Interesting items from the SEC 14D filing
Nov 23, 2015 20:04:09 GMT
CM kipper007, chuck, and 2 more like this
Post by actcfan on Nov 23, 2015 20:04:09 GMT
Few items I found interesting, not sure if they have been discussed or if people might have missed them in this long document. A few of these items I would think should be front in center in the legal case against Ocata BOD/mgmt.
1) The BOD states in their 8/31/15 meeting that the $8 offer "undervalues" Ocata. So $8 (~$375MM) undervalues but $8.50 ($396MM) is not?
On August 31, 2015, the Board held a meeting to further evaluate the Initial Proposal. Also in attendance at the meeting were members of Ocata management and representatives of Goodwin Procter. Representatives of Goodwin Procter reviewed with the Board its fiduciary duties in connection with considering a potential sale of Ocata. At the invitation of the Board, Jefferies then joined the meeting to discuss with the Board certain financial aspects of the Initial Proposal. In its consideration of the Initial Proposal, the Board reviewed Ocata’s short- and long-term business strategies and prospects as a standalone business, the competitive landscape and market trends in the industry, and the challenges confronting Ocata in achieving its strategic objectives, including Ocata’s significant capital funding needs for its ongoing clinical trials, the challenges in securing advantageous licensing partnerships to contribute to the funding of Ocata’s development operations, the performance and status of Ocata’s research and development programs, as well as the significant cost levels required to continue and maintain these programs and the long development period and inherent uncertainty in the development of the Company’s treatment programs, and in obtaining regulatory approvals for such treatments. In light of this discussion, the directors concluded that they should review the Initial Proposal in the context of Ocata’s standalone plan and possible interest from other potential strategic partners. While the Board determined to further evaluate the Initial Proposal, it concluded as a preliminary matter that Jefferies should contact Citi, and in an attempt to seek an improved price from Astellas, indicate that the Board believed that the Initial Proposal undervalued Ocata. The Board also concluded that it was not appropriate at this time to consider or respond to Astellas’ request to engage in exclusive negotiations.
On October 26, 2015, in accordance with the Board’s directives, representatives of Jefferies communicated to representatives of Citi that after considering the October 19 Proposal, the Board believed that the revised proposal still did not adequately value Ocata and its RPE program, and requested that Astellas further increase its proposed price.
2) While Wotton talked on the last CC as if the AMD delay was no big deal, it apparently was a huge deal in that the 4 month delay basically changed their situation from believing they could raise money on the back of interim results, into believing they would need to reduce their workforce and not be able to raise money in time. Basically this trial design screw up that they glossed over as no big deal put a nail in the coffin it sounds like.. How could they leave themselves so little wiggle room?
Wotton on 11/9/15 Conf Call:
Paul Wotton - President and Chief Executive Officer
Yes. Actually Caroline – this is Paul. Enrollment actually has been more rapid than we anticipated, it’s the randomization as Eddy mentioned, we just have to go back and modify the criteria. We are still expecting to get first cohort read out next summer. So that's our timeline right now.
Update from OCAT management to OCAT BOD on October 25th:
At the meeting, members of Ocata management informed the Board that Ocata was anticipating a potential delay of approximately four months in randomizing patients in its AMD Phase 2 study as a result of a higher than anticipated screen failure rate among enrolled patients against the strict entry criteria for the study. It was anticipated that there could be a corresponding delay in the Company’s ability to access capital, which previously was expected to follow delivery of interim results of the clinical study. It was not anticipated that this screening delay would delay the overall study timetable. In light of this development, the Board requested that management prepare a plan for a reduction in near-term operating expenses to account for this potential delay.
Update from OCAT management to OCAT BOD on October 29th:
Members of Ocata management reviewed with the Board management’s standalone plan, including financial forecasts that were substantially equivalent to the financial forecasts reviewed by the Board at the September 3, 2015 Board meeting except that to assist the Board and Jefferies in their review, the financial forecasts reviewed at this meeting included financial forecasts regarding Ocata’s anticipated future operations for the 11 years beyond 2023 (see “—Certain Prospective Financial Information About Ocata” on page 30 of this Schedule 14D-9 for further detail regarding Ocata’s projections). Members of Ocata management also reviewed with the Board a near-term cash preservation plan as requested by the Board at its October 25, 2015 meeting, and noted that a significant reduction in workforce likely would be required if Ocata were to remain independent in order to avoid a significant liquidity issue beginning in the fourth quarter of 2016. In this regard, the Board considered the fact that access to the capital markets for small biotech companies recently had slowed considerably, and that raising capital absent participation by company insiders and new positive pre-clinical data, and therefore at attractive valuations that would not be significantly dilutive to existing Ocata stockholders, could be difficult.
