, 2017, the latest practicable trading day before the date of this proxy statement/prospectus, the high and low sales prices of shares of Invitae common stock as reported on the NYSE were $9.37 and $9.14, respectively. As of September 26, 2017, there were 69 stockholders of record of Invitae common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

 



 

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CombiMatrix Common Stock

CombiMatrix common stock is listed on the NASDAQ Capital Market under the symbol “CBMX.” CombiMatrix’s fiscal year ends on December 31 of each year. The following table shows the high and low reported intraday sales prices per shares of CombiMatrix common stock as reported on the NASDAQ Capital Market:

 

     Sales Price Per Share  
         High              Low      

Fiscal year ended December 31, 2014

     

First Quarter

   $ 54.75      $ 34.50  

Second Quarter

   $ 46.50      $ 30.15  

Third Quarter

   $ 40.50      $ 17.25  

Fourth Quarter

   $ 26.10      $ 16.35  

Fiscal year ended December 31, 2015

     

First Quarter

   $ 32.40      $ 19.20  

Second Quarter

   $ 30.00      $ 21.00  

Third Quarter

   $ 26.34      $ 15.45  

Fourth Quarter

   $ 19.05      $ 9.75  

Fiscal year ended December 31, 2016

     

First Quarter

   $ 11.49      $ 3.53  

Second Quarter

   $ 4.40      $ 2.62  

Third Quarter

   $ 5.19      $ 2.63  

Fourth Quarter

   $ 4.35      $ 2.15  

Fiscal year ended December 31, 2017

     

First Quarter

   $ 5.85      $ 2.60  

Second Quarter

   $ 6.63      $ 4.35  

On July 31, 2017, the date of the public announcement of the Merger Agreement, the high and low sales prices of shares of CombiMatrix common stock as reported on the NASDAQ Capital Market were $5.30 and $4.95, respectively. On September 29, 2017, the latest practicable trading day before the date of this document, the high and low sales prices of shares of CombiMatrix common stock as reported on the NASDAQ Capital Market were $7.65 and $7.43, respectively. As of September 26, 2017, there were 9 stockholders of record of CombiMatrix common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

Dividends

Neither Invitae nor CombiMatrix has paid or declared any cash dividends on their common stock, and neither anticipates paying cash dividends on its common stock for the foreseeable future. Both Invitae and CombiMatrix currently expect to retain any future earnings to fund operations and expand their businesses. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the Merger will be at the discretion of Invitae’s board of directors and will depend upon a number of factors, including its results of operations, financial condition, capital requirements, future prospects, contractual restrictions, general business conditions, restrictions imposed by applicable law and other factors Invitae’s board of directors deems relevant. In addition, the terms of Invitae’s loan agreement prohibit the payment of dividends.

 



 

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COMPARATIVE MARKET VALUE OF SECURITIES

Invitae common stock is listed on the NYSE under the symbol “NVTA.” CombiMatrix common stock is listed on the NASDAQ Capital Market under the symbol “CBMX.” The following table shows the closing prices of Invitae common stock and CombiMatrix common stock as reported on July 28, 2017, the last trading day prior to public announcement of the Merger, on July 31, 2017, the date of the public announcement of the Merger, and on September 29, 2017, the last practicable date prior to the date of this proxy statement/prospectus. This table also shows the implied value of the Merger consideration proposed for each share of CombiMatrix common stock, which was calculated by multiplying the closing price of Invitae common stock on the relevant date by the estimated Exchange Ratio of 0.91 (i.e., assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer).

 

     Closing Price of
Invitae
Common Stock
     Closing
Price of

CombiMatrix
Common Stock
     Implied
Value of

Merger
Consideration
 
          

As of July 28, 2017

   $ 9.51      $ 5.15      $ 8.62  

As of July 31, 2017

   $ 9.28      $ 4.95      $ 8.41  

As of September 29, 2017

   $ 9.37      $ 7.50      $ 8.49  

The market price of Invitae common stock and CombiMatrix common stock will fluctuate prior to the special meeting of CombiMatrix stockholders and before the Merger is completed, which will affect the implied value of the Merger consideration to CombiMatrix stockholders. You should obtain current market quotations for the shares.

 



 

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COMPARATIVE PER SHARE DATA

The following table shows, for the six months ended June 30, 2017 and the year ended December 31, 2016, selected per share information for CombiMatrix common stock and Invitae common stock on a historical and pro forma equivalent basis. Except for the historical information as of and for the year ended December 31, 2016, the information in the table is derived from unaudited information. You should read the data with the historical consolidated financial statements and related notes of Invitae contained in its Annual Report on Form 10-K for the year ended December 31, 2016, which has been incorporated into this document by reference, and the historical financial statements and related notes of CombiMatrix contained in its Annual Report on Form 10-K for the year ended December 31, 2016, attached as Annex C to this proxy statement/prospectus, as well as the unaudited pro forma condensed combined financial statements and related notes contained in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The following data is not necessarily indicative of future operations of the combined company.

The pro forma equivalent data for CombiMatrix are calculated by multiplying the pro forma combined (loss) income from continuing operations per share, pro forma dividends declared per share and pro forma book value by the estimated Exchange Ratio so that the per share amounts are equated to the respective values for one share of CombiMatrix common stock. The assumed Exchange Ratio in the Merger is 0.91 shares of Invitae common stock for one share of CombiMatrix common stock. The pro forma condensed combined statement of operations data assumes the Merger and related events were consummated on January 1, 2016, the beginning of Invitae’s 2016 fiscal year. The pro forma condensed combined balance sheet data assumes the Merger was consummated June 30, 2017.

 

     CombiMatrix      Invitae  
     Historical      Pro Forma
Equivalent
     Historical      Pro Forma
Combined
 

(Loss) Income from Continuing Operations Per Share

           

Basic

           

Six Months Ended June 30, 2017

   $ (0.31    $ (1.13    $ (1.30    $ (1.24

Year Ended December 31, 2016

   $ (3.27    $ (2.66    $ (3.02    $ (2.92

Diluted

           

Six Months Ended June 30, 2017

   $ (0.31    $ (1.13    $ (1.30    $ (1.24

Year Ended December 31, 2016

   $ (3.27    $ (2.66    $ (3.02    $ (2.92

Cash Dividends Declared Per Share

           

Six Months Ended June 30, 2017

     None        None        None        None  

Year Ended December 31, 2016

     None        None        None        None  

Book Value Per Share

           

June 30, 2017

   $ 2.04      $ 3.23      $ 1.54      $ 3.55  

 



 

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RECENT DEVELOPMENTS

Invitae Private Placement

On August 3, 2017, Invitae closed a private placement to certain accredited investors, in which it sold 5,188,235 shares of common stock at a price of $8.50 per share, and 3,458,823 shares of Series A convertible preferred stock at a price of $8.50 per share, for gross proceeds of approximately $73.5 million and estimated net proceeds of $68.8 million. The Series A convertible preferred stock is a non-voting common stock equivalent, and conversion of the Series A convertible preferred stock is prohibited if the holder exceeds a specified threshold of voting security ownership. The Series A convertible preferred stock is convertible into common stock on a one-for-one basis, subject to adjustment for events such as stock splits, combinations and the like.

Acquisition of Good Start Genetics, Inc. by Invitae

On July 31, 2017, Invitae, Bueno Merger Sub, Inc., a wholly owned subsidiary of Invitae, and Good Start Genetics, Inc., a privately-held Delaware corporation, or Good Start, entered into a merger agreement pursuant to which Good Start would become a wholly owned subsidiary of Invitae. The acquisition closed on August 4, 2017. Consideration for the Good Start acquisition consisted of approximately $40.0 million, including approximately $16.0 million in shares of Invitae common stock, or approximately 1.69 million shares, subject to a hold back of approximately 25% of such amount for up to 13 months to cover potential indemnification liabilities, cash of up to approximately $18.4 million, which was paid to retire certain Good Start debt and the payment or assumption of approximately $5.6 million in pre-closing and closing-related liabilities and obligations of Good Start.

 



 

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RISK FACTORS

In addition to the other information included in and incorporated by reference into this document, including the risk factors and other information set forth in the Quarterly Report on Form 10-Q of Invitae for the quarter ended June 30, 2017, the Annual Report on Form 10-K of Invitae for the fiscal year ended December 31, 2016, the Quarterly Report on Form 10-Q of CombiMatrix for the quarter ended June 30, 2017 attached as Annex D to this proxy statement/prospectus and the Annual Report on Form 10-K of CombiMatrix for the fiscal year ended December 31, 2016 attached as Annex C to this proxy statement/prospectus, and the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors before deciding whether to vote for the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger. For further discussion of these and other risk factors, please see Invitae’s and CombiMatrix’s periodic reports and other documents attached as annexes and incorporated by reference into this document. See the section entitled “Where You Can Find More Information.”

Risks Related to the Merger

The completion of the proposed Merger is subject to a number of conditions that are outside the control of Invitae and CombiMatrix, and there can be no assurance that the proposed Merger will be completed in a timely manner or at all. If the Merger is not consummated, Invitae’s and CombiMatrix’s businesses could suffer materially and their respective stock prices could decline.

The consummation of the proposed Merger between Invitae and CombiMatrix is subject to a number of closing conditions, including but not limited to (i) the approval by CombiMatrix’s stockholders and (ii) completion of the Warrant Exchange Offer for CombiMatrix Series F warrants, which requires (a) a minimum participation level by holders of at least 90% of the Series F warrants outstanding immediately prior to the date of the Merger Agreement, and (b) other closing conditions to the Warrant Exchange Offer are satisfied. The completion of the Merger is also subject to a number of other conditions, including certain governmental approvals and the absence of a material adverse effect upon either party. There is no assurance that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and Invitae and CombiMatrix may lose some or all of the intended benefits of the Merger.

If the proposed Merger is not consummated, Invitae and CombiMatrix may be subject to a number of material risks, and each of their respective businesses and stock prices could be adversely affected, as follows:

 

    Invitae and CombiMatrix have each incurred and expect to continue to incur significant expenses related to the proposed Merger even if the Merger is not consummated;

 

    If the Merger Agreement is terminated under certain circumstances, CombiMatrix may be required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid);

 

    If the Merger Agreement is terminated under certain circumstances, either party may be required to reimburse the other party for various expenses incurred in connection with the Merger up to a maximum of $400,000;

 

    If the Merger Agreement is terminated under circumstances that require CombiMatrix to pay Invitae a termination fee and/or expense reimbursement, CombiMatrix may not have sufficient funds to make such payments to Invitae; or

 

    The market price of Invitae’s or CombiMatrix’s common stock may decline to the extent that the current market price reflects a market assumption that the proposed Merger will be completed.

The proposed Merger could disrupt the business of Invitae and/or CombiMatrix and harm their respective financial condition.

The announcement of the Merger or the pendency of the proposed transaction may disrupt the current plans and operations of Invitae and CombiMatrix and may divert management’s time and resources from their core

 

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businesses. Furthermore, Invitae or CombiMatrix may not realize the expected benefits, synergies and growth prospects resulting from the proposed Merger, or they may not be achieved in a timely manner. Invitae has limited experience with respect to acquisitions and may not be successful in integrating CombiMatrix’s business following the closing or in managing their growth effectively. Invitae or CombiMatrix may experience potential difficulties in employee retention as a result of the announcement and pendency of the proposed acquisition. Additionally, the reaction of customers and potential customers, payers, partners and competitors to the announcement of the proposed transaction may disrupt Invitae’s or CombiMatrix’s business. Any cash Invitae may spend as part of the integration activities after closing of the proposed Merger could divert that cash from other uses.

Neither the Merger Exchange Ratio nor the amount that will be offered to CombiMatrix Series F warrant holders in the Warrant Exchange Offer is adjustable based on the market price of Invitae common stock so the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement establishes the Exchange Ratio for the CombiMatrix common stock and preferred stock and establishes a minimum amount that will be offered to CombiMatrix Series F warrant holders in the Warrant Exchange Offer, and any changes in the market price of Invitae common stock before the completion of the Merger will not affect the number of shares CombiMatrix securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Invitae common stock declines from the market price on the date of the Merger Agreement, then CombiMatrix securityholders could receive Merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Invitae common stock increases from the market price on the date of the Merger Agreement, then CombiMatrix securityholders could receive Merger consideration with substantially more value for their shares of CombiMatrix capital stock than the parties had negotiated for in the establishment of the Exchange Ratio. Additionally, the Merger Agreement does not include a termination right based solely on price. Because the Exchange Ratio does not adjust as a result of changes in the value of Invitae common stock, for each one percentage point that the market value of Invitae common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total Merger consideration issued to CombiMatrix securityholders.

If the combined organization is unable to realize the full strategic and financial benefits currently anticipated from the Merger, CombiMatrix stockholders may not receive consideration in the Merger which is commensurate with or greater than the value of their pre-Merger ownership, or they may receive only part of the commensurate benefit to the extent the combined organization is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

The results of operations of Invitae after the Merger may be affected by factors different from those currently affecting the results of operations of CombiMatrix.

The businesses of Invitae and CombiMatrix differ in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s common stock may be affected by factors different from those currently affecting the independent results of operations of CombiMatrix. For a discussion of the business of Invitae and certain factors to be considered in connection with Invitae’s business, see the section entitled “Information About the Companies” and the documents incorporated by reference in this proxy statement/prospectus and referred to in the section entitled “Where You Can Find More Information.” For a discussion of the business of CombiMatrix and certain factors to be considered in connection with CombiMatrix’s business, see the section entitled “Information About the Companies” and the documents attached as annexes to this proxy statement/prospectus and referred to in the section entitled “Where You Can Find More Information.”

 

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The principal form of Merger consideration is shares of Invitae common stock, the price of which is volatile and could fluctuate substantially, whether before or after the consummation of the Merger.

The market price of Invitae common stock that stockholders of CombiMatrix will receive in the Merger may be volatile and could fluctuate substantially due to many factors, including, among other things:

 

    actual or anticipated fluctuations in Invitae’s results of operations;

 

    competition from existing tests or new tests that may emerge;

 

    announcements by Invitae or its competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;

 

    failure to meet or exceed financial estimates and projections of the investment community or that Invitae provides to the public;

 

    issuance of new or updated research or reports by securities analysts or changed recommendations for Invitae common stock;

 

    Invitae’s focus on long-term goals over short-term results;

 

    the timing of Invitae’s investments in the growth of its business;

 

    actual or anticipated changes in regulatory oversight of Invitae’s business;

 

    additions or departures of key management or other personnel;

 

    disputes or other developments related to Invitae’s intellectual property or other proprietary rights, including litigation;

 

    sale of common stock or other securities in the future;

 

    the trading volume of Invitae common stock;

 

    changes in reimbursement by current or potential payers;

 

    changes in Invitae’s pricing policies or the pricing policies of its competitors; and

 

    general economic and market conditions.

Share price changes may result from a variety of factors, including general market and economic conditions, changes in Invitae’s and CombiMatrix’s respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Invitae and CombiMatrix. CombiMatrix stockholders should obtain current market quotations for Invitae common stock before voting their shares at the special meeting. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies whose shares are traded on the stock market. These broad market factors may materially harm the market price of Invitae common stock, regardless of Invitae’s operating performance.

CombiMatrix stockholders will generally have a reduced ownership and voting interest in Invitae after the Merger and will exercise less influence over management.

Upon the completion of the Merger, except for stockholders who own common stock in both Invitae and CombiMatrix, each CombiMatrix stockholder will be a stockholder of Invitae with a percentage ownership of Invitae that is smaller than such stockholder’s current percentage ownership of CombiMatrix. Because of this, CombiMatrix stockholders will generally have less influence on the management and policies of the combined company than they now have on the management and policies of CombiMatrix, as applicable.

 

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

The market price of the combined organization’s common stock may decline as a result of the Merger for a number of reasons, including:

 

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

 

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

 

    Invitae stockholders will experience substantial dilution as a result of the additional securities to be issued in the Merger; or

 

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

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the Merger Agreement, including the Merger, may be completed, various approvals must be obtained from governmental and self-regulatory authorities, including the expiration or early termination of any applicable waiting period under the HSR Act. These authorities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on the combined company following the Merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the Merger that are not anticipated or cannot be met. Furthermore, such conditions on completion may constitute a burdensome condition that may allow Invitae to refuse to consummate the Merger, as described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger.” If the consummation of the Merger is delayed, including by a delay in receipt of necessary governmental approvals, or if it is not approved, the business, financial condition and results of operations of each company may also be materially adversely affected.

Sales of substantial amounts of Invitae common stock in the open market by former CombiMatrix stockholders could depress Invitae’s share price.

Invitae common stock issued to stockholders of CombiMatrix in the Merger will be freely tradable without restrictions or further registration under the Securities Act. If the Merger is completed and if CombiMatrix’s former stockholders sell substantial amounts of Invitae common stock in the public market following completion of the Merger, the market price of Invitae common stock may decrease. These sales might also make it more difficult for Invitae to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate.

The anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

The Merger involves the integration of two companies that have previously operated independently. Prior to announcement, Invitae and CombiMatrix did not conduct any integration planning for the two companies, and their ability to do so prior to consummation of the Merger may be substantially limited by applicable law. After the Merger, the two companies will devote significant management attention and resources to integrating the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and stock price. Even if Invitae and CombiMatrix are able to integrate their business operations successfully, there can be no assurance that this integration will result in the realization of the full

 

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benefits of synergies, cost savings, innovation and operational efficiencies that they currently expect from this integration or that these benefits will be achieved within the anticipated time frame.

The combined company may also be unable to use CombiMatrix’s current net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes. Changes in services, changes in sources of revenue, and branding or rebranding initiatives may involve substantial costs and may not be favorably received by customers, resulting in an adverse impact on the combined company’s financial results, financial condition and stock price.

CombiMatrix may not be able to meet its cash requirements beyond August 2018 without obtaining additional capital from external sources and its current outstanding warrants issued in connection with various past preferred stock financings may prevent it from issuing new securities. If CombiMatrix is unable to raise additional capital through future financings or from external sources, it may not be able to continue as a going concern.

As of June 30, 2017, CombiMatrix had $3.0 million in cash and cash equivalents, which it anticipates will meet its cash requirements through and beyond the fourth quarter of 2017. However, in order for CombiMatrix to continue as a going concern beyond that point in the absence of the Merger, it will have to increase revenue and cash reimbursement and continue to control operating expenses, and it may be required to obtain capital from external sources. CombiMatrix’s ability to continue independently as a going concern in the absence of the Merger is dependent upon its ability to further implement its business plan, generate sufficient revenues and cash reimbursement and to control operating expenses, of which there can be no assurance.

In order to issue securities at a price below the exercise prices of CombiMatrix’s outstanding warrants issued in connection with its past preferred stock private placement financings, CombiMatrix must obtain the affirmative consent of holders of at least 67% of such outstanding CombiMatrix warrants. If CombiMatrix is unable to obtain the consent of these holders in connection with future financings, CombiMatrix may be unable to raise additional capital on acceptable terms, or at all. If external financing sources are not available in a timely manner or at all, or are inadequate to fund CombiMatrix’s operations, it could experience reduced revenues and cash flows from the sales of its diagnostic services and its ability to launch, market and sell additional services necessary to grow and sustain its operations could be jeopardized.

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

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

 

    conditions generally affecting the industries in which CombiMatrix and Invitae operate or the United States or global economy or capital markets as a whole;

 

    any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof;

 

    changes in regulatory, legislative or political conditions in the United States or any other country or region in the world;

 

    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world;

 

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

 

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

 

    any changes in U.S. GAAP or applicable legal requirements after the date of the Merger Agreement;

 

    with respect to CombiMatrix, any rejection by a governmental body of a registration or filing by CombiMatrix relating to certain intellectual property rights; or

 

    with respect to CombiMatrix, any change in the cash position of CombiMatrix which results from operations in the ordinary course of business.

If adverse changes occur and the parties still complete the Merger, Invitae’s stock price may suffer. This in turn may reduce the value of the Merger to the stockholders of Invitae, CombiMatrix or both.

Some CombiMatrix executive officers and directors have interests in the Merger that are different from yours.

Executive officers of CombiMatrix negotiated the terms of the Merger Agreement with Invitae, and the CombiMatrix board of directors approved the Merger and recommended that its stockholders vote to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. In considering the information contained in this document, you should be aware that some members of CombiMatrix’s management and certain members of its board of directors have economic interests in the Merger that are different from yours, including with respect to compensation to be received by certain CombiMatrix directors and executives under the CombiMatrix Transaction Bonus Payout Agreements, and pursuant to certain consulting agreements between Invitae and CombiMatrix’s chief executive officer and chief financial officer. Please see the section entitled “The Merger Proposal—Interests of Certain CombiMatrix Directors and Officers in the Merger.”

During the pendency of the Merger, CombiMatrix may not be able to enter into a business combination with another party at a favorable price (subject to certain exceptions) because of restrictions in the Merger Agreement, which could adversely affect its business.

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

Certain provisions of the Merger Agreement limit CombiMatrix’s ability to pursue an alternative transaction and may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit CombiMatrix from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when CombiMatrix’s board of directors determines in good faith, after consultation with its independent financial advisor, if any, and its outside legal counsel, that an unsolicited alternative takeover proposal is or is reasonably likely to lead to a superior takeover proposal and is reasonably capable of being consummated and that failure to cooperate with the proponent of the proposal is reasonably likely to result in a breach of the board’s fiduciary duties. If the Merger Agreement is terminated under certain circumstances, CombiMatrix may be required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid), and, under specified circumstances, reimburse Invitae for various expenses incurred in connection with the Merger, up to a maximum of $400,000. This termination fee may discourage third parties from submitting alternative takeover proposals to CombiMatrix or its stockholders. It should be noted that the failure of CombiMatrix stockholders to approve the Merger Proposal will not in and of itself trigger CombiMatrix’s obligation to pay the termination fee, unless other factors, including a third-party acquisition proposal for CombiMatrix, also exist.

 

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If the Merger Agreement is terminated by Invitae as a result of a breach by CombiMatrix of its representations, warranties or covenants, or because the occurrence of a material adverse effect applicable to CombiMatrix was the sole failed condition to closing, then CombiMatrix will be obligated to reimburse Invitae’s third-party expenses up to a maximum of $400,000.

The shares of Invitae common stock to be received by CombiMatrix stockholders as a result of the Merger will have different rights from the shares of CombiMatrix common stock.

Upon the completion of the Merger, CombiMatrix stockholders will become Invitae stockholders and their rights as stockholders will be governed by the organizational documents of Invitae. The rights associated with CombiMatrix common stock are different from the rights associated with Invitae common stock. Please see the section entitled “Comparison of Rights of Invitae and CombiMatrix Stockholders.

The fairness opinion that CombiMatrix has obtained from its financial advisor has not been, and is not expected to be, updated to reflect any changes in circumstances that may have occurred since the signing of the Merger Agreement.

The fairness opinion issued to CombiMatrix by Torreya Capital, or Torreya, regarding the fairness, from a financial point of view, of the consideration to be issued in connection with the Merger, speaks only as of July 30, 2017. Changes in the operations and prospects of CombiMatrix or Invitae, general market and economic conditions and other factors which may be beyond the control of CombiMatrix or Invitae, and on which the fairness opinion was based, may have altered the value of Invitae or CombiMatrix or the market prices of Invitae common stock or CombiMatrix common stock as of the date of this proxy statement/prospectus, or may alter such values and market prices by the time the Merger is completed. Torreya does not have any obligation to update, revise or reaffirm its opinion to reflect subsequent developments, and has not done so. Because CombiMatrix does not currently anticipate asking Torreya to update its opinion, the opinion will not address the fairness of the Merger consideration from a financial point of view at the time the Merger is completed or as of any other date other than the date of such opinion. CombiMatrix’s board of directors’ recommendation that CombiMatrix stockholders vote “FOR” approval of the Merger Proposal, however, is made as of the date of this proxy statement/prospectus. For a description of the opinion that CombiMatrix received from Torreya, see the section entitled “The Merger Proposal—Opinion of CombiMatrix’s Financial Advisor.

