Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events

Subsequent Events

13. Subsequent Events

Proposed Acquisition by Eli Lilly and Company

On October 17, 2022, the Company entered into the Merger Agreement with Parent and Purchaser. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, on October 31, 2022, Purchaser commenced a tender offer (the “Offer”) to purchase all of the issued and outstanding shares (the “Shares”) of common stock, par value $0.0001 per share (the “Common Stock”), of the Company in exchange for (a) $12.50 per Share, net to the stockholder in cash, without interest and less any applicable tax withholding (the “Cash Consideration”), plus (b) one non-tradable contingent value right (each, a “CVR”), which represents the contractual right to receive contingent payments of up to $3.00 per CVR, net to the stockholder in cash, without interest and less any applicable tax withholding, upon the achievement of certain specified milestones in accordance with the terms and subject to the conditions of a contingent value rights agreement (the “CVR Agreement”) to be entered into with a rights agent selected by Parent and reasonably acceptable to the Company (the Cash Consideration plus one CVR, collectively, the “Offer Price”).

Following the consummation of the Offer, and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into the Company as provided in the Merger Agreement (the “Merger”), with the Company being the surviving corporation. The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the General Corporation Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without a stockholder vote promptly following consummation of the Offer. At the effective time of the Merger (the “Effective Time”), each Share (other than (i) Shares held in the treasury of the Company or owned by Parent, Purchaser or any direct or indirect wholly owned subsidiary of Parent or Purchaser or (ii) Shares that are held by stockholders who are entitled to and properly demand appraisal for such Shares in accordance with Section

262 of the DGCL, but including each Share that is subject to vesting or forfeiture restrictions granted pursuant to a Company equity incentive plan, program or arrangement (“Company Restricted Stock”)) will be cancelled and converted into the right to receive the Offer Price from Purchaser. As a result of the Merger, the Company will cease to be a publicly traded company.

The obligation of Parent and Purchaser to consummate the Offer is subject to the condition that there be validly tendered and not validly withdrawn prior to the expiration of the Offer a number of Shares that, together with the number of Shares, if any, then owned beneficially by Parent and Purchaser (together with their wholly owned subsidiaries) would represent a majority of the Shares outstanding as of the consummation of the Offer (the “Minimum Tender Condition”). The Minimum Tender Condition may not be waived by Purchaser without the prior written consent of the Company. The obligation of Purchaser to consummate the Offer is also subject to other customary conditions, including the expiration of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the absence of governmental injunctions or other legal restraints prohibiting the Merger or the Offer. In addition, the obligation of Purchaser to consummate the Offer is conditioned upon, among other things, the accuracy of the representations and warranties of the Company (subject to certain materiality exceptions), and material compliance by the Company with its covenants under the Merger Agreement. Consummation of the Offer is not subject to a financing condition.

The Merger Agreement provides for the following treatment of the Company’s equity awards:

● at the Effective Time, each option to purchase Shares having an exercise price less than the Cash Consideration (each such option, a “Company Cash-Out Stock Option”) that is outstanding immediately prior to the Effective Time, whether or not vested, shall be canceled and converted into the right to receive (x) an amount in cash, without interest and less any applicable tax withholdings, equal to the product of (A) the total number of Shares subject to such Company Cash-Out Stock Option immediately prior to the Effective Time multiplied by (B) the excess, if any, of the Cash Consideration over the applicable exercise price per share under such Company Cash-Out Stock Option and (y) one CVR for each share of Common Stock subject to such Company Cash-Out Stock Option immediately prior to the Effective Time (without regard to vesting);

● effective as of five business days prior to the date on which the closing of the Merger occurs (the “Closing Date”), or such other date (in no event later than two business days prior to the Closing Date) occurring prior to the Closing Date as may be determined by the board of directors of the Company (the “Company Board”) in its reasonable discretion (such date, the “Acceleration Date”), each then-outstanding and unexercised option to purchase Shares having an exercise price equal to or greater than the Cash Consideration (each such option, a “Company Exercisable Pre-Close Stock Option”) shall vest in full and become exercisable up to and through the close of regular trading on the Nasdaq on the second business day following the Acceleration Date (such second business day, the “Last Exercise Date”) in accordance with the terms and conditions of such Company Exercisable Pre-Close Stock Option in effect on the date of the Merger Agreement, and such Company Exercisable Pre-Close Stock Options shall terminate and be of no further force or effect as of immediately prior to closing of the Merger if not exercised by the holder on or prior to the close of regular trading on the Last Exercise Date; and

● at the Effective Time, each Share of Company Restricted Stock that is outstanding immediately prior to the Effective Time will vest in full as of immediately prior to the Effective Time and will be treated in the same manner as all other Shares of Common Stock.

The Merger Agreement includes customary representations, warranties and covenants of the Company, Parent and Purchaser. The Company has agreed, among other things, to use commercially reasonable efforts to operate its business in the ordinary course until the time at which the Purchaser irrevocably accepts for purchase all Shares validly tendered (and not validly withdrawn) pursuant to the Offer and not to engage in specified types of transactions during such period. The Company has also agreed to customary non-solicitation restrictions, including not to solicit, facilitate or engage in discussions with third parties regarding other proposals for alternative business combination transactions

involving the Company or change the recommendation of the Company Board to the Company’s stockholders regarding the Offer, in each case, except as otherwise permitted by the Merger Agreement, including to enter into an alternative transaction that constitutes a Superior Proposal (as defined in the Merger Agreement) in compliance with the Company Board’s fiduciary duties under applicable law and subject to payment of a termination fee. Parent and Purchaser have agreed to use reasonable best efforts to take actions that may be required in order to obtain antitrust approval of the proposed transaction, subject to certain limitations.

The Merger Agreement also includes customary termination provisions for both the Company and Parent, including, among others, the right of both parties to terminate for failure to consummate the Offer on or before February 14, 2023, which date shall be extended to April 15, 2023 if the closing condition regarding the expiration of the waiting period (and any extension thereof) under the HSR Act remains unsatisfied. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, the Company will be required to pay the Parent a termination fee of $17.5 million (including under specified circumstances in connection with the Company’s entry into an agreement with respect to a Superior Proposal or the Company Board’s change of recommendation in favor of the Offer). The parties to the Merger Agreement are also entitled to specifically enforce the terms and provisions of the Merger Agreement.

For additional information related to the Merger Agreement, refer to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 filed with the SEC on October 31, 2022, together with the exhibits and annexes thereto and as amended or supplemented from time to time. Please also see “Item 1A. Risk Factors—Risks Related to Pending Transaction with Eli Lilly and Company” of this Quarterly Report on Form 10-Q.

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