3) Who is Company A??
On January 5, 2015, to facilitate further discussions, Ocata and Company A entered into a mutual confidentiality agreement containing a standstill provision that would terminate if Ocata entered into a definitive agreement with a third party to effect a business combination.
On February 3, 2015, Ocata received a preliminary, non-binding proposal from Company A for a strategic stock-for-stock business combination of the two companies to effect a corporate inversion. The preliminary proposal provided for, among other things, a pro forma ownership in the combined company for Ocata stockholders of 55% and for Company A’s stockholders of 45%, which transaction would be funded with approximately $90 million of cash from Company A. Ocata’s chief executive officer updated the Board regarding Company A’s proposal. Following receipt of this preliminary proposal, Ocata management contacted Jefferies to inquire whether it would be available to act as a financial advisor to Ocata in connection with its evaluation of Company A’s preliminary proposal. Ocata considered Jefferies as a potential financial advisor candidate to assist and advise the Board because of Jefferies’ substantial experience in merger and acquisition transactions and its knowledge of and familiarity with Ocata and the industries in which it operates, including through its prior involvement in assisting Ocata in connection with Ocata’s proposed underwritten offering discussed above.
Between February 26, 2015 and April 7, 2015, Ocata and Company A engaged in discussions regarding Company A’s preliminary proposal. During that time, Ocata management, representatives of Jefferies and representatives of Ocata’s outside legal counsel, Goodwin Procter LLP (“Goodwin Procter”), conducted a review of Company A and the proposed transaction, particularly with respect to corporate inversion aspects.
4) Is Pfizer Company B??
October 29th article where Pfizer/Allergan confirm talks:
www.cnbc.com/2015/10/28/pfizer-allegan-considering-a-merger-dj-citing-sources.html
Between October 26, 2015 and October 29, 2015 in accordance with the Board’s directives, Jefferies contacted four additional strategic parties. One of these parties responded that it was not interested in pursuing a strategic transaction with Ocata because ophthalmology would not be a strategic fit. Two parties did not express interest in a transaction and did not give specific reasons. Jefferies had multiple conversations with a fourth party (which we refer to as “Company B”), indicating that Ocata was expected imminently to execute an agreement for a strategic transaction with a third party and that timing was of the essence. Although Company B indicated to Jefferies that it might have interest in considering a potential strategic transaction with Ocata, Company B did not promptly or actively act upon its stated interest. Ocata was aware through media reports that Company B was involved in its own evaluation of a potential strategic combination with a third party and assumed that this may in part have been a reason that its communications with Jefferies proceeded slowly.
[Nov 8th] Representatives of Jefferies noted for the Board that, while Ocata had substantially completed negotiation of a confidentiality and standstill agreement with Company B, the negotiations regarding that agreement had proceeded slowly and an agreement had not been executed between the parties. Given the slow pace of the discussions with Company B, despite repeatedly informing Company B that it would need to proceed quickly if it was interested in a strategic transaction with Ocata, the Board concluded that Company B either did not have serious interest in a strategic transaction with Ocata at this time or was unable at this time to devote the necessary resources to fully engage with Ocata.
1) The BOD states in their 8/31/15 meeting that the $8 offer "undervalues" Ocata. So $8 (~$375MM) undervalues but $8.50 ($396MM) is not?
On August 31, 2015, the Board held a meeting to further evaluate the Initial Proposal. Also in attendance at the meeting were members of Ocata management and representatives of Goodwin Procter. Representatives of Goodwin Procter reviewed with the Board its fiduciary duties in connection with considering a potential sale of Ocata. At the invitation of the Board, Jefferies then joined the meeting to discuss with the Board certain financial aspects of the Initial Proposal. In its consideration of the Initial Proposal, the Board reviewed Ocata’s short- and long-term business strategies and prospects as a standalone business, the competitive landscape and market trends in the industry, and the challenges confronting Ocata in achieving its strategic objectives, including Ocata’s significant capital funding needs for its ongoing clinical trials, the challenges in securing advantageous licensing partnerships to contribute to the funding of Ocata’s development operations, the performance and status of Ocata’s research and development programs, as well as the significant cost levels required to continue and maintain these programs and the long development period and inherent uncertainty in the development of the Company’s treatment programs, and in obtaining regulatory approvals for such treatments. In light of this discussion, the directors concluded that they should review the Initial Proposal in the context of Ocata’s standalone plan and possible interest from other potential strategic partners. While the Board determined to further evaluate the Initial Proposal, it concluded as a preliminary matter that Jefferies should contact Citi, and in an attempt to seek an improved price from Astellas, indicate that the Board believed that the Initial Proposal undervalued Ocata. The Board also concluded that it was not appropriate at this time to consider or respond to Astellas’ request to engage in exclusive negotiations.