The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is illustrative only and the actual financial condition and results of operations after the Merger may differ materially.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Invitae’s actual financial condition or results of operations would have been had the Merger been completed on the date indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the identifiable tangible and intangible CombiMatrix assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price and fair values of assets acquired and liabilities assumed in this proxy statement/prospectus are preliminary and final amounts will be based upon the actual purchase price and the fair value of the assets and liabilities of CombiMatrix as of the date of the completion of the Merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement/prospectus. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.

If the Merger is not completed, Invitae and CombiMatrix will have incurred substantial expenses without realizing the expected benefits of the Merger.

Each of Invitae and CombiMatrix has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, as well as the costs and

 

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expenses of filing, printing and mailing this proxy statement/prospectus, and all filing and other fees paid to the SEC in connection with the Merger. If the Merger is not completed, Invitae and CombiMatrix would have to recognize these expenses without realizing the expected benefits of the Merger.

Any litigation relating to the Merger could require Invitae or CombiMatrix to incur significant costs and suffer management distraction, as well as delay and/or enjoin the Merger.

Lawsuits related to the Merger may be filed against CombiMatrix, Invitae and/or the directors and officers of either company. The outcome of any such litigation is uncertain. Such lawsuits could prevent or delay completion of the Merger and may adversely affect CombiMatrix’s and Invitae’s business, financial condition, results of operations and/or cash flows.

Risks Related to Invitae’s Business and Strategy

Invitae’s success will depend on its ability to use rapidly changing genetic data to interpret test results accurately and consistently, and its failure to do so would have an adverse effect on Invitae’s operating results and business, harm its reputation and could result in substantial liabilities that exceed its resources.

Invitae’s success depends on its ability to provide reliable, high-quality tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with those variants. Errors, such as failure to detect genomic variants with high accuracy, or mistakes, such as failure to identify, or incompletely or incorrectly identifying, gene variants or their significance, could have a significant adverse impact on Invitae’s business.

In August 2017, a client reported a discrepancy between an Invitae test report and a test report issued by another laboratory for the presence of a single rare variant in the MSH2 gene known as the Boland inversion. This gene is associated with Lynch syndrome, which is a familial cancer syndrome that significantly increases the risk of colorectal and other cancers. Invitae’s assay had reliably detected the Boland inversion event since its first validation. However, during the implementation of an update to the assay, Invitae omitted the components designed specifically to identify the Boland inversion event. As soon as Invitae learned of the error, Invitae quickly rectified it and implemented three new quality checks to ensure this type of error does not happen again. Invitae has identified all potential patients impacted by this incident, and is reanalyzing its previous test results to ensure their accuracy. Invitae expects that less than 50 patients will be affected by this incident. Invitae also expects to complete reanalysis and notification to impacted patients and their clinicians in the fourth quarter of 2017.

Hundreds of genes can be implicated in some disorders, and overlapping networks of genes and symptoms can be implicated in multiple conditions. As a result, a substantial amount of judgment is required in order to interpret testing results for an individual patient and to develop an appropriate patient report. Invitae classifies variants in accordance with published guidelines as benign, likely benign, variants of uncertain significance, likely pathogenic or pathogenic, and these guidelines are subject to change. In addition, it is Invitae’s practice to offer support to clinicians and geneticists ordering Invitae’s tests regarding which genes or panels to order as well as interpretation of genetic variants. Invitae also relies on clinicians to interpret what Invitae reports and to incorporate specific information about an individual patient into the physician’s treatment decision.

The marketing, sale and use of Invitae’s genetic tests could subject Invitae to liability for errors in, misunderstandings of, or inappropriate reliance on, information it provides to clinicians or geneticists, and lead to claims against it if someone were to allege that a test failed to perform as it was designed, if Invitae failed to correctly interpret the test results, or if the ordering physician were to misinterpret test results or improperly rely on them when making a clinical decision. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for Invitae to defend. Although Invitae maintains liability insurance, including for errors and omissions, it cannot assure you that such insurance would fully protect Invitae from the financial impact of defending against these types of claims or any judgments, fines or settlement costs

 

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arising out of any such claims. Any liability claim, including an errors and omissions liability claim, brought against Invitae, with or without merit, could increase Invitae’s insurance rates or prevent it from securing insurance coverage in the future. Additionally, any liability lawsuit could cause injury to Invitae’s reputation or cause it to suspend sales of its tests. The occurrence of any of these events could have an adverse effect on Invitae’s business, reputation and results of operations.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains or incorporates by reference certain forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of Invitae and CombiMatrix and the benefits of the Merger between Invitae and CombiMatrix, which are subject to numerous assumptions, risks and uncertainties. These forward-looking statements are found at various places throughout this document, including in the section entitled “Risk Factors.” You can find many of these statements by looking for words such as “plan,” “believe,” “expect,” “intent,” “anticipate,” “estimate,” “project,” “potential,” “possible” or other similar expressions. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including:

 

    strategies, prospects, plans, expectations or objectives of management of Invitae or CombiMatrix for future operations of the combined company;

 

    the anticipated operations, financial position, revenues, costs or expenses of Invitae, CombiMatrix or the combined company;

 

    any changes in future economic conditions or performance;

 

    competitive pressures on product pricing and services;

 

    the effect of governmental regulations, including the possibility that there are unexpected delays in obtaining regulatory approvals;

 

    the failure to obtain approval of CombiMatrix’s stockholders;

 

    the failure to complete the Warrant Exchange Offer for the CombiMatrix Series F warrants;

 

    the effect of any litigation relating to completion of the Merger; and/or

 

    other risks discussed and identified in public filings with the SEC made by CombiMatrix or Invitae.

All forward-looking statements included in this document are based on information available at the time of this document. These forward-looking statements should not be relied upon as predictions of future events as neither CombiMatrix nor Invitae can assure you that the events or circumstances in these statements will be achieved or will occur. Neither CombiMatrix nor Invitae assumes any obligation to update any forward-looking statement.

For additional information about factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, please see the reports that CombiMatrix and Invitae have filed with the SEC as described in the section entitled “Where You Can Find More Information.

 

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THE COMBIMATRIX SPECIAL MEETING

This document is being furnished to CombiMatrix stockholders by CombiMatrix’s board of directors in connection with the solicitation of proxies from the holders of CombiMatrix common stock for use at the special meeting of CombiMatrix stockholders and any adjournments or postponements of the special meeting. This document also is being furnished to CombiMatrix stockholders as a prospectus of Invitae in connection with the issuance by Invitae of shares of Invitae common stock to CombiMatrix stockholders in the Merger.

Together with this document, you are also being sent a notice of the CombiMatrix special meeting and a form of proxy that is solicited by the CombiMatrix board of directors. The CombiMatrix special meeting will be held at the offices of Stradling Yocca Carlson & Rauth, P.C., 660 Newport Center Drive, Suite 1600, Newport Beach, California 92660, on November 10, 2017 at 1:00 pm, local time.

Matters to Be Considered

The purpose of the CombiMatrix special meeting is to consider and vote on:

 

    a proposal to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. This proposal is referred to as the “Merger Proposal;”

 

    a proposal to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger. This proposal is referred to as the “Compensation Proposal”; and

 

    a proposal to approve the possible adjournment of the special meeting, including, if necessary or appropriate, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the foregoing proposals. This proposal is referred to as the “Adjournment Proposal.”

Methods of Voting

You may vote over the Internet, by telephone, by mail or in person at the special meeting. Please be aware that if you vote by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible.

Voting over the Internet. You can vote via the Internet. The website address for Internet voting is provided on your proxy card. To vote via the Internet, you will need to use the control number appearing on your proxy card. You can use the Internet to transmit your voting instructions up until 11:59 p.m. Eastern Time on the day before the special meeting. Internet voting is available 24 hours a day. If you vote via the Internet, you do not need to vote by telephone or return a proxy card.

Voting by Telephone. You can vote by telephone by calling the toll-free telephone number provided on your proxy card. You will need to use the control number appearing on your proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 p.m. Eastern Time on the day before the special meeting. Telephone voting is available 24 hours a day. If you vote by telephone, you do not need to vote over the Internet or return a proxy card.

Voting by Mail. You can vote by marking, dating and signing your proxy card, and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the Annual Meeting.

Voting in Person at the Meeting. If you attend the special meeting and plan to vote in person, you will be provided with a ballot at the special meeting. If your shares are registered directly in your name, you are

 

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considered the stockholder of record and you have the right to vote in person at the special meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote at the special meeting, you will need to bring to the special meeting a legal proxy from your broker or other nominee authorizing you to vote those shares. Please follow the instructions provided to you by your broker or other nominee.

All shares represented by valid proxies that are received through this solicitation, and that are not revoked, will be voted in accordance with the instructions you provide on the proxy card. If you return your signed proxy card without indicating how to vote on any particular proposal, the CombiMatrix common stock represented by your proxy will be voted on that proposal consistent with the recommendation of the CombiMatrix board of directors.

Revoking a Proxy

You may revoke your proxy at any time before it is voted at the special meeting. To do this, you must:

 

    enter a new vote over the Internet or by telephone, or by signing and returning a replacement proxy card bearing a later date than your original proxy card;

 

    provide written notice of the revocation to CombiMatrix’s Corporate Secretary at its principal executive office, 300 Goddard, Suite 100, Irvine, California 92618; or

 

    attend the special meeting and vote in person if your shares are registered in your name rather than in the name of a broker, but your attendance alone will not revoke any proxy that you have previously given.

If you choose either of the first two methods, you must submit your notice of revocation or your new signed proxy to CombiMatrix’s Corporate Secretary to be received no later than the beginning of the special meeting.

Broker Non-Votes

If your shares are held in “street name” by a bank or broker, you should follow the instructions of your bank or broker regarding the revocation of proxies. If you fail to instruct your broker or nominee to vote, your broker or nominee will not have the authority to vote your shares, which will have the same effect as a vote against the Merger Proposal, although will have no effect on the Compensation Proposal or the Adjournment Proposal.

Solicitation of Proxies

CombiMatrix has engaged Advantage Proxy, Inc. to assist it in soliciting proxies using the means described in this document, whose contact information is below.

ADVANTAGE PROXY, INC.

PO Box 13581

Des Moines, WA 98198

Telephone: (877) 870-8565 (toll free); (206) 870-8565 (collect)

Email: ksmith@advantageproxy.com

CombiMatrix will pay the fees of this solicitation firm, which CombiMatrix expects to be approximately $11,000. In addition to solicitation by mail, the directors, officers, employees and agents of CombiMatrix and Invitae may solicit proxies from CombiMatrix stockholders by in-person interview, telephone, facsimile, email or otherwise, but such persons will not be specially compensated. CombiMatrix and Invitae will share equally the costs of printing and filing this proxy statement/prospectus. Any solicitation made and information provided in such a solicitation will be consistent with the proxy statement. CombiMatrix will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held as of the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials.

 

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Householding of Proxy Materials

In connection with the CombiMatrix special meeting, only one proxy statement/prospectus will be sent to certain CombiMatrix street-name stockholders who share a single address, unless contrary instructions are received from any stockholder at that address. This practice, known as “householding,” is designed to reduce printing and postage costs. However, if you are residing at such an address and wish to receive a separate proxy statement/prospectus, you may contact CombiMatrix’s proxy solicitor to request additional copies.

Record Date

The close of business on September 26, 2017 has been fixed as the record date for determining CombiMatrix common stockholders entitled to receive notice of and to vote at the special meeting. At that time, 2,938,982 shares of CombiMatrix common stock were outstanding, held by 9 holders of record.

Quorum

There must be a quorum in order to conduct voting at the special meeting. Under the second amended and restated bylaws of CombiMatrix, holders of a majority of the shares outstanding and entitled to vote must be present in person or by proxy to constitute a quorum. All shares of CombiMatrix common stock represented at the meeting, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted at the CombiMatrix special meeting.

Vote Required

Each share of CombiMatrix common stock outstanding on the record date and entitled to vote entitles the holder to one vote on each matter to be voted upon by stockholders at the special meeting. Approval of the Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of CombiMatrix common stock entitled to vote on the record date for the CombiMatrix special meeting. Approval, on a non-binding advisory basis, of the Compensation Proposal requires that the votes cast in favor of this proposal at the CombiMatrix special meeting exceed the votes cast opposing the proposal, assuming a quorum is present. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of CombiMatrix common stock that are represented at the special meeting and entitled to vote thereon, whether or not a quorum is present. Failing to vote or abstaining from voting with respect to the Merger Proposal will have the same effect on that proposal as a vote against that proposal. Failing to vote or abstaining from voting with respect to the Compensation Proposal will not have an effect on this proposal. Failing to vote on the Adjournment Proposal will not have an effect on this proposal, but abstaining for voting will have the same effect as a vote against that proposal.

The CombiMatrix board of directors urges CombiMatrix stockholders to promptly vote by Internet or telephone, or by completing, dating and signing the accompanying proxy card and returning it promptly in the enclosed postage-paid envelope, or, if you hold your shares in “street name” through a bank or broker, by following the instructions of your bank or broker.

If you hold your stock in your name as a stockholder of record, you may complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible, or you may vote over the Internet or by telephone, or vote in person at the CombiMatrix special meeting. If you hold your stock in “street name” through a bank or broker, you must direct your bank or broker to vote in accordance with the voting instruction form included with these materials and forwarded to you by your bank or broker. The voting instruction form provides instructions on voting by mail, telephone or on the Internet.

As of the record date, directors and executive officers of CombiMatrix had the right to vote approximately 41,759 shares of CombiMatrix common stock, or approximately 1.42% of the outstanding CombiMatrix common stock entitled to vote at the special meeting.

 

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Recommendation of the CombiMatrix Board of Directors

The CombiMatrix board of directors has approved and adopted the Merger Agreement and the transactions it contemplates, including the Merger. The CombiMatrix board of directors determined that the Merger Agreement and the transactions it contemplates are in the best interests of CombiMatrix and its stockholders. The CombiMatrix board of directors unanimously recommends that the CombiMatrix stockholders vote “FOR” each of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal. For a more detailed discussion of the CombiMatrix board of directors’ recommendation, see the section entitled “The Merger Proposal—CombiMatrix’s Reasons for the Merger; Recommendation of the CombiMatrix Board of Directors” in this proxy statement/prospectus.

Attending the Special Meeting

All holders of CombiMatrix common stock as of the record date, including stockholders of record and stockholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend the special meeting. Stockholders of record can vote in person at the special meeting. If you are not a stockholder of record, you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the special meeting. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership and you must bring a form of personal photo identification with you in order to be admitted to the special meeting. CombiMatrix reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification.

 

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INFORMATION ABOUT THE COMPANIES

Invitae Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Invitae’s goal is to aggregate most of the world’s hereditary genetic tests into a single service with higher quality, faster turnaround time and lower pricing than many single gene tests today. Invitae was founded on four core principles: patients should own and control their own genetic information; healthcare professionals are fundamental in ordering and interpreting genetic information; driving down the price of genetic information will increase its clinical and personal utility; and genetic information is more valuable when shared. Invitae utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Invitae currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. Invitae’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions, as well as recently acquired capabilities in preimplantation and carrier screening for inherited disorders. Invitae now provides comprehensive genetic information for every stage of life, from preconception through adult diagnostics.

Invitae common stock is currently listed on the New York Stock Exchange under the symbol “NVTA.”

CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

CombiMatrix is a family health-focused clinical molecular diagnostic laboratory specializing in pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders. CombiMatrix strives to provide best-in-class clinical laboratory support to healthcare professionals, allowing them to maximize the clinical utility of their patients’ test results and to optimize patient care. CombiMatrix’s testing focuses on advanced technologies, including single nucleotide polymorphism, or SNP, chromosomal microarray analysis, next-generation sequencing, fluorescent in situ hybridization, or FISH, and high resolution chromosome analysis (also referred to as karyotyping). CombiMatrix’s approach to testing is to offer sophisticated technology along with high quality clinical support to its ordering physicians and their patients. CombiMatrix also own a one-third minority interest in Leuchemix, Inc., a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

CombiMatrix was originally incorporated in October 1995 as a California corporation. In September 2000, CombiMatrix was reincorporated as a Delaware corporation. In August 2007, CombiMatrix became publicly traded on NASDAQ under the symbol “CBMX,” where it is currently listed and traded. The CombiMatrix Series F warrants are listed on NASDAQ under the symbol “CBMXW.” Following completion of the Merger, the CombiMatrix common stock and the CombiMatrix Series F warrants will cease trading on NASDAQ and CombiMatrix will file the appropriate forms with the Securities and Exchange Commission to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Coronado Merger Sub, Inc.

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Merger Sub is a wholly owned subsidiary of Invitae and was formed solely for the purpose of carrying out the Merger. In the Merger, Merger Sub will merge with and into CombiMatrix and Merger Sub will cease to exist.

 

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THE MERGER PROPOSAL

Background of the Merger

On September 23, 2015, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey & Whitney LLP, or Dorsey, at which the CombiMatrix board of directors began evaluating the alternative benefits and risks between raising additional capital to meet CombiMatrix’s future needs and exploring possible partnerships or strategic transactions.

On November 23, 2015, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey, at which CombiMatrix’s management reported on various potential opportunities for strategic alternatives that they had researched and discussed the feasibility of raising additional capital. The CombiMatrix board of directors authorized CombiMatrix’s management to select and engage an investment bank to assist in pursuing an underwritten registered public offering of common stock to raise additional capital while also authorizing CombiMatrix’s management in parallel to seek and vet all opportunities for potential partnerships or strategic transactions.

On December 2, 2015, the CombiMatrix board of directors adopted the CombiMatrix Transaction Bonus Plan as a form of retention for senior management to actively assist in exploring a strategic transaction, and to motivate and align the participants’ interest in negotiating for and maximizing stockholder value for a strategic transaction.

In January 2016, CombiMatrix’s management engaged in initial high level discussions with Party O regarding potential partnership opportunities or a strategic transaction.

In January 2016, CombiMatrix’s management engaged in initial high level discussions with Party G regarding a potential partnership or strategic transaction. Additional discussions occurred in April and May 2016.

On February 12, 2016, CombiMatrix’s management had an initial meeting with Party A and continued to discuss a potential strategic transaction with Party A over the course of the following month. On April 11, 2016, CombiMatrix received a draft term sheet letter from Party A for a proposed stock-for-stock acquisition for approximately $15 million. CombiMatrix’s management had multiple synergy meetings and calls with Party A in March and April 2016.

In February 2016, CombiMatrix’s management engaged in initial high level discussions with the chief executive officer of Party D regarding a potential partnership or strategic transaction.

In February 2016, CombiMatrix’s management engaged in initial high level discussions with Party C regarding a potential partnership or strategic transaction.

In late March 2016, CombiMatrix’s management began discussions and held a due diligence meeting with Party B regarding a possible partnership or strategic transaction. Discussions regarding a potential commercial partnership with Party B continued throughout the process.

In April 2016, CombiMatrix’s management engaged in initial high level discussions with Party F regarding a potential partnership or strategic transaction.

In April 2016, CombiMatrix’s management engaged in initial high level discussions with Invitae’s President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) regarding a potential partnership or strategic transaction.

In May 2016, CombiMatrix’s management engaged in initial high level discussions with Party E regarding a potential partnership or strategic transaction, followed by an in-person meeting on June 5, 2016.

 

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None of these eight companies, including Invitae, showed interest in a possible strategic transaction at the time CombiMatrix’s management initially had contacted them. Given the muted responses, CombiMatrix’s management considered the possibility of engaging an investment bank to assist with establishing a competitive process for exploring potential partnerships or strategic transactions.

In early April 2016, CombiMatrix’s management had been in contact with several investment banks to discuss a potential engagement for exploring possible strategic transactions or other business development opportunities.

On April 5, 2016, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey, at which CombiMatrix’s senior management provided an update on the status of strategic discussions with Party A, Party B, Party C, Party D, Party E, Party F, Party G and Party O, and discussed the benefits of possibly engaging an investment bank to assist with establishing a competitive process for exploring potential partnerships or strategic transactions. The CombiMatrix board of directors authorized CombiMatrix’s management to select and retain an investment bank for the purposes of exploring such possible strategic alternatives, including the potential sale of CombiMatrix.

Shortly after the CombiMatrix board of directors meeting on April 5, 2016, CombiMatrix’s management selected Torreya to serve as CombiMatrix’s financial advisor based upon its reputation and experience with respect to the life sciences industry generally. CombiMatrix’s management and Torreya negotiated the terms of the prospective engagement and, on April 20, 2016, CombiMatrix entered into a written engagement letter with Torreya to assist CombiMatrix in exploring strategic alternatives.

On April 21, 2016, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s then outside legal counsel Dorsey, and Torreya, at which CombiMatrix’s senior management provided an update on the status of strategic discussions with Party A, Party B, Party C, Party D, Party E, Party F, Party G, Party O and Invitae. Torreya presented an outline of its plan to run a broad sale process for CombiMatrix and laid out a number of potential buyers and a preliminary timeline. Following the board meeting, CombiMatrix’s senior management, with the help of representatives of Torreya, and pursuant to the authorization of the CombiMatrix board of directors granted at its April 5, 2016 meeting, began to explore strategic alternatives, including potential investment and/or partnering activities with a strategic partner or the potential sale of CombiMatrix.

Between May 4, 2016 and September 24, 2016, representatives of Torreya canvassed approximately 100 parties to gauge interest in potential partnerships or strategic transactions, and circulated a form confidentiality agreement. Torreya contacted both financial buyers and strategic buyers during the initial phase of the process; however, the initial phase was acutely focused on strategic interest given the latest strategic discussions at CombiMatrix.

On May 6, 2016, CombiMatrix entered into a confidentiality agreement with Party G. The confidentiality agreement included a standstill provision, but permitted Party G to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 9, 2016, CombiMatrix entered into a confidentiality agreement with Party D. The confidentiality agreement included a standstill provision, but permitted Party D to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 9, 2016, CombiMatrix entered into a confidentiality agreement with Party H. The confidentiality agreement included a standstill provision, but permitted Party H to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 11, 2016, CombiMatrix entered into a confidentiality agreement with Invitae. The confidentiality agreement included a standstill provision, but permitted Invitae to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

 

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On May 19, 2016, CombiMatrix entered into a confidentiality agreement with Party C. The confidentiality agreement included a standstill provision, but permitted Party C to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 24, 2016, CombiMatrix entered into a confidentiality agreement with Party F. The confidentiality agreement included a standstill provision, but permitted Party F to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 27, 2016, CombiMatrix entered into a confidentiality agreement with Party B. The confidentiality agreement included a standstill provision, but permitted Party B to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 28, 2016, CombiMatrix entered into a confidentiality agreement with Party E. The confidentiality agreement included a standstill provision, but permitted Party E to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 28, 2016, Party D indicated that it was declining to continue in the sale process due to its need to focus on cleaning up its capital structure.

From June 2016 to September 2016, CombiMatrix’s senior management held several meetings and telephonic conferences with interested parties, which included Party F, Party G, Invitae, Party B and Party I.

On June 1, 2016, CombiMatrix entered into a confidentiality agreement with Party A. The confidentiality agreement included a standstill provision, but permitted Party A to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended June 3, 2016, Torreya sent a process letter to all interested parties requesting them to submit bids for CombiMatrix by June 15, 2016.

On June 6, 2016, CombiMatrix entered into a confidentiality agreement with Party J. The confidentiality agreement included a standstill provision, but permitted Party J to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On June 15, 2016, Party B submitted an all-cash preliminary Indication of Interest, or IOI, providing a valuation range between $10 and $20 million.

On June 15, 2016, Party F submitted a preliminary IOI all-cash offer for $18 million.

On June 15, 2016, Party H submitted a preliminary IOI contemplating a reverse merger at a 90% Party H—10% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On June 16, 2016, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s then outside legal counsel Dorsey, and Torreya, to discuss the bids received to date, the remaining interested parties and likely bidders, as well as a general status update on the parties contacted and responses received. The CombiMatrix board of directors authorized that all bidders be allowed into the next round of the process and be granted further access to information in the Virtual Data Room, except for Party E due to concerns about competitive harm and Party H because its offer was not viewed as a serious one.

On June 17, 2016, Party E submitted a first round proposal of $5 million of which $1 million would be placed in an escrow holdback.

On June 19, 2016, both Party C and Party J indicated they were declining to continue in the sale process.

 

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On June 24, 2016, Party G submitted an offer for a reverse merger at a 67% Party G—33% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

During the week ended June 24, 2016, a representative from Torreya spoke with Party H and Party E, and advised them their offers were not sufficient to enable them to continue into the second round of the process.

On June 30, 2016, Party I illustrated a proposed buyout structure in which Party I would acquire CombiMatrix for a de minimis upfront consideration. A representative from Torreya advised Party I that this upfront consideration would need to move up significantly in order to be considered by CombiMatrix.

On July 5, 2016, Party F provided a letter of intent requesting exclusivity, but maintained the pricing of $18 million in the form of an all-cash transaction.

On July 5, 2016, Invitae provided a preliminary IOI for a stock-for-stock merger valued at two times CombiMatrix’s stated 2015 revenues as disclosed in its most recent Form 10-K, or approximately $20.2 million.

On July 6, 2016, CombiMatrix’s management held a telephonic meeting with Party F to discuss the complexities of its capitalization table, more specifically the impact of the Series F warrants on potential transaction structures.

On July 6, 2016, Party A declined to continue in the sale process because it was unwilling to engage in a competitive process.

On July 13, 2016, CombiMatrix’s management held a telephonic meeting with Party B to discuss its business and financial forecast, as well as additional business-related questions and the impacts of the challenging capitalization table.

On July 14, 2016, Party F responded to CombiMatrix’s request to amend the structure of its offer to include both stock and cash components, however Party F was unable to adjust its initial offer and maintained its position with an $18 million all-cash offer.

On July 23, 2016, CombiMatrix entered into a confidentiality agreement with Party K. The confidentiality agreement included a standstill provision, but permitted Party K to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On July 25, 2016, Party G submitted a revised offer for a reverse merger at a 52.5% Party G – 47.5% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

During the week ended August 5, 2016, Party B advised it declined to further participate in the sale process.

On August 10, 2016, CombiMatrix’s management held an all-day onsite meeting at their offices in Irvine, California with Party G.

On August 16, 2016, CombiMatrix’s management held an all-day meeting at their offices in Irvine, California with Invitae.

On August 19, 2016, CombiMatrix’s senior management sent an email to the CombiMatrix board of directors providing an update on the process, including where the process stood with Invitae. CombiMatrix’s management reported that there were a number of moving parts that needed to transpire ahead of receiving an updated offer, and a potential path forward with Invitae was thus uncertain. Party G and Party F were also still active in the process at that time.

 

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During the week ended August 19, 2016, a representative from Torreya indicated to a senior executive at Party F that CombiMatrix would prefer a cash and stock transaction. Torreya added that CombiMatrix would require a revised proposal with additional consideration in order to consider exclusivity with Party F.

During the week ended August 26, 2016, Invitae’s President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) contacted CombiMatrix’s chief executive officer and indicated Invitae declined to further participate in the sale process because it was going to focus on other priorities. Both CombiMatrix’s management and representatives from Torreya contacted several parties who had previously been contacted throughout the process across varied stages of stated interest to hone in on the remaining prospective buyers.

During the week ended September 9, 2016, Party L’s chief executive officer notified CombiMatrix’s management that it was not in a position to bid for CombiMatrix at the time. A representative from Torreya contacted Party F and asked if it would move forward for $19 million with exclusivity. Party F’s senior executive said he would respond after communicating internally. A representative for Party G contacted Torreya and indicated it was not able to put together a revised bid and declined to further participate in the sale process at that time because Party G needed to refocus on executing its near-term business plan.

During the week ended September 16, 2016, Invitae’s then President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) confirmed to Torreya that Invitae was not in a position to move forward in the process at that time. Party F’s senior executive informed a representative from Torreya that Party F declined to further participate in the sale process at that time due to a lack of internal support for a transaction.

During the week ended September 23, 2016, all other interested parties who had put forward IOIs had declined to further participate in the sale process. Torreya presented CombiMatrix’s management additional strategic options on how to move forward in the process, including broadening the call list to additional potential strategic and financial buyers and raising private debt to finance business operations.

From late September 2016 to January 2017, representatives at Torreya contacted approximately 45 additional potential financial buyers, of which approximately 10 entered into confidentiality agreements that included standstill provisions, but permitted such potential financial buyers to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On October 12, 2016, CombiMatrix entered into a confidentiality agreement with Party M. The confidentiality agreement included a standstill provision, but permitted Party M to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended October 21, 2016, CombiMatrix’s management held telephonic conferences with Party N and Party O. Shortly after the call, Party N indicated it declined to further participate in the sale process.

On October 27, 2016, CombiMatrix entered into a confidentiality agreement with Party P. The confidentiality agreement included a standstill provision, but permitted Party P to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On October 28, 2016, CombiMatrix entered into a confidentiality agreement with Party Q. The confidentiality agreement included a standstill provision, but permitted Party Q to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On November 4, 2016, CombiMatrix entered into confidentiality agreements with Party R, Party S, Party T, Party U, and Party V. The confidentiality agreements included a standstill provision, but permitted such companies to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

 

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During the week ended November 4, 2016, CombiMatrix’s management held a telephonic conference with Party P.

During the week ended November 11, 2016, CombiMatrix entered into a confidentiality agreement with Party W. The confidentiality agreement included a standstill provision, but permitted Party W to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended November 18, 2016, CombiMatrix entered into confidentiality agreements with Party X and Party Y. The confidentiality agreements included a standstill provision, but permitted the companies to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period. CombiMatrix management held telephonic conferences with Party X and Party M. Party Q indicated it declined to further participate in the sale process.

During the week ended November 25, 2016, CombiMatrix’s management held a telephonic conference with Party U, a private equity firm.

During the week ended December 2, 2016, CombiMatrix entered into a confidentiality agreement with Party Z. The confidentiality agreement included a standstill provision, but permitted Party Z to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period. CombiMatrix management held a telephonic conference with Party S. Party P and Party O both indicated they declined to further participate in the sale process.

During the week ended December 9, 2016, CombiMatrix management held telephonic conferences with Party Y, Party S and Party U. Party X indicated it declined to further participate in the sale process.

On December 10, 2016, CombiMatrix entered into a confidentiality agreement with Party L. The confidentiality agreement included a standstill provision, but permitted Party L to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On December 13, 2016, CombiMatrix entered into a confidentiality agreement with Party AA. The confidentiality agreement included a standstill provision, but permitted Party AA to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended December 16, 2016 CombiMatrix’s management hosted a site visit at their headquarters in Irvine, California with Party U and its portfolio company, Party UP. Party S and Party Y indicated they declined to further participate in the sale process.

During the week ended December 23, 2016, Party L spoke with a representative of Torreya and asked to speak to CombiMatrix’s management at the JP Morgan conference in January 2017. Party F indicated for the final time that there was no interest internally in re-engaging in the sale process.

During the week ended January 6, 2017, a representative from Torreya contacted Invitae and Party B, asking if they would be interested in re-engaging in the sale process. Party Z indicated that it would be able to put together a bid only in the third week of January 2017, shortly after the JP Morgan conference.

During the week ended January 13, 2017, CombiMatrix’s management met informally with Party B and Party L at the JP Morgan conference in San Francisco, California.

During the week ended January 20, 2017, Party Z indicated it would no longer continue in the sale process.

On January 23, 2017, Party U provided a preliminary IOI outlining an all-cash acquisition of CombiMatrix at a $13.5 million valuation. Torreya advised CombiMatrix’s management that in order to maximize the implied

 

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value to stockholders for a transaction with Party U, CombiMatrix could sell off the business in two separate transactions, with an asset sale to Party U in the first step followed by a sale of the remaining public company shell in a second step.

On January 26, 2017 CombiMatrix’s management held a telephonic conference with Party U to discuss the offer and legal implications. In addition, a financial advisor for Party BB contacted a representative of Torreya and indicated Party BB was interested in acquiring a public company shell as a method to go public.

On January 27, 2017 CombiMatrix’s management held a telephonic conference with Party BB to discuss the concept and structure of a sale of a public company shell.

On January 27, 2017, Party U provided a revised preliminary IOI outlining an all-cash acquisition of CombiMatrix at a $15.0 million valuation.

On January 31, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s current outside legal counsel Stradling Yocca Carlson & Rauth, P.C., or Stradling, and Torreya. Torreya provided an update on the process and the current field of bidders. Torreya advised that CombiMatrix make a counter-offer to Party U in tandem with a pending offer from Party BB so that the clearing price of the consolidated transaction would net the stockholders at least $20 million of cash consideration. In addition, Torreya reported on the latest discussions and next steps with Party CC, Party DD, Party BB and Party L. The CombiMatrix board of directors instructed Torreya to send Party L a draft Letter of Intent to begin conversations on a stock-for-stock merger and make a counter-offer to Party U in an effort to reach at least $20 million of cash consideration.

On February 1, 2017, CombiMatrix entered into a confidentiality agreement with Party DD. The confidentiality agreement included a standstill provision, but permitted Party DD to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On February 3, 2017, due to the muted responses from potential buyers and with guidance from the CombiMatrix board of directors, CombiMatrix’s management suspended the sale process with Torreya, but continued to explore on its own strategic options including a range of potential strategic transactions and business development opportunities. CombiMatrix’s management indicated to Torreya, however, that it would need Torreya’s continued support, including fairness opinion services, as CombiMatrix explored potential strategic transactions on its own. CombiMatrix negotiated with Torreya the amendment of the fee terms of the engagement letter. On February 9, 2017, CombiMatrix and Torreya amended the fee terms of their engagement letter pursuant to the agreed upon tail arrangement that if a strategic transaction resulted from a contact CombiMatrix’s management initiated and asked Torreya to assist on, including providing fairness opinion services, Torreya would receive a flat fee instead of success fee compensation calculation based on a percentage of the transaction value.

On February 6, 2017, Party BB provided a preliminary IOI outlining an upfront cash consideration of $1.3 million for the public company shell and 0.5% of the pro-forma equity ownership. Party BB’s offer to buy the public company shell, however, was moot because Party U’s offer was below what the CombiMatrix board of directors thought would be appropriate. Discussions with Party DD and Party L also ended.

On February 13, 2017, Party CC, a privately-held company, submitted an offer for a reverse merger at 83.3% Party CC—16.7% CombiMatrix equity ownership split, but that required CombiMatrix to find a way to extinguish the Series F warrants through a CombiMatrix exchange offer or eliminate their Black-Scholes buyback provision. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On February 17, 2017, Party CC’s chief executive officer made a presentation to the CombiMatrix board of directors regarding Party CC’s business and prospects.

 

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On February 23, 2017, Invitae re-engaged to explore the possibility of restarting strategic discussions with CombiMatrix when its President and Chief Executive Officer called CombiMatrix’s President and Chief Executive Officer.

On March 6, 2017, Party CC submitted a revised offer for a reverse merger at 77.8% Party CC—22.2% CombiMatrix equity ownership split, but that required CombiMatrix to find a way to extinguish the Series F warrants through a CombiMatrix exchange offer or to eliminate the Black-Scholes buyback provision contained in such Series F warrants. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On March 10, 2017, Invitae indicated it was preparing to submit a proposal for a potential stock-for-stock merger valuing CombiMatrix at two times 2016 revenue as disclosed in its most recent form 10-K filing, or approximately $25.7 million.

On March 14, 2017, Invitae submitted a preliminary IOI for a stock-for-stock merger valuing CombiMatrix at two times 2016 revenue as disclosed in its most recent form 10-K filing, or approximately $25.7 million.

On March 15, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya provided an analysis and guidance on the current bids from Party CC and Invitae. Torreya advised the CombiMatrix board of directors that the reverse merger opportunity with Party CC was a less attractive value proposition to its stockholders. After consideration of all relevant factors, the CombiMatrix board of directors determined that Invitae’s proposal stood to maximize shareholder value because, among other factors: the total consideration offered by Invitae was higher in management’s and the board of directors’ view; in Party CC’s offer, CombiMatrix’s stockholders would receive a low percentage of the combined entity in a reverse merger and historically reverse mergers have not traded well; unlike Party CC’s offer, Invitae’s offer would not trigger the Black-Scholes buyout provision of CombiMatrix’s Series F warrants and therefore would result in a higher amount of consideration being received by CombiMatrix’s stockholders; there were greater synergies between Invitae’s business and CombiMatrix’s business, presenting better opportunities for post-merger growth; and Party CC was a pre-revenue startup in a different industry space, and the post-merger performance of the combined company would be uncertain. Torreya advised the CombiMatrix board of directors that it should make a counter-offer to Invitae.

On March 20, 2017, Invitae submitted a revised preliminary IOI for a stock-for-stock merger valuing CombiMatrix between $25 million and $30 million plus working capital to be defined.

On March 21, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya presented a valuation analysis of CombiMatrix by analyzing recent comparable transactions, comparable public companies and discounted cash flow valuation methodologies, as well as how Invitae’s latest offer fit relative to CombiMatrix’s implied valuation. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to counter Invitae with a valuation range of $28 million to $33 million plus working capital to be defined.

On March 21, 2017, Invitae submitted a revised preliminary IOI for a stock-for-stock merger valuing CombiMatrix between $28 million and $33 million plus working capital to be defined. CombiMatrix executed the IOI and sent it back to Invitae starting a period of exclusivity expiring April 14, 2017.

On March 24, 2017, CombiMatrix’s management and members of the CombiMatrix board of directors hosted a site visit at their headquarters in Irvine, California with Invitae. A representative of Torreya notified Party CC that CombiMatrix had moved into a period of exclusivity with another party and thus would not be moving forward with Party CC’s offer at this time.

 

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On April 8, 2017, CombiMatrix’s management sent an email to the CombiMatrix board of directors notifying them of CombiMatrix’s first quarter financial results and updating them on the continuing Merger negotiations with Invitae.

From early April 2017 through late May 2017, Invitae and CombiMatrix exchanged several iterations and markups of a revised IOI and respective illustrative transaction terms until the summary of terms was orally agreed upon and an initial draft of the Merger Agreement was provided by Invitae on May 23, 2017. Also during this period Invitae, Invitae’s outside legal counsel Pillsbury Winthrop Shaw Pittman LLP, or Pillsbury, CombiMatrix, Stradling, and other advisors continued to engage in diligence review, as well as exchanged comments on the draft IOI.

On April 13, 2017, Invitae submitted a proposal modifying the IOI that the parties had executed on March 21, 2017, or the Proposal. The Proposal indicated a purchase price for CombiMatrix of $30 million, plus or minus “net cash” (defined broadly as current assets minus total liabilities at closing) to be paid in common stock of Invitae and calculated on a fully diluted basis of CombiMatrix securities, inclusive of outstanding Series F warrants.

On April 14, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, to consider the new Proposal submitted by Invitae, which management estimated would translate into net consideration to CombiMatrix common stockholders of approximately $6.10 per share (based on Invitae’s then-current common stock price), or approximately $17.8 million, taking into account the net cash formula in the Proposal and CombiMatrix’s share count on a fully diluted basis. The CombiMatrix board of directors directed CombiMatrix’s management to make a counterproposal that the “fully diluted” shares calculation exclude the outstanding Series F warrants.

On April 18, 2017, Invitae rejected CombiMatrix’s counter-proposal to exclude the Series F warrants from the fully-diluted calculation of the proposed purchase price. The parties discussed alternative solutions to Invitae’s concerns surrounding the Series F warrants and Invitae indicated that it would be open to the possibility of conducting a concurrent tender offer of Invitae common stock for the Series F warrants.

Later on April 18, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, in which the CombiMatrix board of directors approved the proposed solution of Invitae making a concurrent tender offer of Invitae common stock for the Series F warrants.

On April 22, 2017, Invitae submitted a revised Proposal that indicated a purchase price for CombiMatrix of $33 million, plus or minus net cash, and included a concurrent tender offer of Invitae common stock for the Series F warrants at a value of $2.90 per warrant, but contained a cap on the purchase price (regardless of how much net cash would be increased by any warrant exercises). CombiMatrix’s management estimated that the Proposal would approximate $8.37 per share of CombiMatrix common stock if no Series F warrants were exercised and $7.33 per share of CombiMatrix common stock if all of the Series F warrants were exercised.

On April 28, 2017, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management and Stradling, in which it authorized management to continue discussions with Invitae. Because the exclusivity period with Invitae had expired on April 14, 2017, the CombiMatrix board of directors further authorized CombiMatrix’s senior management to explore any other strategic alternatives that may become available.

During the week of May 1, 2017, CombiMatrix’s chief executive officer contacted Party U to gauge its interest in revisiting the possible strategic transaction, but Party U expressed no interest in engaging in a bidding war for a strategic transaction.

On May 5, 2017, Invitae submitted a further revised Proposal that indicated a purchase price for CombiMatrix of $25 million, plus or minus net cash, but without a cap, to be paid in common stock of Invitae and calculated on a

 

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fully diluted basis of CombiMatrix securities, but excluding outstanding Series D Warrants and also excluding any Series F warrants tendered in a tender exchange offer. Under the tender offer, Invitae would make a supplemental offer of $2.90 per Series F warrant (approximately an additional $6 million based on Invitae’s then-current common stock price). The purchase price would be subject to a floor of $7.00 per share of common stock (based on Invitae’s then-current common stock price) regardless of how much dilution may occur if Series F warrants are exercised. The revised Proposal also required that the transaction bonus pursuant to CombiMatrix’s Transaction Bonus Plan be paid with restricted stock units for Invitae common stock despite the fact that the transaction bonus is payable in cash pursuant to the terms of the Transaction Bonus Plan.

On May 8, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya presented an updated valuation analysis of CombiMatrix by analyzing recent comparable transactions, comparable public companies and discounted cash flow valuation methodologies, along with a sensitivity analysis of Series F warrants tender versus exercise, as well as how Invitae’s latest offer fit relative to CombiMatrix’s implied valuation. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to make a counteroffer to Invitae for a $27 million purchase price for the CombiMatrix common stock (subject to the net cash adjustment) and a floor of $8.25 per share of CombiMatrix common stock (based on Invitae’s then-current common stock price), or approximately $42 million if all the Series F warrants exercised prior to closing the Merger.

On May 11, 2017, CombiMatrix received an unsolicited IOI by Party K for a reverse merger at a range between 75-81% Party K—19-25% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On May 12, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya provided guidance on the IOI received from Party K and concluded that given the historical risk profile of Party K and its current capitalization, Invitae’s offer reflected a superior value proposal for CombiMatrix’s stockholders. However, Torreya also advised that CombiMatrix make a counter proposal back to Party K. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to counter Party K with a $45 million all-cash offer plus a cash buyout of the Series F warrants (based upon the maximum value of the Invitae Proposal being approximately $42 million if all the Series F warrants are exercised prior to closing the Merger), with proof of funds and ability to close within 30 days, and with no exclusivity.

On May 16, 2017, CombiMatrix’s chief executive officer contacted the chief executive officer of Party K and presented the all-cash counterproposal, which Party K ultimately rejected later that week.

From late May 2017 through late July 2017, Invitae and CombiMatrix exchanged several iterations and markups of the draft Merger Agreement until terms were fully agreed upon and the Merger Agreement was signed on July 31, 2017. Also during this period Invitae, Pillsbury, CombiMatrix, Stradling, and other advisors continued to engage in diligence review, as well as exchanged comments on the draft Merger Agreement.

On June 9, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, and discussed the terms of an interim draft of the Merger Agreement. The CombiMatrix board of directors directed CombiMatrix’s management to negotiate with Invitae to, among other things, reduce the termination fee and expense reimbursement in the Merger Agreement from $2,000,000 and $500,000, respectively, down to $1,000,000 and $300,000, respectively. Later on June 9, 2017, CombiMatrix’s management made a counter-offer to Invitae with a termination fee and expense reimbursement of $1,000,000 and $300,000, respectively.

On June 27, 2017, Invitae agreed to a termination fee and expense reimbursement in the Merger Agreement of $1,400,000 and $400,000, respectively, and on July 18, 2017, Invitae agreed that the termination fee would be reduced by any amount of expense reimbursement already paid.

 

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On July 14, 2017, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya to discuss an interim draft of the Merger Agreement. The CombiMatrix board of directors directed CombiMatrix’s management to request that Invitae consider shifting a certain amount of Merger consideration from the Series F warrant exchange tender offer to the CombiMatrix common stockholders.

On July 15, 2017, CombiMatrix’s chief executive officer contacted Invitae’s chief executive officer to request that Invitae consider shifting a certain amount of Merger consideration from the Series F warrant exchange tender offer to the CombiMatrix common stockholders. Invitae’s chief executive officer indicated that Invitae was unwilling to shift the consideration between common stockholders and Series F warrant holders.

On July 21, 2017, Invitae opened a discussion with CombiMatrix’s senior management regarding their continued work for CombiMatrix post-Merger and provided an initial draft of consulting agreements for them.

On July 28, 2017, the CombiMatrix board of directors met telephonically, with representatives of CombiMatrix’s senior management, Torreya and Stradling present, to consider the proposed transaction with Invitae. At the meeting, the CombiMatrix board of directors reviewed the key provisions of the near-final draft of the Merger Agreement and ancillary agreements, including structure and timing considerations, the exchange ratio, closing conditions, treatment of stock options, restricted stock units and warrants, the termination provisions and termination fees and circumstances under which the payment of termination fees would be triggered. The CombiMatrix board of directors was made aware of the consulting arrangements that Invitae was offering to CombiMatrix’s chief executive officer and chief financial officer and of their respective financial interests in those arrangements.

During that meeting on July 28, 2017, representatives of Torreya delivered to the CombiMatrix board of directors its oral opinion, which was confirmed by delivery of a written opinion dated July 28, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, matters considered and limits on the review undertaken by Torreya in preparing the opinion, the consideration to be paid in the Merger and in the proposed Warrant Exchange Offer was fair, from a financial point of view, to CombiMatrix’s common stockholders. The CombiMatrix board of directors directed CombiMatrix’s management to further negotiate the termination fee provision in the Merger Agreement so that the termination fee would not be triggered solely by an unsolicited bid.

Between July 28, 2017 and July 30, 2017, Invitae, Pillsbury, CombiMatrix, Stradling, and other advisors had continued discussions on the terms of the Merger Agreement.

On July 30, 2017, the CombiMatrix board of directors met telephonically, with representatives of CombiMatrix’s senior management, Torreya and Stradling present, to consider the proposed transaction with Invitae. At the meeting, the CombiMatrix board of directors reviewed the revisions made to the near-final draft of the Merger Agreement and ancillary agreements since the versions of July 28, 2017, including Invitae’s agreement that the termination fee would not be triggered solely by an unsolicited bid.

During that meeting on July 30, 2017, representatives of Torreya delivered to the CombiMatrix board of directors its oral opinion, which was confirmed by delivery of a written opinion dated July 30, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, matters considered and limits on the review undertaken by Torreya in preparing the opinion, the consideration to be paid in the Merger and in the proposed Warrant Exchange Offer was fair, from a financial point of view, to CombiMatrix’s common stockholders.

On July 31, 2017, the parties finalized the Merger Agreement and the Merger Agreement was executed.

On July 31, 2017, after the closing of the markets in the United States, CombiMatrix and Invitae announced the Transaction through separate press releases.

 

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CombiMatrix’s Reasons for the Merger; Recommendation of the CombiMatrix Board of Directors

At a meeting held on July 30, 2017, the CombiMatrix board of directors, by unanimous vote, determined that the Merger was in the best interest of CombiMatrix and its stockholders, approved the Merger Agreement and ancillary agreements and the transactions contemplated by the Merger Agreement and ancillary agreements, and recommended that CombiMatrix stockholders vote “FOR” the Merger Proposal.

The CombiMatrix board of directors believes that the businesses of CombiMatrix and Invitae are complementary and that a combination of CombiMatrix with Invitae presents a compelling strategic opportunity to enhance value for CombiMatrix stockholders. In reaching its decision to approve the Merger Agreement and transactions contemplated thereby, including the Merger, and to recommend that CombiMatrix stockholders vote “FOR” the Merger Proposal, the CombiMatrix board of directors, with the assistance of CombiMatrix’s management and financial and legal advisors, considered and analyzed a number of factors and a number of potential risks, including those reviewed by the CombiMatrix board of directors at the meetings described in this proxy statement/prospectus in the section entitled “The Merger ProposalBackground of the Merger.”

The following is a summary of the material factors considered by the CombiMatrix board of directors in determining to approve the Merger Agreement and the transactions contemplated thereby, including the Merger:

 

    the implied consideration per share of CombiMatrix’s common stock to be paid by Invitae pursuant to the Merger Agreement ranged between $8.00 and $8.60, which reflects (i) a premium of 55.3% to 67.0% over the closing trading price of the CombiMatrix’s common stock on July 28, 2017, (ii) a premium of 63.3% to 75.5% over the lowest trading price of the CombiMatrix’s common stock over the thirty days prior to July 28, 2017, (iii) a premium of 47.8% to 58.9% over the volume weighted average stock price, or VWAP, of the CombiMatrix’s common stock over the thirty days prior to July 28, 2017, (iv) a premium of 47.0% to 58.0% over the VWAP of the CombiMatrix’s common stock over the ninety days prior to July 28, 2017, and (v) a premium of 98.8% to 113.7% over the VWAP of the CombiMatrix’s common stock over the one hundred eighty days prior to July 28, 2017.

 

    the CombiMatrix board of directors’ and management’s understanding of CombiMatrix’s and Invitae’s respective business, operations, financial condition, earnings, prospects, competitive position and the nature of the industry in which CombiMatrix and Invitae compete, including the risks, uncertainties and challenges facing CombiMatrix, Invitae and such industry, and the risks that CombiMatrix would face if it continued to operate on a standalone basis;

 

    the fact that CombiMatrix’s business and operations complement those of Invitae and, despite the similar nature of the businesses of CombiMatrix and Invitae and that certain customers and/or partners may overlap, the fact that the market opportunity for growth and the ability of the combined company to be better positioned to capitalize on the opportunities for growth than CombiMatrix would be able to accomplish alone is compelling;

 

    the expected synergies to be realized by the combined company and the expectation of the CombiMatrix board of directors that the future earnings and prospects of the combined company (and, relatedly, the value to CombiMatrix stockholders who receive the Merger consideration) would be superior to those of CombiMatrix on a standalone basis;

 

    the financial analyses reviewed and discussed with the CombiMatrix board of directors by representatives of Torreya as well as the oral opinion of Torreya rendered to the CombiMatrix board of directors on July 28, 2017 and July 30, 2017 as to the fairness, from a financial point of view, to the holders of shares of CombiMatrix common stock of the Merger consideration to be paid to such stockholders in the Merger pursuant to the Merger Agreement (which oral opinion was subsequently confirmed in writing on July 30, 2017 by delivery of Torreya’s written opinion dated July 30, 2017), as more fully described below in the section entitled “The Merger Proposal—Opinion of CombiMatrix Financial Advisor”;

 

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    the CombiMatrix board of directors’ process for soliciting the parties (including both strategic and financial parties), prior to the entry into the Merger Agreement, that were believed to be the most able and willing to pay the highest price for CombiMatrix, including being given an opportunity to conduct due diligence and to make offers to acquire CombiMatrix, as described above in the section entitled “The Merger Proposal—Background of the Merger”;

 

    the fact that CombiMatrix’s management and the CombiMatrix board of directors believed that it was unlikely that another buyer would pay in excess of the Merger consideration, and if there was such a buyer that presented a superior proposal prior to the stockholder vote to approve the Merger Proposal, CombiMatrix would have certain rights in accordance with the terms of the Merger Agreement, as further described herein;

 

    the fact that holders of CombiMatrix common stock will have an opportunity to receive shares of Invitae common stock pursuant to the Merger, the perceived likelihood that the future value of a share of Invitae common stock will exceed the potential future value of a share of CombiMatrix common stock, the potential for shares of Invitae common stock to increase in value following completion of the Merger, the ability that CombiMatrix stockholders that receive and hold Invitae shares will have to participate in any such potential increase in value, and the expected tax treatment of the receipt of common stock of Invitae in the Merger;

 

    the fact that the Merger is not subject to approval by Invitae’s stockholders;

 

    Invitae’s track record, market capitalization and financial strength, and the absence of a financing condition in the Merger Agreement;

 

    the efforts made to negotiate a merger agreement that would be favorable to CombiMatrix’s stockholders and the terms and conditions of the fully negotiated Merger Agreement, including the size of the termination fee of $1,400,000 payable to Invitae in specified circumstances, and the parties’ agreement on the circumstances under which such fee may become payable, as further discussed in the section entitled “The Merger Agreement—Termination of the Merger Agreement and Termination Fee”;

 

    the ability of CombiMatrix under the terms of the Merger Agreement to negotiate with third parties concerning certain unsolicited competing acquisition proposals if CombiMatrix were to receive such proposals prior to the adoption of the Merger Agreement by the CombiMatrix stockholders, and the ability of CombiMatrix to terminate the Merger Agreement to accept a superior proposal under certain circumstances, each as further described in the section entitled “The Merger Agreement—Non Solicitation”;

 

    the belief that the terms of the Merger Agreement, taken as a whole, including the parties’ representations, warranties and covenants, and the conditions to the parties’ respective obligations, are reasonable;

 

    the fact that a vote of the holders of CombiMatrix common stock is required under Delaware law to adopt the Merger Agreement;

 

    the risk that pursuing other potential alternatives, including continuing to operate on a standalone basis, could have resulted in the loss of an opportunity to consummate a transaction with Invitae;

 

    the fact that, as an all-stock transaction, the Merger would not be taxable to the holders of CombiMatrix common stock that are U.S. holders for U.S. federal income tax purposes; and

 

    the fact that the shares of Invitae common stock issuable as Merger consideration will be registered by Invitae under a Form S-4 Registration Statement and listed for trading on the NYSE.

 

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In the course of its deliberations, the CombiMatrix board of directors also considered a variety of risks and other countervailing factors related to the Merger Agreement and the Merger, including the following material factors:

 

    the possibility that the Merger might not be consummated in a timely manner or at all due to a failure of certain conditions, including with respect to the required approval of the transaction by antitrust regulatory authorities;

 

    the risks and costs to CombiMatrix if the Merger does not close in a timely manner or at all, including the potential negative impact on CombiMatrix’s ability to retain key employees, the diversion of management and employee attention and the potential disruptive effect on CombiMatrix’s day-to-day operations and CombiMatrix’s relationships with customers, suppliers and other third parties;

 

    the fact that the holders of CombiMatrix common stock will have a much smaller ongoing equity interest in the surviving corporation following the Merger;

 

    the fact that the value of the Merger consideration could fluctuate prior to closing the Merger based on fluctuations in Invitae’s stock price;

 

    the fact that the per share Merger consideration to common stockholders would decline due to dilution from any exercises of Series F warrants prior to closing the Merger;

 

    the restrictions on the conduct of CombiMatrix’s business prior to the consummation of the Merger, which may delay or prevent CombiMatrix from undertaking business opportunities that may arise or any other action that it might otherwise take with respect to the operations of CombiMatrix;

 

    the risk that the parties may incur significant costs and delays resulting from seeking governmental consents and approvals necessary for completion of the Merger;

 

    the fact that the integration of CombiMatrix and Invitae may be complex and time-consuming and may require substantial resources and effort, and the risk that if Invitae does not successfully integrate CombiMatrix, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected;

 

    the possibility that strategic and other benefits expected to be created by the combination of CombiMatrix and Invitae following the completion of the Merger, including expected synergies, may not be realized by the combined company or will take longer to realize than expected;

 

    the provisions of the Merger Agreement that restrict CombiMatrix’s ability to solicit or participate in discussions or negotiations regarding alternative business combination transactions;

 

    the possibility that CombiMatrix’s obligation to pay Invitae a termination fee of up to $1,400,000 upon the termination of the Merger Agreement under certain circumstances could discourage other potential acquirors from making an alternative proposal to acquire CombiMatrix;

 

    the possibility that CombiMatrix could be obligated to pay Invitae an expense reimbursement fee of up to $400,000 upon the termination of the Merger Agreement under certain circumstances;

 

    the possibility that if the Merger is terminated due to certain circumstances and CombiMatrix has to pay termination fees and transaction expenses, CombiMatrix may not have sufficient funds to make such payments;

 

    the significant costs to be incurred by CombiMatrix in connection with the Merger; and

 

    the CombiMatrix stockholders will not receive cash from Invitae as part of the Merger consideration, other than cash for fractional shares.

In addition, the CombiMatrix board of directors was aware of and considered the fact that CombiMatrix’s executive officers have financial interests in the Merger that may be different from, or in addition to, those of CombiMatrix’s stockholders generally, including those interests that are a result of employment and compensation arrangements with CombiMatrix, as described more fully below in the section entitled “The Merger Proposal—Interests of Certain CombiMatrix Directors and Officers in the Merger.”

 

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The foregoing discussion of the factors considered by the CombiMatrix board of directors is not intended to be exhaustive, but rather includes the material factors considered by the CombiMatrix board of directors. The CombiMatrix board of directors collectively reached the conclusion to approve the Merger Agreement and deem the Merger Agreement and the transactions contemplated thereby, including the Merger, to be advisable and in the best interests of CombiMatrix and its stockholders, in light of the various factors described above and other factors that the members of the CombiMatrix board of directors believed were appropriate. In view of the wide variety of factors considered by the CombiMatrix board of directors in connection with its evaluation of the Merger and the complexity of these matters, the CombiMatrix board of directors did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the CombiMatrix board of directors. Rather, the CombiMatrix board of directors made its recommendation based on the totality of the information available to the CombiMatrix board of directors, including discussions with, and questioning of, CombiMatrix’s management and its financial and legal advisors. In considering the factors discussed above, individual members of the CombiMatrix board of directors may have given different weights to different factors.

This explanation of the CombiMatrix board of directors’ reasons for recommending the adoption of the Merger Agreement and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Invitae’s Reasons for the Merger

The Invitae board of directors concluded that the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents, and the transactions contemplated thereby or undertaken in connection therewith are advisable and in the best interests of Invitae and its stockholders and, accordingly, approved the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents, and the transactions contemplated thereby or undertaken in connection therewith. In evaluating the transactions, the Invitae board of directors consulted with Invitae’s management and legal advisors, and considered the following material factors that the Invitae board of directors believes favor the transactions:

 

    the transactions would not preclude Invitae from entering into possible future business combination transactions,

 

    the Invitae board of directors’ belief that the Exchange Ratio added certainty to the proposed transactions without subjecting Invitae stockholders to the possibility of excessive dilution,

 

    the requirement that participation in the Warrant Exchange Offer by at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement is a condition to Invitae’s obligation to proceed with a closing of the Merger,

 

    the fact that CombiMatrix may be required, under certain circumstances, to pay a termination fee to Invitae of $1,400,000 (net of expense reimbursement previously paid) and/or Invitae’s expenses up to $400,000, and

 

    the terms of the Merger Agreement, as described in the section entitled “The Merger Agreement” below, which the Invitae board of directors generally viewed as favorable to Invitae.

In the course of its deliberations regarding the transactions, the Invitae board of directors also identified and considered the following potentially negative factors:

 

    the potential disruption to Invitae’s business that could result from the announcement of the transactions, including the diversion of management and employee attention, employee attrition and the effect on business and customer relationships,

 

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    the effect of the public announcement of the transactions on Invitae’s stock price if Invitae stockholders or CombiMatrix stockholders do not view the Merger positively,

 

    the possibility that the transactions might not be completed due to difficulties in satisfying the conditions to the Merger or the occurrence of a material adverse effect on either company’s business,

 

    the risks and costs to Invitae if the transactions do not close, and the potential effect of the resulting public announcement of termination of the Merger Agreement on, among other things, the market price for Invitae common stock, its operating results, its ability to attract and retain key personnel and its ability to complete an alternative transaction,

 

    the fact that Invitae may be required, under certain circumstances, to pay CombiMatrix’s expenses up to $400,000, and

 

    the fact that, subject to compliance with certain obligations under the Merger Agreement, the CombiMatrix board of directors is permitted to change its recommendation to the CombiMatrix stockholders and the CombiMatrix stockholders may fail to approve the Merger Proposal; in addition, the CombiMatrix board of directors may explore and respond to an alternative transaction proposed by a third party that it concludes constitutes, or could reasonably be expected to constitute, a superior proposal.

The foregoing discussion of the information and factors considered by the Invitae board of directors is not intended to be exhaustive, but includes the material factors considered by the Invitae board of directors. In view of the variety of factors considered in connection with its evaluation of the Merger Agreement, the issuance of shares in the Merger and the other transactions contemplated by the Merger Agreement and other transaction documents, the Invitae board of directors did not find it practicable to, and did not, quantify or otherwise assign specific weights to the factors considered in reaching its determination and recommendation. In addition, each of the members of the Invitae board of directors may have given differing weights to different factors. On balance, the Invitae board of directors believed that the positive factors discussed above outweighed the negative factors discussed above.

Board of Directors and Management of Invitae Following Completion of the Merger

Upon completion of the Merger, the board of directors of Invitae will continue to consist of the current five members, comprised of Eric Aguiar, M.D., Geoffrey S. Crouse, Sean E. George, Ph.D., Invitae’s President and Chief Executive Officer, Christine M. Gorjanc, and Randal W. Scott, Ph.D., Invitae’s Executive Chairman. Upon completion of the Merger, Randal W. Scott, Ph.D. will continue serve as Executive Chairman and Sean E. George, Ph.D. will continue to serve as President and Chief Executive Officer of Invitae. The other executive officers of Invitae will continue to serve in their current capacities, including Lee Bendekgey, Chief Operating Officer, Shelly D. Guyer, Chief Financial Officer, and Robert L. Nussbaum, Chief Medical Officer.

Information about the current Invitae and CombiMatrix directors and executive officers can be found in the documents listed under the headings “Invitae SEC Filings” and “CombiMatrix SEC Filings” in the section entitled “Where You Can Find More Information.

Ownership of Invitae Following the Merger

Based on the number of shares of CombiMatrix common stock and the number of CombiMatrix Series F warrants outstanding as of September 26, 2017, and assuming 100% of the CombiMatrix Series F warrants are tendered in the Warrant Exchange Offer, Invitae expects to issue in the Merger approximately 4.0 million shares of Invitae common stock, including common stock underlying warrants and restricted stock units. Based on the number of CombiMatrix securities and the number of shares of Invitae common stock outstanding on the record date and assuming 100% of the CombiMatrix Series F warrants are tendered in the Warrant Exchange Offer, upon completion of the Merger the CombiMatrix securityholders are expected to own approximately 6.9% of the fully-diluted common stock of the combined company.

 

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Public Trading Markets

Invitae common stock is currently listed on the NYSE under the symbol “NVTA.” CombiMatrix common stock is currently listed on the NASDAQ Capital Market under the symbol “CBMX” and CombiMatrix Series F warrants are currently listed on the NASDAQ Capital Market under the symbol “CBMXW.” Upon completion of the Merger, CombiMatrix common stock and Series F warrants will be delisted from the NASDAQ Capital Market and deregistered under the Exchange Act. The newly issued Invitae common stock issuable pursuant to the Merger Agreement will be listed on the NYSE.

Appraisal Rights

Appraisal rights are statutory rights that enable stockholders to dissent from an extraordinary transaction, such as a Merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Under Delaware law, neither the holders of Invitae common stock nor the holders of CombiMatrix capital stock are entitled to appraisal rights in connection with the Merger.

Regulatory Approvals Required for the Merger

Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock and restricted stock units and the filing of this proxy statement/prospectus with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

Opinion of CombiMatrix Financial Advisor

Pursuant to an engagement letter dated April 20, 2016, as amended, CombiMatrix retained Torreya to act as financial advisor in connection with the Merger and to render an opinion to the CombiMatrix board of directors as to the fairness, from a financial point of view, to the stockholders of CombiMatrix of the total Merger consideration.

As more specifically set forth in the Merger Agreement, Invitae intends to merge its wholly owned subsidiary with and into CombiMatrix, with all of the outstanding equity of CombiMatrix being exchanged for the total Merger consideration, which is referred to in this section as the Consideration. The terms and conditions of the Merger are more fully set forth in the Merger Agreement.

Torreya rendered to CombiMatrix’s board of directors at its meetings on July 28, 2017 and July 30, 2017, Torreya’s oral opinion, subsequently confirmed by delivery of a written opinion dated July 30, 2017, that, as of such dates, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth therein, the consideration to be paid in the Merger and in the proposed Warrant Exchange Offer pursuant to the Merger Agreement was fair, from a financial point of view, to CombiMatrix’s stockholders.

The full text of the written opinion of Torreya, dated July 30, 2017, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. CombiMatrix encourages CombiMatrix stockholders to read the opinion in its entirety for the assumptions made, procedures followed, other

 

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matters considered and limits of the review by Torreya. The summary of the written opinion of Torreya set forth herein is qualified by reference to the full text of such opinion. Torreya’s analyses and opinion were prepared for and addressed to the CombiMatrix board of directors and are directed only to the fairness, from a financial point of view, of the aggregate transaction value to be paid in the Merger. Torreya’s opinion is not a recommendation to any stockholder as to how to vote with respect to the proposed Merger or to take any other action in connection with the Merger or otherwise.

In connection with its opinion, Torreya reviewed and considered, among other things:

 

    the final draft of the Merger Agreement dated July 29, 2017;

 

    certain publicly available financial and other information for CombiMatrix and certain other relevant financial and operating data furnished to Torreya by CombiMatrix management;

 

    certain internal financial analyses, reports and other information concerning CombiMatrix prepared by the management of CombiMatrix and certain financial forecasts concerning CombiMatrix prepared by the management of CombiMatrix, which are collectively referred to as the CombiMatrix Forecast;

 

    certain stock market data of CombiMatrix and certain publicly traded companies Torreya deemed relevant;

 

    certain acquisition premia paid to other publicly traded companies in the life sciences sector in the last three years Torreya deemed relevant;

 

    certain financial terms of the Merger as compared to the financial terms of certain selected business acquisitions Torreya deemed relevant; and

 

    such other information, financial studies, academic reports, analyst reports, market research, and such other factors that Torreya deemed relevant for the purposes of its opinion.

Torreya also held discussions with certain members of the management of CombiMatrix and Invitae with respect to certain aspects of the proposed transaction, the past and current business operations of CombiMatrix and Invitae, the financial condition and future prospects and operations of CombiMatrix and Invitae, the effects of the proposed transaction on the financial condition and future prospects of CombiMatrix and Invitae, and certain other matters Torreya believed necessary or appropriate to its inquiry.

In conducting its review and arriving at its opinion, Torreya, with CombiMatrix’s consent, assumed and relied upon, without independent investigation, the accuracy and completeness in all material respects of all financial and other information provided to it by CombiMatrix, or which was publicly available or was otherwise reviewed by Torreya. Torreya did not undertake any responsibility for the accuracy, completeness or reasonableness of, or independent verification of, such information. Torreya relied upon, without independent verifications, the assessment of CombiMatrix management as to the existing services of CombiMatrix and the viability of, and risks associated with, the future services of CombiMatrix (including without limitation, the development, testing and marketing of such services, the receipt of all necessary governmental and other regulatory approvals for the development, testing and marketing thereof, and the life and enforceability of all relevant patents and other intellectual and other property rights associated with such services).

In addition, Torreya did not conduct or assume any obligation to conduct any physical inspection of the properties or facilities of CombiMatrix. Torreya, with CombiMatrix’s consent, assumed that the CombiMatrix Forecast was reasonably prepared by the management of CombiMatrix on bases reflecting the best currently available estimates and good faith judgments of such management as to the future performance of CombiMatrix, and such projections provide a reasonable basis for Torreya’s opinion. Torreya expresses no opinion as to the CombiMatrix Forecast or the assumptions on which it was made. Torreya further relied upon the assurance of the management of CombiMatrix that they are unaware of any facts that would make the information provided to Torreya incomplete or misleading in any material respect. Torreya expressly disclaims any undertaking or obligations to advise any person of any change in any fact or matter affecting its opinion of which Torreya becomes aware after the date of its opinion.

 

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Torreya did not make or obtain any independent evaluations, valuations or appraisals of the assets or liabilities of CombiMatrix, nor was Torreya furnished with such materials. Torreya relied, with CombiMatrix’s consent, on the assessments by CombiMatrix and its advisors as to all legal, regulatory and tax matters with respect to CombiMatrix. Torreya’s services to CombiMatrix in connection with the Merger Agreement have been comprised solely of rendering an opinion from a financial point of view with respect to the Consideration. Torreya expressed no view as to any other aspect or implication of the Merger Agreement or any other agreement, arrangement or understanding entered into in connection with the Merger Agreement or otherwise. Torreya’s opinion is necessarily based upon economic and market conditions and other circumstances as they existed and could be evaluated by Torreya as of the date of its opinion. It should be understood that although subsequent developments may affect Torreya’s opinion, Torreya does not have any obligation to update, revise or reaffirm its opinion and Torreya expressly disclaims any responsibility to do so.

For purposes of rendering its opinion, Torreya assumed in all respects material to its analysis that the final form of the Merger Agreement when signed would be substantially similar to the last draft reviewed by Torreya. Torreya also assumed that all governmental, regulatory and other consents and approvals contemplated by the Merger Agreement will be obtained and that in the course of obtaining any of those consents no restrictions will be imposed or waivers made that would have an adverse effect on the contemplated benefits of the Merger Agreement.

Torreya’s opinion does not constitute a recommendation to any CombiMatrix stockholder as to how such stockholder should vote with respect to the Merger Agreement or to take any other action in connection with the Merger Agreement or otherwise. Torreya was not requested to opine as to, and Torreya’s opinion does not in any manner address, CombiMatrix’s underlying business decision to enter into the Merger Agreement or the relative merits of the transactions contemplated by the Merger Agreement as compared to other business strategies or transactions that might be available to CombiMatrix. Furthermore, Torreya expressed no view as to the price or trading range for shares of Invitae common stock following the execution of the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement. The issuance of Torreya’s opinion was approved by an authorized internal fairness committee of Torreya in accordance with its customary practice.

Summary of Material Financial Analysis

The following is a summary of the material financial analyses performed by Torreya to arrive at its opinion. Some of the summaries of financial analyses 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. The tables alone do not constitute a complete description of the financial analyses. Considering the data set forth in the tables without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses. Torreya performed certain procedures, including each of the financial analyses described below, and reviewed with the management of CombiMatrix the assumptions on which such analyses were based and other factors, including the historical and projected financial results of CombiMatrix.

Certain Definitions. Throughout this Summary of Valuation and Financial Analyses, the following financial terms are used in connection with Torreya’s various valuation and financial analyses:

 

    VWAP: means the relevant company’s volume weighted average stock price over a specified period.

 

    FV: means the relevant company’s firm value, comprised of the market value of common equity (based on the company’s share price and estimated fully diluted share count) plus (i) the principal or face amount of total debt and preferred stock less (ii) cash, cash equivalents, short- and long-term marketable investments and certain other cash-like items.

 

    LTM: means last twelve months.

 

    DCF: means discounted cash flow.

 

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    Unlevered free cash flow: means the relevant company’s after-tax unlevered operating cash flow minus capital expenditures.

Implied Enterprise Value. Torreya notes that the proposed Merger implies a total enterprise value for CombiMatrix of $33 million relative to its latest enterprise value of roughly $12 million according to its most recent SEC filings and public market trading data as of market close on July 28, 2017.

Historical Trading Range Analysis. Torreya reviewed the historical trading range of shares of CombiMatrix’s common stock for the 52 week period ending July 28, 2017. Torreya observed that, as of July 28, 2017, the closing price of CombiMatrix’s common stock was $5.15 per share and that, for the 52 weeks ended July 28, 2017, the maximum trading price for shares of CombiMatrix’s common stock was $6.63 and the minimum trading price for shares of CombiMatrix’s common stock was $2.15.

Torreya further observed that the implied consideration per share of CombiMatrix’s common stock ranging between $8.60 and $8.00 offered by Invitae pursuant to the Merger Agreement and certain operating financial assumptions made by CombiMatrix management, as well as other assumptions related to the potential exercise or tendering outcomes of Series F warrants, reflected the following premiums based on the respective values of CombiMatrix’s common stock price on July 28, 2017, the 30, 90 and 180-day VWAPs, and stock prices for other periods ending on July 28, 2017:

 

Reference

Date/Period for
CombiMatrix
Common Stock

   Share
Price for Such
Date/Period
   Implied Premium
Based on $8.60
Offer Price
  Implied Premium
Based on $8.00
Offer Price (“Floor”)

At 07/28/17

   $5.15    67.0%   55.3%

30-Days Prior

   $4.90    75.5%   63.3%

30-Day VWAP

   $5.41    58.9%   47.8%

90-Day VWAP

   $5.44    58.0%   47.0%

180-Day VWAP

   $4.02    113.7%   98.8%

Analysis of Selected Publicly Traded Companies. Torreya performed a comparable companies analysis, which is designed to provide an implied trading value of a company by comparing it to selected companies with similar characteristics to the subject company. Torreya compared certain financial information of CombiMatrix with publicly available information for the selected companies. The selected companies were chosen based on Torreya’s knowledge of the industry and because the selected companies have businesses that may be considered similar to CombiMatrix’s. Although none of the selected companies are identical or directly comparable to CombiMatrix, all of the selected companies are publicly traded companies in the Life Sciences Laboratory Services sector with enterprise values between $15.7 million and $1.6 billion. These companies, which are referred to as the Selected Publicly Traded Life Sciences Laboratory Services Companies, were:

 

    Myriad Genetics

 

    Natera

 

    Harvard Bioscience

 

    CareDx

 

    Interpace Diagnostics

 

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With respect to the Selected Publicly Traded Life Sciences Laboratory Services Companies, the Torreya opinion utilized the following information:

 

Company

   FV/LTM Revenue  

Myriad Genetics

     2.1x  

Natera

     1.9x  

Harvard Bioscience

     1.0x  

CareDx

     1.1x  

Interpace Diagnostics

     1.2x  

Based on the analysis of the relevant metrics for the selected companies, Torreya selected ranges of multiples of 1.0x to 2.0x for LTM revenue and applied this valuation range to the relevant financial statistics for CombiMatrix and used such information to calculate a range of potential values per share of CombiMatrix common stock.

Selected Publicly Traded Life Sciences Laboratory Services Companies range of potential values per share of CombiMatrix common stock:

 

25th Percentile:

   $ 4.74  

Mean:

   $ 6.56  

Median:

   $ 5.28  

75th Percentile:

   $ 9.01  

Although the companies referred to above were used for comparison purposes, none of those companies is identical to CombiMatrix. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the Selected Publicly Traded Life Sciences Laboratory Services Companies and other factors that could affect the public trading value of such companies and CombiMatrix to which they are being compared.

Select Precedent M&A Transactions Analysis. Using publicly available information, Torreya reviewed the terms of selected public and private company precedent transactions announced since February 7, 2011 in which the targets were Life Sciences Laboratory Services companies that operate in and/or were exposed to similar lines of business as CombiMatrix, and also where the total equity consideration was less than $100 million upfront. The following precedent transactions, which are referred to as the Selected Life Sciences Laboratory Services Transactions, were considered, including their respective dates of announcement:

 

Buyer / Target

   Announcement Date  

Agilux Labs / Charles River

     09/28/2016  

PharmaCore / Cambrex

     09/26/2016  

Recombine / The Cooper Companies*

     05/25/2016  

Genesis Genetics / The Cooper Companies

     04/04/2016  

Reprogenetics / The Cooper Companies

     08/10/2015  

Diatherix Laboratories / Eurofins

     06/01/2015  

LipoScience / Lab Corp

     11/21/2014  

SeraCare Life Sciences / Linden

     04/24/2012  

Orchid Cellmark / Lab Corp

     04/06/2011  

Central Coast Pathology / PAL (Sonic Healthcare)

     02/07/2011  

 

* Transaction included for reference purposes only and not as a component of Torreya’s fairness analysis.

Torreya reviewed for the transactions listed above, among other things, the firm value of the transaction, the premium to the unaffected target stock price, the premium to the unaffected target stock price as of one month

 

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prior to the applicable transaction’s announcement date, and the multiple of firm value relative to the LTM revenue prior to the applicable transaction’s announcement date. Financial data of the Selected Life Sciences Laboratory Services Transactions were based on publicly available research analysts’ estimates, public filings and other publicly available information at the time of announcement of the relevant transaction.

With respect to the Selected Life Sciences Laboratory Services Transactions, the Torreya opinion utilized the following information:

 

Buyer / Target

   FV / LTM Revenue  

Agilux Labs / Charles River

     2.4x  

PharmaCore / Cambrex

     1.5x  

Recombine / The Cooper Companies*

     4.3x  

Genesis Genetics / The Cooper Companies

     2.5x  

Reprogenetics / The Cooper Companies

     2.3x  

Diatherix Laboratories / Eurofins

     1.3x  

LipoScience / Lab Corp

     1.3x  

SeraCare Life Sciences / Linden

     1.4x  

Orchid Cellmark / Lab Corp

     1.1x  

Central Coast Pathology / PAL (Sonic Healthcare)

     1.4x  

 

* Transaction included for reference purposes only and not as a component of Torreya’s fairness analysis.

Based on the analysis of the relevant metrics for the selected companies, Torreya selected a range of multiples of 1.3x to 2.3x for LTM revenue and applied these ranges of multiples to the relevant financial statistics for CombiMatrix and used such information to calculate a range of potential values per share of CombiMatrix common stock.

Selected Life Sciences Laboratory Services Transactions range of values per share of CombiMatrix common stock:

 

25th Percentile:

   $ 5.87  

Mean:

   $ 7.60  

Median:

   $ 6.37  

75th Percentile:

   $ 10.55  

No company or transaction utilized as a comparison in the selected precedent transactions analysis is identical to CombiMatrix, nor are the transactions identical to the transactions contemplated by the Merger Agreement. In evaluating the transactions listed above, Torreya made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of CombiMatrix, such as the impact of competition on the business of CombiMatrix or the industry generally, industry growth and the absence of any adverse material change in the financial condition or property of CombiMatrix or the industry or in the financial markets in general. Accordingly, mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using comparable transaction data.

Premia Paid Analysis. Using publicly available information relating to (i) several public U.S. and E.U. target transactions sized between $20 million and $16.4 billion between January 24, 2011 and June 6, 2017 across the life sciences laboratory services industry, which are referred to as the Life Sciences Laboratory Services Transactions, and (ii) the aforementioned Selected Life Sciences Laboratory Services Transactions for which the target was a public company, Torreya reviewed the premia paid in connection with such precedent transactions. Based on the analysis of the premia paid in connection with the selected precedent transactions, Torreya formulated a range of premiums and applied these ranges of premiums to the relevant financial statistics for

 

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CombiMatrix at market close on July 27, 2017. Based on the application of such ranges of premiums to the relevant financial statistics of CombiMatrix, Torreya calculated a range of potential values per share of CombiMatrix common stock of $6.33 to $7.35 based on the 25th—75th percentiles.

CombiMatrix DCF Analysis. Torreya performed a DCF analysis to determine a range of potential values per share of CombiMatrix common stock, using the CombiMatrix Forecast. Torreya calculated a range of implied prices per share of CombiMatrix common stock based on the sum of the discounted after-tax net present values of (i) annual free cash flows that CombiMatrix is estimated to generate for the fiscal years ending December 31, 2017 through December 31, 2027, and (ii) a projected terminal value of CombiMatrix common stock as of December 31, 2027 extrapolated using the Perpetuity Growth Method. Torreya then discounted the cash flows back to July 27, 2017 using discount rates of 21%—24%, which represented a range around CombiMatrix’s weighted average cost of capital of 22.0%, as well as perpetuity growth rate from 2.5%—3.5%, which represented a range around CombiMatrix’s assumed perpetuity growth rate of 3%, which was found using selected public traded companies historical financials and industry analyses. Based on this analysis, Torreya calculated a range of potential values of $7.78 to $9.71 per share of CombiMatrix common stock.

General. The summary set forth above does not purport to be a complete description of all the analyses performed by Torreya. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. Torreya did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, notwithstanding the separate factors summarized above, Torreya believes, and has advised the CombiMatrix board of directors, that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the process underlying its opinion. In performing its analyses, Torreya made numerous assumptions with respect to industry performance, business and economic conditions and other matters, many of which are beyond the control of CombiMatrix. These analyses performed by Torreya are not necessarily indicative of actual values or

future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses or securities may actually be sold. Accordingly, such analyses and estimates are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors. None of CombiMatrix, Torreya or any other person assumes responsibility if future results are materially different from those projected. The analyses supplied by Torreya and its opinion were among several factors taken into consideration by the CombiMatrix board of directors in making its decision to enter into the Merger Agreement and should not be considered as determinative of such decision.

Except in connection with Torreya’s current engagement by CombiMatrix, where Torreya acted as exclusive financial advisor and provided a fairness opinion to the CombiMatrix board of directors pursuant to its engagement, Torreya has not provided any investment banking or other services to CombiMatrix or any of its affiliates. Torreya may provide investment banking and other services to or with respect to CombiMatrix or its affiliates in the future, for which Torreya may receive compensation.

The CombiMatrix board of directors selected Torreya as its financial advisor in connection with the Merger based on Torreya’s reputation and experience with respect to the life sciences industry generally. Torreya is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger.

Pursuant to Torreya’s engagement letter with CombiMatrix dated April 20, 2016, and subsequent fee adjustment correspondence on both February 9, 2017 and July 11, 2017, Torreya will receive a flat transaction fee equal to $600,000 paid in connection with the Merger, or the Success Fee. Payment of the Success Fee is contingent upon the successful completion of the Merger. In addition, CombiMatrix has agreed to indemnify Torreya against

 

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certain liabilities that may arise out of its engagement and to reimburse Torreya’s reasonable out-of-pocket expenses, subject to an agreed maximum amount. Torreya will not receive any other significant payment of compensation contingent upon the successful completion of the Merger other than the Success Fee.

Interests of Certain CombiMatrix Directors and Officers in the Merger

When you consider the recommendations of CombiMatrix’s board of directors in favor of approval of the Merger Proposal, you should keep in mind that the directors and officers of CombiMatrix have interests in the Merger as individuals that are different from, or in addition to, your interests as a stockholder. The CombiMatrix board of directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions it contemplates.

In addition, the exercise of CombiMatrix’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Merger may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the best interests of CombiMatrix’s stockholders.

As of September 26, 2017, directors and executive officers of CombiMatrix owned or controlled 1.42% of the outstanding shares of CombiMatrix common stock.

Restated Executive Change of Control Severance Plan

CombiMatrix provides certain severance benefits such that if any of its executive officers is terminated for other than cause, death or disability, the executive will receive payments equal to three months’ base salary plus medical and dental benefits. In addition, CombiMatrix has a Restated Executive Change of Control Severance Plan (as amended, the “Severance Plan”) that affects certain senior management-level employees who are classified as “Section 16 Officers” of CombiMatrix. Pursuant to the Severance Plan, if a participating employee is involuntarily terminated (other than for death, disability or for cause) or resigns for “good reason” (as defined in the Severance Plan) during the two-year period following a “change of control” (as defined in the Severance

Plan) of CombiMatrix, then, subject to execution of a release of claims against CombiMatrix, the employee will be entitled to receive: (i) one-half times annual base salary (one times annual base salary for the chief executive officer); (ii) immediate vesting of outstanding compensatory equity awards; and (iii) payment of COBRA premiums for the participating employee and eligible dependents for a pre-determined period of time. Payment of benefits under the Severance Plan will be limited by provisions contained in Section 409A of the U.S. Internal Revenue Code. The Severance Plan is administered by a plan administrator, which initially is the compensation committee of the CombiMatrix board of directors. In order to participate in the Severance Plan, an eligible employee must waive any prior retention or severance agreements. The Severance Plan automatically renews annually unless terminated upon 12 months prior written notice. It is anticipated that Mr. McDonough, CombiMatrix’s chief executive officer, and Mr. Burell, CombiMatrix’s chief financial officer, will receive approximately $380,000 and $141,000, respectively, in benefits (inclusive of payment of COBRA premiums) under the Severance Plan as a result of any consummation of the Merger.

Transaction Bonus Payout Agreements

The CombiMatrix board of directors and compensation committee adopted a Transaction Bonus Plan on December 2, 2015, or the Transaction Bonus Plan, as a form of retention for senior management to actively assist in exploring a strategic transaction, and to motivate and align the participants’ interest in negotiating for and maximizing stockholder value for a strategic transaction. The Transaction Bonus Plan provides for certain bonus payments to be made, upon any consummation of a qualifying change of control transaction such as the Merger, to certain participants as shall be determined from time to time by the compensation committee of the CombiMatrix board of directors. The aggregate value of the bonuses payable under the Transaction Bonus Plan shall be the greater of (i) $1,000,000 or (ii) ten percent of the net proceeds received in connection with a qualifying change of control transaction such as the Merger, and the percentage of such bonus pool awarded to

 

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each eligible participant shall be determined from time to time by the compensation committee of the CombiMatrix board of directors. Although the total amount of the bonuses payable under the Transaction Bonus Plan will not be known until immediately prior to the closing of the Merger, and the participants and the allocation of bonus amounts payable under the Transaction Bonus Plan have not yet been determined by the

compensation committee of the CombiMatrix board of directors, it is anticipated that CombiMatrix’s executive officers will receive a substantial portion of the bonus pool and that CombiMatrix’s non-employee members of the board of directors will receive a small portion of the bonus pool.

In connection with the execution of the Merger Agreement, certain officers of CombiMatrix entered into a transaction bonus payout agreement, or the Executive Officer Transaction Bonus Payout Agreement. The form of the Executive Officer Transaction Bonus Payout Agreement, dated July 31, 2017, is attached as Exhibit B-1 to Annex A to this proxy statement/prospectus and is incorporated herein by reference. In accordance with the terms of the Executive Officer Transaction Bonus Payout Agreement, CombiMatrix’s executive officers and a vice president of CombiMatrix have agreed to accept restricted stock units for Invitae common stock, or Invitae RSUs, in lieu of cash payments under the Transaction Bonus Plan, which Invitae RSUs will be subject to the terms of an Invitae RSU award agreement. The number of shares of Invitae common stock subject to such Invitae RSUs shall be equal to the dollar amount of the transaction bonus awarded to the participant under the Transaction Bonus Plan divided by the Invitae Trailing Average Share Value.

If the applicable executive has a Consulting Agreement (as defined and described below) with Invitae as of the closing of the Merger, then the Invitae RSUs granted under the Executive Officer Transaction Bonus Payout Agreement shall vest and be settled as follows: (a) Invitae RSUs represented by the dollar amount of the transaction bonus awarded to the executive under the Transaction Bonus Plan minus $817,834 in the case of Mr. McDonough and $40,000 in the case of Mr. Burell, divided by the Invitae Trailing Average Share Value, shall vest and be settled on the closing of the Merger; and (b) Invitae RSUs represented by $817,834 in the case of Mr. McDonough and $40,000 in the case of Mr. Burell, divided by the Invitae Trailing Average Share Value, shall vest and be settled on the eight-month anniversary of the closing of the Merger, so long as the executive has rendered services as required by the Consulting Agreement through the eight-month anniversary of the closing of

the Merger (subject to acceleration for a change in control of Invitae or a termination of the Consulting Agreement without cause, for good reason or due to death or permanent disability). To the extent that the applicable executive does not have a Consulting Agreement in effect as of the closing of the Merger, the Invitae RSUs granted under the Executive Officer Transaction Bonus Payout Agreement shall vest on the closing of the Merger and be settled in three equal monthly installments, subject to acceleration of settlement upon a change in control of Invitae.

In connection with the execution of the Merger Agreement, non-employee members of the CombiMatrix board of directors entered into a transaction bonus payout agreement, or the Board Transaction Bonus Payout Agreement. The form of the Board Transaction Bonus Payout Agreement, dated July 31, 2017, is attached as Exhibit B-2 to Annex A to this proxy statement/prospectus and is incorporated herein by reference. In accordance with the terms of the Board Transaction Bonus Payout Agreement, CombiMatrix’s non-employee directors have agreed to accept unrestricted Invitae common stock at the closing of the Merger in lieu of cash payments under the Transaction Bonus Plan. The number of shares of Invitae common stock shall be equal to the dollar amount of the transaction bonus awarded to the participant under the Transaction Bonus Plan divided by the Invitae Trailing Average Share Value.

Consulting Agreements

In connection with the execution of the Merger Agreement and in order to satisfy one of the conditions to closing of the Merger, Mr. McDonough and Mr. Burell each entered into an eight-month consulting agreement with Invitae to become effective as of the closing of the Merger, each of which is referred to as a Consulting Agreement, and, collectively as the Consulting Agreements. The Consulting Agreements require such individuals to provide strategic management and leadership services of CombiMatrix as the operations of CombiMatrix

 

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integrate into Invitae. The Consulting Agreements provide for monthly compensation of $30,333.33 and $22,150, respectively, for Messrs. McDonough and Burell and monthly reimbursement of COBRA premiums. In addition, the Consulting Agreements provide that (a) within 75 days after December 31, 2017, and assuming that no portion of any such bonus amount has been previously paid to the contractor, Invitae will pay the contractor any

applicable annual bonus amount for actual achievement of second half and year-end targets under that certain CombiMatrix Amended and Restated 2017 Executive Performance Bonus Plan and (b) Invitae will reimburse all reasonable and otherwise unreimbursed transportation and hotel expenses for the contractor and his spouse for the CombiMatrix 2017 President’s Club. The Consulting Agreements are terminable by Invitae or the contractor, but in the event of termination without cause or for good reason, all compensation will continue to be paid through the eight-month anniversary and the performance bonus also will be paid in the event of termination due to death or permanent disability.

Indemnification and Other Interests

In connection with the closing of the Merger, all CombiMatrix RSUs and in-the-money stock options held by the CombiMatrix executive officers and members of the board of directors will be accelerated in full and converted into the right to receive Merger consideration (less the exercise price of the in-the-money stock options).

CombiMatrix is party to indemnification agreements with each of its directors and executive officers that require CombiMatrix, among other things, to indemnify the directors and executive officers against certain liabilities that may arise by reason of their status or service as directors or officers. In addition, pursuant to the terms of the Merger Agreement, CombiMatrix’s directors and executive officers will be entitled to certain ongoing indemnification from the surviving corporation in the Merger and coverage under directors’ and officers’ liability insurance policies. Such indemnification and insurance coverage is further described in the section entitled “The Merger Agreement—Indemnification and Insurance for CombiMatrix Directors and Officers.”

Merger-Related Compensation for CombiMatrix’s Named Executive Officers

In accordance with Item 402(t) of Regulation S-K, the tables below present the estimated amounts of compensation that each named executive officer of CombiMatrix could receive that are based on or otherwise relate to the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section such term is used to describe the Merger-related compensation that may become payable to CombiMatrix’s named executive officers. This Merger-related compensation will be the subject of a non-binding advisory vote of CombiMatrix stockholders at the special meeting. See the section entitled “Matters Being Submitted to a Vote of CombiMatrix Stockholders—CombiMatrix Proposal No. 2: The Non-Binding Advisory Merger-Related Compensation Proposal.”

 

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The amounts set forth below have been calculated assuming completion of the Merger on September 27, 2017, the latest practicable date prior to the filing of this proxy statement/prospectus, and, where applicable, assuming each named executive officer experiences a qualifying termination as of September 27, 2017. In addition, for purposes of determining equity award values, the amounts below are determined using the per-share Merger consideration. The amounts indicated below are estimates of amounts that would be payable to CombiMatrix’s named executive officers, and the estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement/prospectus. Some of the assumptions are based on information not currently available, and as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. The amounts set forth in the table below do not reflect any reduction that might apply by reason of the applicable limits on paying amounts subject to a golden parachute excise tax; it is not expected that any payments would be grossed up in respect of such taxes. In addition, consistent with SEC guidance, the amounts below do not take into account the effect of the new Consulting Agreements between Invitae and Messrs. McDonough and Burell, which are described above. All dollar amounts set forth below have been rounded to the nearest whole number.

 

     Golden Parachute Payment(1)  

Name

   Cash
Severance ($)(2)
     Equity ($)(3)      Perquisites/
Benefits ($)(4)
     Total ($)  

Mark McDonough

     364,000        600,234        1,313,440        2,277,674  

Scott Burell

     132,600        195,806        661,220        989,626  

 

(1) All amounts reflected in the table, other than estimated amounts pertaining to the Transaction Bonus Plan, are attributable to “double-trigger” arrangements (i.e., the amounts are triggered by (a) the change in control that will occur upon completion of the Merger and (b) the officer’s qualifying termination in connection with the change in control).
(2) The amounts reflect cash severance benefits that are payable under the Severance Plan in connection with the Merger. The severance benefits payable under the Severance Plan are described in more detail above.
(3) The amounts reflect the aggregate value of time-based restricted stock unit awards held by each of CombiMatrix’s named executive officers that will be accelerated in connection with the Merger. The terms of equity acceleration are described in more detail above. All stock options held by each of CombiMatrix’s named executive officers are out-of-the-money and, accordingly, will be terminated in connection with the Merger.
(4) The amounts reflect the payment of (i) estimated amounts of $1,291,000 and $650,000 provided to Messrs. McDonough and Burell, respectively, under the Transaction Bonus Plan (in the form of Invitae RSUs) and (ii) COBRA premiums of $22,440 and $11,220 provided to Messrs. McDonough and Burell, respectively, under the Severance Plan. The Transaction Bonus Plan payments and COBRA premiums are described in more detail above. The Transaction Bonus Plan payments reflected in the table are only estimates based on an assumed aggregate Merger consideration of $26 million, and allocations of amounts under the Transaction Bonus Plan are subject to approval of the compensation committee of the CombiMatrix board of directors.

 

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THE MERGER AGREEMENT

The following describes certain aspects of the Merger, including material provisions of the Merger Agreement. The following description of the Merger Agreement is subject to, and qualified in its entirety by, reference to the Merger Agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference into this document. You are urged to carefully read the Merger Agreement in its entirety.

Structure

Under the Merger Agreement, Merger Sub will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae.

Completion and Effectiveness of the Merger

The Merger will be completed as promptly as practicable after all of the conditions to completion of the Merger are satisfied or waived, including the approval of the stockholders of CombiMatrix and the successful completion of the Warrant Exchange Offer for CombiMatrix Series F warrants. Invitae and CombiMatrix are working to complete the Merger as quickly as practicable. However, Invitae and CombiMatrix cannot predict the exact timing of the completion of the Merger because it is subject to various conditions.

Merger Consideration and Exchange Ratio

At the effective time of the Merger,

 

    each share of CombiMatrix common stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix common stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a fraction of a share of Invitae common stock equal to the Exchange Ratio described in more detail below;

 

    each share of CombiMatrix Series F preferred stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix Series F preferred stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a number of shares of Invitae common stock equal the Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon conversion of one share of Series F preferred stock on the date immediately prior to the Merger;

 

    each CombiMatrix RSU outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix RSU by the Exchange Ratio;

 

    each in-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock underlying such CombiMatrix stock option by the Exchange Ratio, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the Invitae Trailing Average Share Value;

 

    each out-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration; and

 

   

although Invitae’s obligation to proceed with the Merger is subject to achieving 90% participation in the Warrant Exchange Offer as described in this proxy statement/prospectus, each outstanding Series D

 

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warrant and Series F warrant to purchase shares of CombiMatrix common stock (other than those Series F warrants exchanged in the Warrant Exchange Offer or previously exercised) will be assumed by Invitae and will be converted into a warrant to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to account for the Exchange Ratio.

If any shares of CombiMatrix common stock, CombiMatrix RSUs, or options to purchase shares of CombiMatrix common stock outstanding prior to the Merger are unvested or are subject to a repurchase option or the risk of forfeiture, then the shares of Invitae common stock issued in exchange for such shares of CombiMatrix common stock, RSUs or options will be issued without regard to such vesting, restrictions, repurchase options or risk of forfeiture.

No fractional shares of Invitae common stock will be issued in connection with the Merger. Instead, each CombiMatrix stockholder, holder of CombiMatrix RSUs or holder CombiMatrix stock options who otherwise would be entitled to receive a fractional share of Invitae common stock (after aggregating all fractional shares of Invitae common stock issuable to such holder) will be entitled to payment in cash of the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the Invitae Trailing Average Share Value.

The Exchange Ratio is calculated using a formula intended to allocate to existing CombiMatrix securityholders a percentage of the combined company. Based on CombiMatrix’s and Invitae’s capitalization as of September 26, 2017, the Exchange Ratio is currently estimated to be between approximately 0.91 and 0.84 shares of Invitae’s common stock. This estimate is subject to adjustment prior to closing of the Merger, including (i) adjustments to account for the issuance of any additional shares of CombiMatrix common stock prior to the consummation of the Merger, (ii) adjustments to account for CombiMatrix’s net cash at the effective time of the Merger and (iii) adjustments to account for the number of CombiMatrix Series F warrants exchanged in the Warrant Exchange Offer, assumed by Invitae, or exercised prior to the closing of the Merger. For example, the estimated Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. Also, a portion or all of the Series F warrants could be exercised prior to the closing of the Merger, which affects the computations of the Exchange Ratio. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus, the Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million.

Based on the estimates set forth above, in connection with the Merger and the Warrant Exchange Offer, Invitae expects to issue a maximum of 3,985,812 shares of common stock, including common stock underlying warrants and Invitae RSUs, to CombiMatrix securityholders, who, immediately after the Merger, are expected to own approximately 6.9% of the fully-diluted common stock of the combined company, with Invitae securityholders, whose shares of Invitae capital stock will remain outstanding after the Merger, owning approximately 93.1% of the fully-diluted common stock of the combined company. These estimates are based on the assumption that 100% of the CombiMatrix Series F warrants are exchanged in the Warrant Exchange Offer and subject to adjustment.

 

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The Exchange Ratio is the greater of X or Y, where:

Calculation of X

X = The quotient obtained by dividing the Invitae Merger Shares by the CombiMatrix Outstanding Shares, where:

 

  a. “CombiMatrix Outstanding Shares” is the total number of shares of CombiMatrix capital stock outstanding immediately prior to the effective time of the Merger on a fully-diluted and an as-converted to common stock basis, assuming (i) the settlement of all CombiMatrix RSUs, whether unvested or vested, (ii) the cash exercise of each outstanding CombiMatrix option (to the extent such option is not an out-of-the-money option terminated in connection with the Merger), (iii) the cash exercise of all CombiMatrix Series F warrants (to the extent such warrants are not exchanged in the Warrant Exchange Offer or exercised prior to consummation of the Warrant Exchange Offer), (iv) the conversion of all CombiMatrix Series F preferred stock, and (v) the issuance of shares of CombiMatrix common stock in respect of all other options, warrants, convertible securities or rights to receive such shares; provided, however, that all shares of CombiMatrix common stock issuable upon exercise of CombiMatrix Series D warrants (so long as the terms of such warrants have not been modified following the date of the Merger Agreement), shares of CombiMatrix common stock issuable upon exercise of CombiMatrix Series F warrants that are exchanged in the Warrant Exchange Offer, and terminated CombiMatrix options will be excluded from this amount.

 

  b. “Adjusted Aggregate Value” is the sum of (i) $27,000,000, plus or minus (ii) CombiMatrix’s Net Cash (as defined below) at the effective time of the Merger.

 

  c. “Invitae Merger Shares” is the total number of shares of Invitae common stock determined by dividing (i) the Adjusted Aggregate Value by (ii) the Invitae Trailing Average Share Value.

 

  d. “Invitae Trailing Average Share Value” means the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement.

Example

As an example, if Net Cash is $0.00, the CombiMatrix Outstanding Shares amount is 3,750,000 and the Invitae Trailing Average Share Value is $9.491, then X would be determined as follows:

 

LOGO

The Exchange Ratio calculated under X would thus be 0.7586 shares of Invitae common stock issuable per share of CombiMatrix common stock. However, if the calculation of Y (below) is greater than X, then Y will be used as the Exchange Ratio.

 

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Calculation of Y

Y = The quotient obtained by dividing (i) the sum of $8.25 minus the Adjustment Amount by (ii) the Invitae Trailing Average Share Value, where:

 

  a. “Adjustment Amount” means the quotient of:

 

  1. The sum of (i) the amount, if any, by which Net Cash (not taking into account any gross proceeds from exercises of CombiMatrix Series F warrants after the date of the Merger Agreement) is below (x) negative $1 million if the aggregate payouts in shares of Invitae common stock (calculated using the Invitae Trailing Average Share Value) pursuant to the Transaction Bonus Payout Agreements will be greater than $2,000,000, and otherwise (y) $0.00, plus (ii) the product of $8.25 multiplied by the sum, if any, of (x) any shares of CombiMatrix common stock that are issued or that become issuable (including upon any conversion or exercise of any securities) after the date of the Merger Agreement (other than pursuant to conversion or exercise of any securities outstanding as of the date of the Merger Agreement) plus (y) the excess, if any, of (A) the total number of shares of CombiMatrix common stock actually outstanding as of the date of the Merger Agreement over (B) the total number of shares of CombiMatrix common stock represented to be outstanding as of the date of the Merger Agreement by CombiMatrix, calculated in each instance on a fully diluted and as-converted/as-exercised to CombiMatrix common stock basis but excluding shares issuable upon the exercise of terminated CombiMatrix stock options or CombiMatrix warrants subject to the CombiMatrix Warrant Repurchase; divided by

 

  2. The CombiMatrix Outstanding Shares.

Example

As an example, if Net Cash (excluding CombiMatrix Series F warrant proceeds) is negative $1,285,000 (and the aggregate payouts in shares of Invitae common stock (calculated using the Invitae Trailing Average Share Value) pursuant to the CombiMatrix Transaction Bonus Payout Agreements will be greater than $2,000,000), there are 20,000 shares of CombiMatrix common stock issued or that become issuable after the date of this Agreement (other than pursuant to conversion or exercise of any securities outstanding as of the date of this Agreement), the Invitae Trailing Average Share Value is $9.491 and the CombiMatrix Outstanding Shares amount is 3,0000,000, then Y would be determined as follows:

 

LOGO

 

LOGO

 

LOGO

The Exchange Ratio calculated under Y would thus be 0.8534 shares of Invitae common stock issuable per share of CombiMatrix common stock. However, if the calculation of X (above) is greater than Y, then X will be used as the Exchange Ratio.

The “X” method of calculation values CombiMatrix at $27,000,000 in the aggregate, with adjustments for Net Cash, CombiMatrix RSU settlements, option exercises, outstanding preferred stock and warrant exercises. The “Y” method of calculation imputes an $8.25 per share valuation, with adjustments thereafter for Net Cash and

 

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any new share issuances after the date of the Merger Agreement. One of the functions of the two separate Exchange Ratio calculations is that the “Y” calculation acts as a floor price (although still subject to certain adjustments, including for working capital) preventing extraordinary reduction in the per share Merger consideration if less than 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement are tendered and Invitae elects to effect the Merger notwithstanding that the closing condition was not fulfilled, or if certain Series F warrants are exercised, both of which would cause dilution to existing CombiMatrix common stockholders.

Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis

For purposes of determining the Exchange Ratio, adjustments will be made to account for CombiMatrix’s Net Cash (as calculated pursuant to the terms of the Merger Agreement) at the effective time of the Merger. CombiMatrix’s Net Cash will be calculated shortly before the closing date of the Merger; provided, however, that current assets, current liabilities not triggered by the closing of the Merger, and long-term capital lease obligations may be calculated as of an earlier month-end date if the Merger closes mid-month and a mid-month calculation of such liabilities and assets would be impractical. The closing of the Merger could be delayed if Invitae and CombiMatrix are not able to agree upon the amount of CombiMatrix’s Net Cash as of CombiMatrix’s cash determination date.

Under the Merger Agreement, CombiMatrix’s “Net Cash” is defined as the sum of (i) CombiMatrix’s cash and cash equivalents (inclusive of any cash resulting from exercises of CombiMatrix options or Series F warrants), marketable securities, short-term investments, accounts receivable (less allowance for doubtful accounts), deposits (to the extent refundable to CombiMatrix), supplies, prepaid expenses, and other current assets (excluding deferred tax assets), in each case determined in a manner consistent with the Merger Agreement or the manner in which such items were historically determined and in accordance with CombiMatrix’s audited financial statements and CombiMatrix’s unaudited interim balance sheet, minus (ii) the sum of CombiMatrix’s accounts payable, accrued expenses and other current liabilities (other than accrued expenses listed below, deferred rent and deferred tax liabilities), capital lease obligations, and all other liabilities (including any amounts payable for the CombiMatrix Warrant Repurchase, any amounts payable in satisfaction of CombiMatrix’s obligations to purchase a “tail” insurance policy for directors and officers prior to closing of the Merger, and any amounts that will become payable to participants pursuant to the CombiMatrix severance plan), in each case as of such date and determined in a manner consistent with the Merger Agreement or the manner in which such items were historically determined and in accordance with CombiMatrix’s audited financial statements and CombiMatrix’s unaudited interim balance sheet, minus (iii) $250,000 (representing CombiMatrix’s normalized working capital), minus (iv) without double counting if otherwise included above, any unpaid fees and expenses (including any attorney’s, accountant’s, financial advisor’s or finder’s fees) incurred by CombiMatrix or any of its subsidiaries in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement or for which CombiMatrix or any of its subsidiaries is otherwise liable, minus (v) without double counting if otherwise included above, all amounts payable to any of CombiMatrix’s employees, officers, directors, consultants, advisors and representatives in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement (including pursuant to the Transaction Bonus Plan), regardless of whether any recipient agrees to accept any portion of any such payment in equity or cash, minus (vi) any fees and expenses payable by CombiMatrix in connection with the resolution of disagreements regarding Net Cash by an independent auditor, plus or minus (as applicable) (vii) the amount of any transaction expense reimbursements owed to, or owed by, CombiMatrix pursuant to the Merger Agreement.

CombiMatrix’s Net Cash balance at the determination date is subject to numerous factors, many of which are outside of CombiMatrix’s control.

Any warrants exercised prior to the consummation of the Merger would increase the number of CombiMatrix Outstanding Shares and the related cash proceeds from such exercises would increase the Net Cash adjustment calculated under the “X” scenario above (but not the “Y” scenario). Similarly, Series F warrants that are not exchanged in the Warrant Exchange Offer would also increase the CombiMatrix Outstanding Shares (meaning

 

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the full amount of shares underlying Series F warrants not tendered would be added to the amount of CombiMatrix Outstanding Shares) and thus potentially adjust the aggregate Merger consideration. Below is a table showing how the participation percentage by the holders of the Series F warrants in the Warrant Exchange Offer and the amount of warrants separately exercised impacts the implied per share Merger consideration based on estimated CombiMatrix Net Cash of $1.8 million (before taking into account in such Net Cash amount any transaction bonus payments or, as applicable, warrant exercise proceeds).

 

 

LOGO

A condition to the closing of the Merger is that at least 90% of the Series F warrants outstanding immediately prior to the date of the Merger Agreement are tendered in the Warrant Exchange Offer; however, the table above includes scenarios where less than 90% have tendered, which presumes Invitae has waived this closing condition under that circumstance. To the extent Series F warrants neither tender nor exercise and the Merger occurs, the shares underlying those warrants are included in the fully diluted shares of CombiMatrix common stock issued and outstanding for the purpose of the table computations.

Invitae Common Stock

Each share of Invitae common stock issued and outstanding at the closing of the Merger will remain issued and outstanding and those shares will be unaffected by the Merger. Invitae stock options, restricted stock units and warrants issued and outstanding at the closing of the Merger will also remain issued and outstanding and unaffected by the Merger. Immediately after the Merger, Invitae securityholders are expected to own approximately 93.1% of the fully-diluted common stock of the combined company.

Procedures for Exchanging CombiMatrix Stock Certificates

At the effective time of the Merger, American Stock Transfer & Trust Company, LLC, as the exchange agent for the Merger, will establish an exchange fund to hold the shares of Invitae common stock to be issued to CombiMatrix stockholders in connection with the Merger.

Promptly after the effective time of the Merger, the exchange agent will mail to each holder of record of CombiMatrix capital stock a letter of transmittal and instructions for surrendering the record holder’s stock certificates in exchange for the shares of Invitae common stock. Upon proper surrender of CombiMatrix stock certificates together with a properly completed and duly executed letter of transmittal in accordance with the exchange agent’s instructions, the holder of such CombiMatrix stock certificates will be entitled to receive shares representing the number of whole shares of Invitae common stock issuable to such holder pursuant to the Merger and cash in lieu of any fractional share of Invitae common stock issuable to such holder. The surrendered certificates representing CombiMatrix capital stock will be cancelled.

After the effective time of the Merger, each certificate representing shares of CombiMatrix capital stock that has not been surrendered will represent only the right to receive shares of Invitae common stock issuable pursuant to the Merger and cash in lieu of any fractional share of Invitae common stock to which the holder of any such certificate is entitled. No interest will be paid or accrued on any cash in lieu of fractional shares payable to holders of CombiMatrix stock certificates.

 

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Any holder or former holder of CombiMatrix capital stock may be subject to withholding under the Code, or under another provision of state, local or foreign tax law. To the extent such amounts are withheld and paid to the appropriate governmental entity, they will be treated as having been paid to the person to whom such amounts would otherwise have been paid.

HOLDERS OF COMBIMATRIX CAPITAL STOCK SHOULD NOT SEND IN THEIR COMBIMATRIX STOCK CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT WITH INSTRUCTIONS FOR THE SURRENDER OF COMBIMATRIX STOCK CERTIFICATES.

Fractional Shares

No fractional shares of Invitae common stock will be issuable pursuant to the Merger to CombiMatrix stockholders, holders of CombiMatrix RSUs or holders of CombiMatrix stock options. Instead, each CombiMatrix stockholder, holder of CombiMatrix RSUs or holder of CombiMatrix stock options who would otherwise be entitled to receive a fraction of a share of Invitae common stock, after aggregating all fractional shares of Invitae common stock issuable to such holder, will be entitled to receive a cash payment in lieu of such fractional shares equal to the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the Invitae Trailing Average Share Value.

Representations and Warranties

The Merger Agreement contains customary representations and warranties made by Invitae, Merger Sub and CombiMatrix relating to their respective businesses, as well as other facts pertinent to the Merger. These representations and warranties are subject to materiality, knowledge and other similar qualifications in many respects and expire at the effective time of the Merger or termination of the Merger Agreement, as further described below. The representations and warranties of each of Invitae, Merger Sub and CombiMatrix have been made solely for the benefit of the other parties and those representations and warranties should not be relied on by any other person. In addition, those representations and warranties may be intended not as statements of actual fact, but rather as a way of allocating risk among the parties, may have been modified by the disclosure schedules delivered in connection with the Merger Agreement, are subject to the materiality standard described in the Merger Agreement, which may differ from what may be viewed as material by you, will not survive completion of the Merger and cannot be the basis for any claims under the Merger Agreement by the other parties after termination of the Merger Agreement, and were made only as of the date of the Merger Agreement or another date as is specified in the Merger Agreement.

CombiMatrix made a number of representations and warranties to Invitae and Merger Sub in the Merger Agreement, including representations and warranties relating to the following matters:

 

    subsidiaries; due organization;

 

    certificate of incorporation; bylaws; charters; codes of conduct;

 

    capitalization;

 

    SEC filings; financial statements;

 

    absence of changes;

 

    title to assets;

 

    real property; leaseholds;

 

    intellectual property;

 

    agreements, contracts and commitments;

 

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    undisclosed liabilities;

 

    compliance; permits; restrictions; regulatory matters;

 

    tax matters;

 

    employee and labor matters; benefit plans;

 

    environmental matters;

 

    insurance;

 

    legal proceedings; orders;

 

    authority; binding nature of agreement;

 

    inapplicability of anti-takeover statutes;

 

    vote required;

 

    non-contravention; consents;

 

    bank accounts; receivables;

 

    financial advisor;

 

    opinion of financial advisor;

 

    shell company status;

 

    transactions with affiliates;

 

    code of ethics;

 

    disclosure; and

 

    exclusivity of representations.

Significant portions of CombiMatrix’s representations and warranties are qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to CombiMatrix means any effect, change, event, circumstance or development that has occurred prior to the date of determination of the occurrence of such material adverse effect, that is or could reasonably be expected to be materially adverse to or has or could reasonably be expected to have or result in a material adverse effect on (i) the business, condition (financial or otherwise), capitalization, assets (including intellectual property), operations or financial performance of CombiMatrix and its subsidiaries, taken as a whole or (ii) the ability of CombiMatrix to consummate the Merger or the other transactions contemplated by the Merger Agreement or perform any of its covenants or obligations under the Merger Agreement in all material respects, except that none of the following, as they apply to CombiMatrix and its subsidiaries, will be taken into account in determining whether there has been a material adverse effect (except as expressly provided):

 

    any rejection by a governmental body of a registration or filing by CombiMatrix relating to CombiMatrix’s intellectual property rights;

 

    any change in the cash position of CombiMatrix that results from operations in the ordinary course of business;

 

    conditions generally affecting the industries in which CombiMatrix and its subsidiaries participate or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate impact on CombiMatrix and its subsidiaries, taken as a whole;

 

   

any failure by CombiMatrix or any of its subsidiaries to meet internal projections or forecasts or third-party revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement, provided that any such effect, change, event,

 

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circumstance or development causing or contributing to any such failure to meet projections or predictions or any change in stock price or trading volume may constitute a material adverse effect of CombiMatrix and may be taken into account in determining whether a material adverse effect has occurred;

 

    the execution, delivery, announcement or performance of obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger;

 

    any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof, to the extent that any such event does not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole;

 

    changes in regulatory, legislative or political conditions in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole;

 

    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole, including (i) changes in interest rates or credit ratings in the United States or any other country, (ii) changes in exchange rates for the currencies of any country, or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world; or

 

    any changes after the date of the Merger Agreement in U.S. GAAP or applicable laws, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole.

Invitae and Merger Sub made a number of representations and warranties to CombiMatrix in the Merger Agreement, including representations and warranties relating to the following subject matters:

 

    organization; authority; enforceability;

 

    non-contravention; governmental consents;

 

    SEC documents;

 

    compliance; permits;

 

    no financial advisor;

 

    legal proceedings; orders;

 

    shares of common stock;

 

    no vote of Invitae stockholders;

 

    lack of ownership of shares;

 

    Merger Sub capitalization;

 

    disclosure; and

 

    exclusivity of representations.

Significant portions of Invitae’s representations and warranties are qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to Invitae means any effect, change, event, circumstance or development that has occurred prior to the date of determination of the occurrence of such material adverse effect, that is or could reasonably be expected to be materially adverse to or has or could reasonably be expected to have or result in a material adverse effect on (i) the business, condition

 

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(financial or otherwise), capitalization, assets, operations or financial performance of Invitae or (ii) the ability of Invitae to consummate the Merger or the other transactions contemplated by the Merger Agreement or perform any of its covenants or obligations under the Merger Agreement in all material respects, except that none of the following, as they apply to Invitae, will be taken into account in determining whether there has been a material adverse effect (except as expressly provided):

 

    conditions generally affecting the industries in which Invitae participates or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate impact on Invitae;

 

    any failure by Invitae to meet internal projections or forecasts or third-party revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement or any change in the price or trading volume of Invitae common stock, provided that any such effect, change, event, circumstance or development causing or contributing to any such failure to meet projections or predictions or any change in stock price or trading volume may constitute a material adverse effect of Invitae and may be taken into account in determining whether a material adverse effect has occurred;

 

    the execution, delivery, announcement or performance of obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger;

 

    any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof, to the extent that any such event does not have a disproportionate impact on Invitae;

 

    changes in regulatory, legislative or political conditions in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on Invitae;

 

    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on Invitae, including (i) changes in interest rates or credit ratings in the United States or any other country, (ii) changes in exchange rates for the currencies of any country, or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world; or

 

    any changes after the date of the Merger Agreement in U.S. GAAP or applicable laws, to the extent that such changes do not have a disproportionate impact on Invitae.

Covenants; Conduct of Business Pending the Merger

During the period commencing on July 31, 2017 and ending at the earlier of the date of termination of the Merger Agreement and the effective time of the Merger, CombiMatrix agreed that it will conduct its business in the ordinary course and in compliance with all applicable laws, rules, regulations, permits and certain material contracts and will provide Invitae with prompt notice upon the occurrence of certain events or discovery of certain conditions, facts or circumstances.

CombiMatrix also agreed that prior to the earlier of termination and the effective time of the Merger, subject to certain limited exceptions set forth in the Merger Agreement, without the consent of Invitae, it would not and would not permit any of its subsidiaries to:

 

    declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of CombiMatrix capital stock or repurchase, redeem or otherwise reacquire any shares of its capital stock or other securities except for shares of CombiMatrix stock from terminated employees;

 

   

sell, issue or grant, or authorize the issuance of any capital stock or other security (except for shares of CombiMatrix common stock issued upon the valid exercise of CombiMatrix options, CombiMatrix

 

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RSUs or CombiMatrix warrants outstanding as of the date of the Merger Agreement), any option, warrant or right to purchase any capital stock or any other security, or any instrument convertible into or exchangeable for any capital stock or other security;

 

    amend the certificate of incorporation, bylaws or other charter or organizational documents of CombiMatrix, or effect or be a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction except as related to the transactions contemplated by the Merger Agreement;

 

    form any subsidiary or acquire any equity interest or other interest in any other entity;

 

    lend money to any person other than in the ordinary course of business, incur or guarantee any indebtedness for borrowed money, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities, guarantee any debt securities of others, or, other than in the ordinary course of business, make any capital expenditure or commitment;

 

    adopt, establish or enter into any CombiMatrix employee benefit plan, cause or permit any CombiMatrix employee benefit plan to be amended other than as required by law or in order to make amendments for the purposes of compliance with Section 409A of the Code, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, employees or consultants, or pay or increase the severance or change of control benefits offered to any current or new employee or consultant, subject to certain exceptions.

 

    enter into any material transaction outside the ordinary course of business;

 

    purchase, lease, license or otherwise acquire, or sell, lease, license or otherwise dispose of, any of its assets, rights or properties, or grant any encumbrance with respect to such assets, rights or properties, in each case, other than in the ordinary course of business consistent with past practices;

 

    make, change or revoke any material tax election, file any material amendment to any tax return, adopt or change any accounting method in respect of taxes, change any annual tax accounting period, enter into any tax allocation agreement, tax sharing agreement or tax indemnity agreement, other than commercial contracts entered into in the ordinary course of business with vendors, customers or landlords, enter into any closing agreement with respect to any tax, settle or compromise any claim, notice, audit report or assessment in respect of material taxes, apply for or enter into any ruling from any tax authority with respect to taxes, surrender any right to claim a material tax refund, or consent to any extension or waiver of the statute of limitations period applicable to any material tax claim or assessment;

 

    enter into, amend or terminate any material contract;

 

    materially change pricing, royalties or other payments set or charged to its customers or licensees, or materially increase pricing, royalties or other payments set or charged by vendors or persons who have licensed intellectual property to CombiMatrix; or

 

    agree, resolve or commit to do any of the foregoing.

Non-Solicitation

The Merger Agreement contains provisions prohibiting CombiMatrix from seeking a competing transaction, subject to specified exceptions described below. Under these “non-solicitation” provisions, CombiMatrix has agreed that neither it nor its subsidiaries, nor any of their officers, directors, employees, representatives, advisors, attorneys, accountants or agents will directly or indirectly: (i) solicit, initiate, respond to or take any action to facilitate or encourage any inquiries or the communication, making, submission or announcement of any competing proposal or inquiry or take any action that could reasonably be expected to lead to a competing proposal or inquiry; (ii) enter into or participate in any discussions or negotiations with any person with respect

 

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to any competing proposal or inquiry; (iii) furnish any information regarding CombiMatrix or any of its subsidiaries to any person in connection with, in response to, relating to or for the purpose of assisting with or facilitating a competing proposal or inquiry; (iv) approve, endorse or recommend any competing proposal (subject to the terms and conditions of the Merger Agreement); (v) execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any competing proposal; or (vi) grant any waiver or release under any confidentiality, standstill or similar agreement (other than to Invitae).

However, prior to the approval of the Merger Proposal, (i) CombiMatrix may enter into discussions or negotiations with any person that has made (and not withdrawn) a bona fide, unsolicited, competing proposal, which CombiMatrix’s board of directors determines in good faith, after consultation with its independent financial advisor, if any, and its outside legal counsel, constitutes, or would reasonably be expected to result in, a superior competing proposal, and (ii) thereafter furnish to such person non-public information regarding CombiMatrix pursuant to an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non-solicitation provisions, no hire provisions and “standstill” provisions) at least as favorable to CombiMatrix as those contained in the confidentiality agreement existing between CombiMatrix and Invitae, but in each case of the foregoing clauses (i) and (ii), only if: (A) neither CombiMatrix nor any representative of CombiMatrix has breached its non-solicitation obligations; (B) the board of directors of CombiMatrix determines in good faith based on the advice of outside legal counsel, that the failure to take such action would reasonably be expected to result in a breach of the fiduciary duties of the CombiMatrix board of directors under applicable laws; (C) at least five business days prior to furnishing any such non-public information to, or entering into discussions with, such person, CombiMatrix gives Invitae written notice of the identity of such person, the terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) made thereby, and of CombiMatrix’s intention to furnish nonpublic information to, or enter into discussions with, such person; and (D) at least five business days prior to furnishing any such non-public information to such person, CombiMatrix furnishes such non-public information to Invitae (to the extent such non-public information has not been previously furnished by CombiMatrix to Invitae). Without limiting the generality of the foregoing, CombiMatrix has acknowledged and agreed that, in the event any representative of CombiMatrix (whether or not such representative is purporting to act on behalf of CombiMatrix) takes any action that, if taken by CombiMatrix, would constitute a breach of the non-solicitation obligations of CombiMatrix, the taking of such action by such representative shall be deemed to constitute a breach of the non-solicitation obligations of CombiMatrix for purposes of the Merger Agreement.

CombiMatrix will notify Invitae no later than 24 hours after receipt of any competing proposal or inquiry, and any such notice will be made orally and in writing and will include the identity of the person making or submitting such competing proposal or inquiry, the terms thereof, and any written materials submitted therewith. CombiMatrix will keep Invitae fully informed, on a current basis, of the status and material developments (including any changes to the terms) of such competing proposal or inquiry and will deliver to Invitae copies of any written materials submitted with such competing proposal or inquiry.

A competing proposal is any of the following proposals, indications of interest or offers, other than transactions contemplated by the Merger Agreement:

 

    any merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction in which (i) CombiMatrix is a constituent corporation, (ii) a person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of persons directly or indirectly acquires beneficial or record ownership of securities representing more than 20% of the outstanding securities of any class of voting securities of CombiMatrix or any of its subsidiaries, or (iii) CombiMatrix or any of its subsidiaries issues securities representing more than 20% of the outstanding securities of any class of voting securities of CombiMatrix or any of its subsidiaries;

 

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    any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated book value or the fair market value of the assets of CombiMatrix and its subsidiaries, taken as a whole; or

 

    any liquidation or dissolution of CombiMatrix.

A superior competing proposal is any unsolicited bona fide competing proposal at a 50% threshold (and excluding a dissolution or liquidation of CombiMatrix) made by a third party that the board of directors of CombiMatrix determines, in its reasonable, good faith judgment, after obtaining and taking into account such matters that it deems relevant following consultation with its outside legal counsel and financial advisor, if any (i) is reasonably likely to be more favorable, from a financial point of view, to the CombiMatrix stockholders than the terms of the Merger; and (ii) is reasonably capable of being consummated; provided, however, that any such offer shall not be deemed to be a superior competing proposal if (A) any financing required to consummate the transaction contemplated by such offer is not committed and is not reasonably capable of being obtained or (B) if the consummation of such transaction is contingent on any such financing being obtained.

Invitae may terminate the Merger Agreement if the CombiMatrix board of directors (each such action, a “change of recommendation” by the CombiMatrix board of directors):

 

    failed to recommend that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal or has for any reason withdrawn or modified in a manner adverse to Invitae its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal;

 

    failed to include its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal in this proxy statement/prospectus;

 

    approved, endorsed or recommended a competing proposal; or

 

    entered into a letter of intent or similar document or a definitive agreement for a competing proposal.

If the Merger Agreement is terminated in connection with these provisions and a bona fide competing proposal had been publicly announced or disclosed or otherwise communicated to the CombiMatrix board of directors prior to the CombiMatrix special meeting, CombiMatrix has agreed to pay Invitae a fee of $1,400,000 (net of expense reimbursement previously paid). See the section entitled “The Merger Agreement—Termination of the Merger Agreement and Termination Fee” below for a more complete discussion of the termination fees.

Disclosure Documents

As promptly as practicable following the date of the Merger Agreement, Invitae and CombiMatrix agreed to prepare and cause to be filed with the SEC this proxy statement/prospectus and Invitae agreed to prepare and cause to be filed with the SEC a registration statement on Form S-4, of which this proxy statement/prospectus is a part, in connection with the registration under the Securities Act of the shares of Invitae common stock to be issued pursuant to the Merger. Each of Invitae and CombiMatrix agreed to use commercially reasonable efforts to cause the registration statement to become effective as promptly as practicable. Prior to the registration statement on Form S-4, of which this proxy statement/prospectus is a part, being declared effective, CombiMatrix and Invitae each agreed to (i) deliver tax representation letters to Stradling and Pillsbury, and (ii) use its commercially reasonable efforts to cause its respective counsel to deliver to it a tax opinion satisfying the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. Each of Invitae and CombiMatrix agreed to use their commercially reasonable efforts to cause the registration statement on Form S-4, of which this proxy statement/prospectus is a part, and this proxy statement/prospectus to comply with the applicable rules and regulations promulgated by the SEC. Invitae and CombiMatrix each agreed to ensure that this proxy statement/prospectus will not, at the time that this proxy statement/prospectus or any amendment or supplement hereto is filed with the SEC or is first mailed to the stockholders of CombiMatrix, at the time of the CombiMatrix stockholders’ meeting and at the effective time of the Merger, contain any untrue statement of a material fact or

 

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omit to state any material fact required to be stated herein or necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading; provided, that Invitae did not make such assurances with respect to statements made in this proxy statement/prospectus by CombiMatrix or based on information furnished by CombiMatrix for inclusion herein, and that CombiMatrix did not make such assurances with respect to statements made in this proxy statement/prospectus by Invitae or based on information furnished by Invitae for inclusion herein. Each of Invitae, Merger Sub and CombiMatrix agreed to furnish all information concerning itself and its subsidiaries, as applicable, to the other parties as the other parties may reasonably request in connection with such actions and the preparation of the registration statement on Form S-4 and this proxy statement/prospectus. CombiMatrix agreed to use commercially reasonable efforts to cause this proxy statement/prospectus to be mailed to its stockholders as promptly as practicable after the registration statement on Form S-4 is declared effective by the SEC.

In connection with the Warrant Exchange Offer, Invitae and CombiMatrix agreed to cooperate with each other regarding, and to prepare, offering documents, and to cause such offering to comply as to form in all material respects with the applicable provisions of the Securities Act and the Exchange Act, for the purpose of effecting and consummating the Warrant Exchange Offer. Invitae and CombiMatrix agreed that the offering documents will include (i) an offer to exchange document describing the material terms of the Warrant Exchange Offer, (ii) a statement on Schedule TO with respect to the Warrant Exchange Offer, if required, (iii) a registration statement on Form S-4 registering the Warrant Exchange Offer, (iv) a statement by the CombiMatrix board of directors describing its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal and the requirement that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement must be exchanged in the Warrant Exchange Offer, including that such requirement is a condition to the obligations of Invitae and Merger Sub to effect the Merger, and (v) all ancillary documents related to the Warrant Exchange Offer, including exhibits, press releases, letters of transmittal, notices and announcements.

Invitae agreed, substantially contemporaneously with, or as promptly as practicable after, the filing of the registration statement on Form S-4, of which this proxy statement/prospectus is a part, to file with the SEC the registration statement on Form S-4 registering the Warrant Exchange Offer. Each of Invitae and CombiMatrix agreed to use commercially reasonable efforts to cause the registration statement to become effective as promptly as practicable. Prior to the registration statement on Form S-4 registering the Warrant Exchange Offer being declared effective, CombiMatrix and Invitae each agreed to (i) deliver tax representation letters to Stradling and Pillsbury and (ii) use its commercially reasonable efforts to cause its respective counsel to deliver to it a tax opinion satisfying the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. Each of Invitae and CombiMatrix agreed use commercially reasonable efforts to cause the registration statement on Form S-4 registering the Warrant Exchange Offer and the other offering documents to comply with the applicable rules and regulations promulgated by the SEC. Invitae and CombiMatrix each agreed to ensure that the offering documents will not, as of the date any offering document is first mailed to holders of CombiMatrix Series F warrants and at the effective time of the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided, that Invitae did not make such assurances with respect to statements made in any offering document by CombiMatrix or based on information furnished by CombiMatrix for inclusion therein, and that CombiMatrix did not make such assurances with respect to statements made in any offering document by Invitae or based on information furnished by Invitae for inclusion therein. Each of Invitae, Merger Sub and CombiMatrix agreed to furnish all information concerning itself and its subsidiaries, as applicable, to the other parties as the other parties may reasonably request in connection with such actions and the preparation of the registration statement on Form S-4 registering the Warrant Exchange Offer. The parties agreed to cause the offering documents to be mailed to the holders of the CombiMatrix Series F warrants when appropriate after the registration statement on Form S-4 registering the Warrant Exchange Offer becomes effective, in order to permit Invitae to conduct the Warrant Exchange Offer in a timely manner and consistent with applicable regulations and requirements under securities laws, including the Exchange Act.

 

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Regulatory Approvals Required for the Merger

Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock and RSUs and the filing of this proxy statement/prospectus with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

Although neither Invitae nor CombiMatrix knows of any reason why these regulatory approvals cannot be obtained in a timely manner, neither Invitae nor CombiMatrix can be certain when or if they will be obtained. Invitae’s and CombiMatrix’s obligations under the Merger Agreement are subject to certain conditions. See the section entitled “The Merger Agreement—Conditions to the Completion of the Merger.”

CombiMatrix Stock Options, RSUs and Warrants

At the effective time of the Merger, (i) each in-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock underlying such CombiMatrix stock option by the Exchange Ratio, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the Invitae Trailing Average Share Value, (ii) each out-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration, (iii) each CombiMatrix RSU outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix RSU by the Exchange Ratio, and (iv) each outstanding Series D warrant and Series F warrant to purchase shares of CombiMatrix capital stock (other than those warrants exchanged in the Warrant Exchange Offer or previously exercised) will be assumed by Invitae and will be converted into a warrant to purchase shares of Invitae common stock, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus.

Although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus, all rights and obligations with respect to each CombiMatrix Series D warrant or Series F warrant outstanding at the closing of the Merger will be assumed by Invitae in accordance with their terms, with the number of underlying shares and exercise price as adjusted for the Exchange Ratio. Invitae stockholders will continue to own and hold their existing shares of Invitae common stock. Accordingly, from and after the effective time of the Merger each Series D warrant or Series F warrant assumed by Invitae may be exercised solely for shares of Invitae common stock. The number of shares of Invitae common stock subject to each outstanding CombiMatrix Series D warrant or Series F warrant, as applicable, assumed by Invitae will be determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix Series D warrant or Series F warrant by the Exchange Ratio. The per share exercise price for the Invitae common stock issuable upon exercise of each CombiMatrix Series D warrant or Series F warrant assumed by Invitae will be determined by dividing the per share exercise price of CombiMatrix common stock subject to such CombiMatrix Series D warrant or Series F warrant, as

 

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applicable, by the Exchange Ratio. Any restriction on any CombiMatrix Series D warrant or Series F warrant assumed by Invitae will continue in full force and effect and the term and other provisions of such CombiMatrix Series D warrant or Series F warrant will otherwise remain unchanged.

Immediately after the announcement of the Merger, CombiMatrix repurchased one-half of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016. Upon the closing of the Merger, CombiMatrix will repurchase the remainder of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants. From and after the effective time of the Merger, holders of CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants will have no further rights with respect thereto.

Indemnification and Insurance for CombiMatrix Directors and Officers

Under the Merger Agreement, from the closing of the Merger through the sixth anniversary of the closing, the surviving corporation in the Merger will indemnify and hold harmless each person who was at the time of signing the Merger Agreement, or was at any time prior to the date of the Merger Agreement, or who becomes prior to the effective time of the Merger, a director or officer of CombiMatrix, against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was a director or officer of CombiMatrix, whether asserted or claimed prior to, at or after the effective time of the Merger, to the fullest extent permitted under the DGCL for directors or officers of Delaware corporations. In addition, each such person will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from the surviving corporation upon receipt by the surviving corporation from such person of a request for such advancement; provided, that any person to whom expenses are advanced provides an undertaking, to the extent then required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

Under the Merger Agreement, the certificate of incorporation and bylaws of the surviving corporation in the Merger will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of CombiMatrix than are presently set forth in the certificate of incorporation and bylaws of CombiMatrix, which provisions may not be amended, modified or repealed for a period of six years’ time from the closing of the Merger in a manner that would adversely affect the rights thereunder of individuals who, at or prior to the closing, were officers or directors of CombiMatrix.

The Merger Agreement also provides that prior to the closing of the Merger, CombiMatrix will purchase an insurance policy with an effective date as of the effective date of the Merger which maintains in effect for six years from the effective date of the Merger the current directors’ and officers’ liability insurance policies maintained by CombiMatrix.

CombiMatrix Transaction Bonus Payout Agreements

Under the Merger Agreement, Invitae and CombiMatrix agreed that (i) bonus payments under the CombiMatrix Transaction Bonus Plan will be paid in cash to all participants in accordance with the terms of the CombiMatrix Transaction Bonus Plan, other than the executive officers, the vice president of billing and reimbursement and the directors of CombiMatrix, (ii) pursuant to the Transaction Bonus Payout Agreements entered into with each of the executive officers and the vice president of billing and reimbursement of CombiMatrix concurrently with the execution of the Merger Agreement, the bonus payments for each such executive officer and vice president of billing and reimbursement will be paid in Invitae RSUs (to be settled in shares of Invitae common stock) calculated using the Invitae Trailing Average Share Value and subject to time-based vesting and/or settlement

 

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with acceleration upon a change in control of Invitae and/or certain other events as set forth in the applicable Transaction Bonus Payout Agreement, and (iii) pursuant to the Transaction Bonus Payout Agreements entered into with each of the outside directors of CombiMatrix concurrently with the execution of the Merger Agreement, the bonus payments for each such director will be paid in unrestricted shares of Invitae Common Stock calculated using the Invitae Trailing Average Share Value. To the extent such shares of common stock are not covered by a registration statement that is effective before the closing date, Invitae also covenanted to use commercially reasonable efforts to register for resale such unrestricted shares of common stock or shares of common stock underlying RSUs.

Additional Agreements

Each of CombiMatrix and Invitae has agreed to, among other things:

 

    use its commercially reasonable efforts to cause to be taken all actions necessary to consummate the Merger and any other transaction contemplated by the Merger Agreement;

 

    reasonably cooperate with the other parties and provide the other parties with such assistance as may be reasonably requested for the purpose of facilitating the performance by each party of its respective obligations under the Merger Agreement and to enable the combined entity to continue to meet its obligations under the Merger Agreement following the closing;

 

    make all filings and other submissions (if any) and give all notices (if any) required to be made and given by such party in connection with the Merger and any other transaction contemplated by the Merger Agreement;

 

    use its commercially reasonable efforts to obtain each consent (if any) reasonably required to be obtained pursuant to any applicable law, contract or otherwise by such party in connection with the Merger or any other transaction contemplated by the Merger Agreement or for any such contract to remain in full force and effect;

 

    use its commercially reasonable efforts to lift any injunction prohibiting, or any other legal bar to, the Merger and any other transaction contemplated by the Merger Agreement;

 

    use its commercially reasonable efforts to satisfy the conditions precedent to the consummation of the Merger Agreement; and

 

    use its commercially reasonable efforts to cause the Merger, together with the Warrant Exchange Offer, to qualify, and has agreed not to, and not to permit or cause any affiliate or any subsidiary to, take any actions or cause any action to be taken which would reasonably be expected to prevent the Merger, together with the Warrant Exchange Offer, from being qualified, as a “reorganization” under Section 368(a) of the Code.

Conditions to the Completion of the Merger

The respective obligations of Invitae and CombiMatrix to complete the Merger and the other transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of various conditions that include, in addition to other customary closing conditions, the following:

 

    the registration statement on Form S-4, of which this proxy statement/prospectus is a part and the registration statement on Form S-4 registering the Warrant Exchange Offer must have been declared effective by the SEC in accordance with the Securities Act and must not be subject to any stop order or proceeding, or any proceeding threatened by the SEC, seeking a stop order;

 

    there must not have been issued any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger or the Warrant Exchange Offer by any court of competent jurisdiction or other governmental entity of competent jurisdiction that remains in effect, and there must be no law, statute, rule, regulation, ruling or decree in effect which has the effect of making the consummation of the Merger or the Warrant Exchange Offer illegal;

 

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    the holders of a majority of the outstanding CombiMatrix common stock must have adopted and approved the Merger Proposal;

 

    any waiting period applicable to the consummation of the Merger and the Warrant Exchange Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR Act, must have expired or been terminated, and there must not be in effect any voluntary agreement by any party to the Merger Agreement and the U.S. Federal Trade Commission, the U.S. Department of Justice or any foreign governmental body, pursuant to which such party has agreed not to consummate the Merger or the Warrant Exchange Offer for any period of time;

 

    there must not be any legal proceeding pending or threatened by an official of a government or governmental entity in which such government or governmental entity indicates that it intends to conduct any legal proceeding or take any other action (i) challenging or seeking to restrain or prohibit the consummation of the Merger, the Warrant Exchange Offer or any of the other transactions contemplated by the Merger Agreement, (ii) relating to the Merger, the Warrant Exchange Offer or any of the other transactions contemplated by the Merger Agreement and seeking to obtain from Invitae, Merger Sub or CombiMatrix any material damages or other relief, (iii) seeking to materially prohibit or limit the ability to vote, transfer, receive dividends or otherwise exercise ownership rights with respect to any Invitae common stock to be issued in the Merger or the Warrant Exchange Offer, (iv) that would materially affect the right or ability of Invitae or CombiMatrix to own the assets or operate their businesses, or (v) seeking to compel Invitae or CombiMatrix to dispose of or hold separate any material assets as a result of the Merger, the Warrant Exchange Offer or any of the other transactions contemplated by the Merger Agreement; and

 

    the shares of Invitae common stock to be issued in the Merger and the Warrant Exchange Offer must be approved for listing on the NYSE as of the effective time of the Merger.

In addition, each of CombiMatrix’s and Invitae’s obligation to complete the Merger is further subject to the satisfaction or waiver by that party of the following additional conditions:

 

    certain representations and warranties of the other party in the Merger Agreement must be true and correct in all material respects on the date of the Merger Agreement and on the closing date of the Merger with the same force and effect as if made on the closing date, or, if such representations and warranties address matters as of a particular date, then as of that particular date;

 

    all other representations and warranties of the other party in the Merger Agreement must be true and correct on the date of the Merger Agreement and on the closing date of the Merger with the same force and effect as if made on the closing date, or, if such representations and warranties address matters as of a particular date, then as of that particular date, except where the failure of these representations and warranties to be true and correct would not have a material adverse effect on the other party;

 

    the other party to the Merger Agreement must have performed or complied with in all material respects all covenants and obligations in the Merger Agreement required to be performed or complied with by it on or before the closing of the Merger;

 

    the other party must not have experienced a material adverse effect that is continuing as of the closing of the Merger; and

 

    the other party must have delivered certain certificates and other documents required under the Merger Agreement for the closing of the Merger.

In addition, the obligation of Invitae and Merger Sub to complete the Merger is further subject to the satisfaction or waiver of the following conditions:

 

   

Invitae must have consummated the Warrant Exchange Offer and at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement must have been

 

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tendered in the Warrant Exchange Offer; provided that Invitae has offered shares of Invitae common stock with a value of at least $2.90 (based on the Invitae Trailing Average Share Value) per CombiMatrix Series F warrant;

 

    CombiMatrix must have completed the repurchase of all CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016;

 

    the Transaction Bonus Payout Agreements with CombiMatrix’s directors and executives must remain in full force and effect;

 

    consulting agreements with each of Mark McDonough and Scott Burell shall have been executed and become effective immediately at the effective time;

 

    Invitae must have received any required consent under its existing loan and security agreement with Oxford Capital, LLC to the Merger, the Warrant Exchange Offer and the other transactions contemplated by the Merger Agreement; and

 

    CombiMatrix must have delivered a certificate setting forth the allocation of the Merger consideration to its securityholders.

Termination of the Merger Agreement and Termination Fee

The Merger Agreement may be terminated at any time before the closing of the Merger, whether before or after the required stockholder approvals to complete the Merger have been obtained, as set forth below:

 

  (1) by mutual agreement of CombiMatrix and Invitae;

 

  (2) by either CombiMatrix or Invitae if the Merger has not closed by January 31, 2018 (other than in cases in which such failure to close is due to a breach by the party wishing to terminate), which date may be extended in certain circumstances;

 

  (3) by either CombiMatrix or Invitae if there is any final and nonappealable order, decree or ruling that prohibits the completion of the Merger;

 

  (4) by either CombiMatrix or Invitae if the CombiMatrix special meeting has been held and completed and the Merger Proposal not been approved (other than by CombiMatrix in cases in which such failure has been caused by CombiMatrix’s action or failure to act and such action or failure to act is a material breach by CombiMatrix);

 

  (5) by Invitae if (i) the CombiMatrix board of directors fails to recommend, withdraws or modifies in a manner adverse to Invitae that CombiMatrix’s stockholders vote to adopt and approve the Merger Proposal, (ii) the CombiMatrix board fails to include its board recommendation of the Merger Proposal in this proxy statement/prospectus, (iii) the CombiMatrix board has approved, endorsed or recommended any competing proposal, (iv) CombiMatrix has entered into any letter of intent or definitive agreement for a competing proposal or (v) CombiMatrix or any of its representatives has breached the non-solicitation obligations in the Merger Agreement;

 

  (6) by CombiMatrix if Invitae breaches any of its representations, warranties, covenants or agreements in the Merger Agreement or if a material adverse effect has occurred with respect to Invitae, in each case that would prevent Invitae from satisfying its closing conditions (with a 30 calendar day cure period); and

 

  (7) by Invitae if CombiMatrix breaches any of its representations, warranties, covenants or agreements in the Merger Agreement or if a material adverse effect has occurred with respect to CombiMatrix, in each case that would prevent CombiMatrix from satisfying its closing conditions (with a 30 calendar day cure period).

 

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CombiMatrix is required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid) and/or Invitae’s expenses up to $400,000, if the Merger Agreement is terminated by CombiMatrix or Invitae pursuant to clause 4 or by Invitae pursuant to clause 5 above, but only if (i) at any time before the CombiMatrix stockholders’ meeting a bona fide competing proposal with respect to CombiMatrix has been publicly announced, disclosed or, in the event the Merger Agreement is terminated pursuant to clause 5 above, otherwise communicated to CombiMatrix’s board of directors and (ii) in the event the Merger Agreement is terminated pursuant clause 4 above, within twelve months after the date of such termination, CombiMatrix enters into a definitive agreement with respect to a competing transaction or consummates a competing transaction. CombiMatrix is also required to pay Invitae expense reimbursements of up to $400,000 if the Merger Agreement is terminated pursuant to clause 7 above (except as it relates to a material adverse effect) or if Invitae fails to consummate the Merger solely as a result of a material adverse effect with respect to CombiMatrix.

Invitae is required to pay CombiMatrix expense reimbursements of up to $400,000 if the Merger Agreement is terminated by CombiMatrix pursuant to clause 6 above (except as it relates to a material adverse effect) or if CombiMatrix fails to consummate the Merger solely as a result of a material adverse effect with respect to Invitae.

Any termination of the Merger Agreement shall not relieve any party for its fraud or of liability for any willful and material breach of any representation, warranty, covenant, obligation or other provision contained in the Merger Agreement.

Amendment

The Merger Agreement may be amended by an instrument in writing signed on behalf of each of Invitae, Merger Sub and CombiMatrix with the approval of the respective boards of directors of Invitae, Merger Sub and CombiMatrix at any time, except that after the Merger Proposal has been adopted by the stockholders of CombiMatrix, no amendment which by law requires further approval by the stockholders of CombiMatrix shall be made without such further approval.

Expenses

The Merger Agreement provides all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such expenses, except as described above in the section entitled “The Merger Agreement—Termination of the Merger Agreement and Termination Fee” and except that CombiMatrix and Invitae shall share equally all filing fees and expenses, other than attorneys’ and accountants’ fees and expenses, incurred in relation to any filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall share equally any fees and expenses, other than attorneys’ and accountants’ fees and expenses, incurred by the engagement of the exchange agent and in relation to printing, filing and mailing with the SEC of the registration statements on Form S-4 for the Merger and the Warrant Exchange Offer and for the related proxy statement/prospectus and offer documents.

Special Meeting of CombiMatrix Stockholders

CombiMatrix is obligated under the Merger Agreement to hold its stockholders meeting for the purpose of adopting and approving the Merger Proposal as promptly as practicable after the registration statement on Form S-4, of which this proxy statement/prospectus is a part, being declared effective by the SEC.

 

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MATTERS BEING SUBMITTED TO A VOTE OF COMBIMATRIX STOCKHOLDERS

CombiMatrix Proposal No. 1: Approval and Adoption of the Agreement and Plan of Merger and Reorganization, dated as of July 31, 2017, by and among Invitae Corporation, Coronado Merger Sub, Inc. and CombiMatrix Corporation, as such agreement may be amended from time to time, and the transactions contemplated thereby, including the merger of Coronado Merger Sub, Inc. with and into CombiMatrix Corporation, with CombiMatrix Corporation surviving as a wholly owned subsidiary of Invitae Corporation.

At the CombiMatrix special meeting, CombiMatrix stockholders will be asked to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger.

CombiMatrix stockholders should read this proxy statement/prospectus carefully in its entirety, including the annexes, for more detailed information concerning the Merger Agreement and the Merger. After careful consideration, the CombiMatrix board of directors, by a unanimous vote of all directors, approved the Merger Agreement and declared the Merger Agreement to be advisable and in the best interests of CombiMatrix and the stockholders of CombiMatrix. The terms of, reasons for, other aspects of the Merger Agreement and the Merger, and a detailed discussion of the CombiMatrix board of directors’ recommendation are described in detail in the sections entitled “The Merger Proposal” and “The Merger Agreement.” CombiMatrix stockholders are also directed to the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

Required Vote

The affirmative vote of holders of a majority of the outstanding shares of CombiMatrix common stock entitled to vote on the record date for the CombiMatrix special meeting is required to approve CombiMatrix Proposal No. 1.

Recommendation of Board of Directors

COMBIMATRIX’S BOARD OF DIRECTORS RECOMMENDS THAT THE COMBIMATRIX STOCKHOLDERS VOTE “FOR” COMBIMATRIX PROPOSAL NO. 1 TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.

CombiMatrix Proposal No. 2: The Non-Binding Advisory Merger-Related Compensation Proposal

Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that CombiMatrix provide its stockholders with the opportunity to vote to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger, as disclosed in the section entitled “The Merger Proposal—Interests of Certain CombiMatrix Directors and Officers in the Merger—Merger-Related Compensation for CombiMatrix’s Named Executive Officers.” This non-binding advisory proposal gives CombiMatrix stockholders the opportunity to express their views on the Merger-related compensation of CombiMatrix’s named executive officers.

The CombiMatrix Board encourages you to review carefully the named executive officer Merger-related compensation information disclosed in this proxy statement/prospectus. The CombiMatrix Board unanimously recommends that you vote “FOR” the following resolution:

“RESOLVED, that the stockholders of CombiMatrix approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to CombiMatrix’s named executive officers in connection with the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The Merger Proposal—Interests of Certain CombiMatrix Directors and Executive Officers in the Merger—Merger-Related Compensation for CombiMatrix’s Named Executive Officers” in CombiMatrix’s proxy statement for the special meeting.”

 

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CombiMatrix stockholders should note that this proposal is not a condition to completion of the Merger and, as an advisory vote, the result will not be binding on CombiMatrix or the CombiMatrix board of directors. Further, the underlying plans and arrangements are contractual in nature and payments under them are, by their terms, not subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Merger is consummated CombiMatrix’s named executive officers will be entitled to receive the compensation that is based on or that otherwise relates to the Merger, subject to and in accordance with the terms and conditions applicable to those payments.

Required Vote

The votes cast in favor of this proposal at the CombiMatrix special meeting must exceed the votes cast opposing the proposal, assuming a quorum is present, to approve, on a non-binding advisory basis, CombiMatrix Proposal No. 2.

Recommendation of Board of Directors

COMBIMATRIX’S BOARD OF DIRECTORS RECOMMENDS THAT THE COMBIMATRIX STOCKHOLDERS VOTE “FOR” COMBIMATRIX PROPOSAL NO. 2 TO APPROVE, ON A NON-BINDING ADVISORY BASIS, THE COMPENSATION THAT MAY BE PAID OR BECOME PAYABLE TO COMBIMATRIX’S NAMED EXECUTIVE OFFICERS IN CONNECTION WITH THE MERGER.

CombiMatrix Proposal No. 3: Approval of Possible Adjournment of the CombiMatrix Special Meeting

If CombiMatrix fails to receive a sufficient number of votes to approve CombiMatrix Proposal No. 1 or CombiMatrix Proposal No. 2, or CombiMatrix does not have a quorum at the CombiMatrix special meeting, CombiMatrix may propose to adjourn the CombiMatrix special meeting, for a period of not more than 30 days, for the purpose of soliciting additional proxies to approve CombiMatrix Proposal No. 1 and CombiMatrix Proposal No. 2. CombiMatrix currently does not intend to propose adjournment at the CombiMatrix special meeting a quorum is present at the CombiMatrix special meeting and there are sufficient votes to approve CombiMatrix Proposal No. 1.

Required Vote

The affirmative vote of holders of a majority of the shares of CombiMatrix common stock having voting power present in person or by proxy at the CombiMatrix special meeting, whether or not a quorum is present, is required to approve CombiMatrix Proposal No. 3.

Recommendation of Board of Directors

CombiMatrix’S BOARD OF DIRECTORS RECOMMENDS THAT THE COMBIMATRIX STOCKHOLDERS VOTE “FOR” COMBIMATRIX PROPOSAL NO. 3 TO APPROVE THE POSSIBLE ADJOURNMENT OF THE COMBIMATRIX SPECIAL MEETING.

 

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THE WARRANT EXCHANGE OFFER

As of September 26, 2017, there were outstanding CombiMatrix Series F warrants held by public warrant holders to acquire a total of 2,066,976 shares of CombiMatrix common stock at an exercise price of $5.17 per share, which were issued pursuant to common stock purchase warrants as part of an underwritten public offering by CombiMatrix that closed on March 24, 2016. The Series F warrants were immediately exercisable upon issuance and have a term of five years. In the Merger Agreement, Invitae and CombiMatrix agreed that Invitae would conduct an exchange offer for the CombiMatrix Series F warrants held by the public warrant holders of CombiMatrix.

In the Warrant Exchange Offer, holders of CombiMatrix Series F warrants may exchange their outstanding CombiMatrix Series F warrants for shares of Invitae common stock with a value calculated to represent at least $2.90 (based on the Invitae Trailing Average Share Value) per Series F warrant.

The completion of the Warrant Exchange Offer is conditioned, among other things, on the participation in the Warrant Exchange Offer of holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement. If the Warrant Exchange Offer is completed, the CombiMatrix Series F warrants held by warrant holders that do not participate in the Warrant Exchange Offer will, in accordance with the terms of each Series F warrant, be assumed by Invitae in accordance with their terms and converted into warrants to purchase the number of shares of Invitae common stock as such warrant holder would have received in the Merger had the Series F warrants been converted to shares of CombiMatrix common stock immediately prior to the completion of the Merger, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Warrant Exchange Offer of at least 90% as described in this proxy statement/prospectus. The number of shares of Invitae common stock underlying such warrant and the exercise price would be adjusted to reflect the Exchange Ratio. Invitae does not currently intend to list such warrants for trading on any exchange.

The Warrant Exchange Offer will be conducted pursuant to a registration statement on Form S-4, which Invitae intends to file with the SEC substantially contemporaneously with or as promptly as practicable after the filing of the registration statement on Form S-4 of which this proxy statement/prospectus statement is a part. The Warrant Exchange Offer is expected to be completed at or immediately prior to the completion of the Merger, if the conditions to the Warrant Exchange Offer are satisfied. The completion of the Merger is conditioned upon the successful completion of the Warrant Exchange Offer on the terms and conditions set forth in the Merger Agreement and described in this proxy statement/prospectus.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Marketing and Laboratory Services Agreement

On September 25, 2017, Invitae and its wholly-owned subsidiary Good Start Genetics, Inc. (collectively referred to as Invitae) entered into a Marketing and Laboratory Services Agreement, or the Marketing Agreement, with CombiMatrix Molecular Diagnostics, Inc., or CMDX, a wholly-owned subsidiary of CombiMatrix. Pursuant to the terms of the Marketing Agreement, Invitae will promote and market certain CMDX diagnostic tests, including miscarriage analysis tests, or the Tests, to physicians and other healthcare providers in the same channels in which Invitae markets its own diagnostic tests. Invitae will also coordinate logistics, customer service and support for the Tests.

In consideration for the services provided by Invitae under the Marketing Agreement, CMDX will pay Invitae a $200 fee for each Test Invitae markets and which CMDX processes, reports and bills to a patient, ordering physician or other healthcare provider and/or third party payer program, subject to all applicable federal, state and local laws, rules, and regulations, including, without limitation, the federal Anti-Kickback Statute and similar state anti-kickback laws and regulations. CMDX has also agreed to assist Invitae in promoting and marketing the Tests by providing training and support and sharing educational materials and scientific publications. In addition, CMDX will remain responsible for Test performance, reporting and billing.

Under the terms of the Marketing Agreement, the parties will jointly own all data and results from Tests performed as a result of Invitae’s promotional activities, and CMDX will retain ownership of the Tests and related intellectual property.

The term of the Marketing Agreement commenced on September 25, 2017 and continues until December 31, 2019, with automatic renewals for successive 12-month periods. The Marketing Agreement may be terminated by either party upon (a) 60 days’ notice prior to the end of the then-current term, (b) a material breach by the other party (subject to a 60-day cure period, or 10 days with respect to a breach of such party’s payment obligations) and (c) 60 days’ notice after the filing of bankruptcy, reorganization, liquidation or receivership proceedings by or against the other party. CMDX may also terminate the Marketing Agreement upon 30 days’ notice if Invitae enters into an agreement with a third party for, or decides to internally develop, invasive prenatal diagnostic tests, pediatric array tests or miscarriage analysis tests.

ACCOUNTING TREATMENT

Invitae prepares its financial statements in accordance with U.S. GAAP. In determining the accounting treatment of the Merger, management has evaluated all pertinent facts and circumstances and has concluded that business combination accounting would apply to the transaction.

The Merger will be accounted for using the acquisition method of accounting, which requires the determination of which entity is the accounting acquirer. The accounting acquirer is the entity that obtains control of the acquiree. The determination of the acquirer considers many factors, including but not limited to the relative voting rights in the combined entity after the business combination, the existence of a large minority interest in the combined entity if no other owner or organized group of owners has a significant voting interest, the composition of the governing body of the combined entity, the composition of the senior management of the combined entity, the terms of the exchange of equity securities, and the relative size of the combining entities and which of the combining entities initiated the combination. There is no hierarchical guidance on determining the acquirer in a business combination effected through an exchange of equity interests.

Invitae has concluded that Invitae is the accounting acquirer based on its evaluation of the facts and circumstances of the acquisition. The purpose of the Merger is to expand Invitae’s business through the

 

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acquisition of the products and services that CombiMatrix offers. Invitae is the larger of the two entities and will be the operating company within the combining companies. Invitae’s board members will continue to hold all of the seats on the Invitae board of directors and CombiMatrix stockholders do not have any board appointment rights. Invitae’s senior management will be continuing as senior management of the combined company.

The Merger will be accounted for using the acquisition method of accounting in accordance with FASB ASC 805, “Business Combinations.” Invitae will recognize and measure the assets acquired and liabilities assumed at their fair values at the acquisition date. Acquisition-related costs, which include advisory, legal, accounting, valuation, and other professional or consulting fees, will be expensed in the period incurred. As of the date of this proxy statement/prospectus, the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed are preliminary and have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations on the type of information that can be exchanged between Invitae and CombiMatrix at this time. Until the Merger is complete, all the relevant information will not be known. Differences between preliminary estimates and the final acquisition accounting will occur.

The financial condition and results of operations of Invitae after completion of the Merger will reflect CombiMatrix after completion of the Merger, but will not be restated retroactively to reflect the historical financial condition or results of operations of CombiMatrix. The earnings of Invitae following completion of the Merger will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities on depreciation expense, amortization expense and interest expense. Goodwill will not be amortized but will be tested for impairment at least annually, and all tangible and intangible assets including goodwill will be tested for impairment when certain indicators are present. If, in the future, Invitae determines that tangible or intangible assets (including goodwill) are impaired, Invitae would record an impairment charge at that time.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following is a discussion of material U.S. federal income tax consequences of the Merger applicable to U.S. Holders (as defined below) who exchange their CombiMatrix capital stock for Invitae common stock in the Merger. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S. tax laws are not discussed. This discussion is based on the Code, U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, each as in effect as of the date of this proxy statement/prospectus. These authorities are subject to differing interpretations or change. Any such change, which may or may not be retroactive, could alter the tax consequences to holders of CombiMatrix capital stock as described herein.

This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of each CombiMatrix stockholder. In addition, it does not address consequences relevant to CombiMatrix stockholders that are subject to particular U.S. tax rules, including, without limitation:

 

    persons who hold shares of CombiMatrix stock in a functional currency other than the U.S. dollar;

 

    persons who hold shares of CombiMatrix stock that constitute “qualified small business stock” under Section 1202 of the Code or “Section 1244 stock” under Section 1244 of the Code;

 

    persons who hold shares of CombiMatrix stock as part of an integrated investment (including a “straddle,” pledge against currency risk, “constructive” sale or “conversion” transaction or other integrated or risk reduction transactions) consisting of shares of CombiMatrix stock and one or more other positions;

 

    persons who are not U.S. Holders as defined below;

 

    persons who are U.S. expatriates;

 

    banks, insurance companies, mutual funds, tax-exempt entities, financial institutions, broker-dealers, real estate investment trusts or regulated investment companies;

 

    persons who do not hold their shares of CombiMatrix stock as a “capital asset” within the meaning of Section 1221 of the Code;

 

    partnerships or other entities classified as partnerships or disregarded entities for U.S. federal income tax purposes, S corporations or other pass-through entities (including hybrid entities);

 

    persons who acquired shares of CombiMatrix stock pursuant to the exercise of compensatory options or in other compensatory transactions;

 

    persons who acquired shares of CombiMatrix stock pursuant to the exercise of warrants or conversion rights under the CombiMatrix Series F convertible preferred stock or other convertible instruments;

 

    persons who acquired shares of CombiMatrix stock in a transaction subject to the gain rollover provisions of Section 1045 of the Code; and

 

    persons who hold shares of CombiMatrix stock through individual retirement accounts or other tax-deferred accounts.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of CombiMatrix stock that, for U.S. federal income tax purposes, is or is treated as:

 

    an individual who is a citizen or resident of the United States;

 

    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

    an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

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    a trust if either (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons (within the meaning of Section 7701(a)(30) of the Code) are authorized or have the authority to control all substantial decisions of such trust, or (ii) the trust was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

If an entity treated as a partnership for U.S. federal income tax purposes holds CombiMatrix stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partnership or a partner of a partnership holding CombiMatrix stock or any other person excluded from this discussion, you should consult your tax advisor regarding the tax consequences of the Merger.

In addition, the following discussion does not address (i) any U.S. federal non-income tax consequences of the Merger, including estate, gift or other tax consequences, (ii) any state, local or non-U.S. tax consequences of the Merger, (iii) the Medicare contribution tax on net investment income or the alternative minimum tax, (iv) the tax consequences of transactions effectuated before, after or at the same time as the Merger (whether or not they are in connection with the Merger), including, without limitation, transactions in which CombiMatrix stock is acquired or CombiMatrix Series F preferred stock is converted to CombiMatrix common stock, and (v) the tax consequences to holders of options, warrants or similar rights to purchase CombiMatrix stock.

IN LIGHT OF THE FOREGOING, COMBIMATRIX STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES, AND ANY TAX REPORTING REQUIREMENTS OF THE MERGER AND RELATED TRANSACTIONS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, Pillsbury will deliver to Invitae and Stradling will deliver to CombiMatrix opinions that the statements under the caption “Material U.S. Federal Income Tax Consequences of the Merger” constitute the opinions of Pillsbury and Stradling, respectively. In rendering their opinions, counsel assume that the statements and facts concerning the Merger and the Warrant Exchange Offer set forth in this proxy statement/prospectus, in the prospectus/offer to exchange relating to the Warrant Exchange Offer, and in the Merger Agreement, are true and accurate in all respects, and that the Merger and the Warrant Exchange Offer will be completed in accordance with this proxy statement/prospectus, the prospectus/offer to exchange relating to the Warrant Exchange Offer, and the Merger Agreement. Counsels’ opinions also assume the truth and accuracy of certain representations and covenants as to factual matters made by Invitae, CombiMatrix and Merger Sub in tax representation letters provided to counsel. In addition, counsel base their tax opinions on the law in effect on the date of the opinions and assume that there will be no change in applicable law between such date and completion of the Warrant Exchange Offer and the Merger. If any of these assumptions is inaccurate, the tax consequences of the Merger could differ from those described in this proxy statement/prospectus.

 

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No ruling from the IRS has been or will be requested with respect to the tax consequences of the Merger. Opinions of counsel do not bind the courts or the IRS, nor will they preclude the IRS from adopting a position contrary to those expressed in the opinions. Subject to the qualifications and assumptions described in this proxy statement/prospectus, the Merger, together with the Warrant Exchange Offer, will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, but subject to the discussion below under the caption “—Possible Alternative Characterization for U.S. Holders Also Holding Repurchased Warrants,” the tax consequences to U.S. Holders of CombiMatrix capital stock will be as follows:

 

    a U.S. Holder will not recognize gain or loss upon the exchange of CombiMatrix stock for Invitae common stock pursuant to the Merger, except with respect to cash received in lieu of a fractional share of Invitae common stock as described below;

 

    a U.S. Holder who receives cash in lieu of a fractional share of Invitae common stock in the Merger will recognize capital gain or loss in an amount equal to the difference between the amount of cash received instead of a fractional share and the U.S. Holder’s tax basis allocable to such fractional share;

 

    a U.S. Holder’s aggregate tax basis for the shares of Invitae common stock received in the Merger (including any fractional share interest for which cash is received) will equal the U.S. Holder’s aggregate tax basis in the shares of CombiMatrix stock surrendered in the Merger; and

 

    the holding period of the shares of Invitae common stock received by a U.S. Holder in the Merger will include the holding period of the shares of CombiMatrix stock surrendered in exchange therefor.

Gain or loss recognized by a U.S. Holder who receives cash in lieu of a fractional share of Invitae common stock will constitute capital gain or loss and any such gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period in the CombiMatrix stock surrendered in the Merger is more than one year as of the effective date of the Merger. Under current law, long-term capital gains of non-corporate taxpayers are taxed at a reduced U.S. federal income tax rate. Under current law, the deductibility of capital losses is subject to limitations. In addition, for purposes of the above discussion regarding the determination of the bases and holding periods for shares of Invitae common stock received in the Merger, U.S. Holders who acquired different blocks of CombiMatrix stock at different times for different prices must calculate their bases and holding periods in their shares of CombiMatrix stock separately for each identifiable block of such stock exchanged in the Merger.

As provided in Treasury Regulations Section 1.368-3(d), each U.S. Holder who receives shares of Invitae common stock in the Warrant Exchange Offer or the Merger is required to retain permanent records pertaining to the Warrant Exchange Offer and the Merger, and make such records available to any authorized IRS officers and employees. Such records should specifically include information regarding the amount, basis, and fair market value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such reorganization. Additionally, U.S. Holders who owned immediately before completion of the Warrant Exchange Offer and the Merger at least five percent (by vote or value) of the total outstanding stock of CombiMatrix, or Series D warrants or Series F warrants (including Series F warrants participating in the Warrant Exchange Offer) the aggregate federal