On October 26, 2015, in accordance with the Board’s directives, representatives of Jefferies communicated to representatives of Citi that after considering the October 19 Proposal, the Board believed that the revised proposal still did not adequately value Ocata and its RPE program, and requested that Astellas further increase its proposed price.
2) While Wotton talked on the last CC as if the AMD delay was no big deal, it apparently was a huge deal in that the 4 month delay basically changed their situation from believing they could raise money on the back of interim results, into believing they would need to reduce their workforce and not be able to raise money in time. Basically this trial design screw up that they glossed over as no big deal put a nail in the coffin it sounds like.. How could they leave themselves so little wiggle room?
Wotton on 11/9/15 Conf Call:
Paul Wotton - President and Chief Executive Officer
Yes. Actually Caroline – this is Paul. Enrollment actually has been more rapid than we anticipated, it’s the randomization as Eddy mentioned, we just have to go back and modify the criteria. We are still expecting to get first cohort read out next summer. So that's our timeline right now.
Update from OCAT management to OCAT BOD on October 25th:
At the meeting, members of Ocata management informed the Board that Ocata was anticipating a potential delay of approximately four months in randomizing patients in its AMD Phase 2 study as a result of a higher than anticipated screen failure rate among enrolled patients against the strict entry criteria for the study. It was anticipated that there could be a corresponding delay in the Company’s ability to access capital, which previously was expected to follow delivery of interim results of the clinical study. It was not anticipated that this screening delay would delay the overall study timetable. In light of this development, the Board requested that management prepare a plan for a reduction in near-term operating expenses to account for this potential delay.
Update from OCAT management to OCAT BOD on October 29th:
Members of Ocata management reviewed with the Board management’s standalone plan, including financial forecasts that were substantially equivalent to the financial forecasts reviewed by the Board at the September 3, 2015 Board meeting except that to assist the Board and Jefferies in their review, the financial forecasts reviewed at this meeting included financial forecasts regarding Ocata’s anticipated future operations for the 11 years beyond 2023 (see “—Certain Prospective Financial Information About Ocata” on page 30 of this Schedule 14D-9 for further detail regarding Ocata’s projections). Members of Ocata management also reviewed with the Board a near-term cash preservation plan as requested by the Board at its October 25, 2015 meeting, and noted that a significant reduction in workforce likely would be required if Ocata were to remain independent in order to avoid a significant liquidity issue beginning in the fourth quarter of 2016. In this regard, the Board considered the fact that access to the capital markets for small biotech companies recently had slowed considerably, and that raising capital absent participation by company insiders and new positive pre-clinical data, and therefore at attractive valuations that would not be significantly dilutive to existing Ocata stockholders, could be difficult.
3) Who is Company A??
On January 5, 2015, to facilitate further discussions, Ocata and Company A entered into a mutual confidentiality agreement containing a standstill provision that would terminate if Ocata entered into a definitive agreement with a third party to effect a business combination.
On February 3, 2015, Ocata received a preliminary, non-binding proposal from Company A for a strategic stock-for-stock business combination of the two companies to effect a corporate inversion. The preliminary proposal provided for, among other things, a pro forma ownership in the combined company for Ocata stockholders of 55% and for Company A’s stockholders of 45%, which transaction would be funded with approximately $90 million of cash from Company A. Ocata’s chief executive officer updated the Board regarding Company A’s proposal. Following receipt of this preliminary proposal, Ocata management contacted Jefferies to inquire whether it would be available to act as a financial advisor to Ocata in connection with its evaluation of Company A’s preliminary proposal. Ocata considered Jefferies as a potential financial advisor candidate to assist and advise the Board because of Jefferies’ substantial experience in merger and acquisition transactions and its knowledge of and familiarity with Ocata and the industries in which it operates, including through its prior involvement in assisting Ocata in connection with Ocata’s proposed underwritten offering discussed above.
Between February 26, 2015 and April 7, 2015, Ocata and Company A engaged in discussions regarding Company A’s preliminary proposal. During that time, Ocata management, representatives of Jefferies and representatives of Ocata’s outside legal counsel, Goodwin Procter LLP (“Goodwin Procter”), conducted a review of Company A and the proposed transaction, particularly with respect to corporate inversion aspects.
4) Is Pfizer Company B??
October 29th article where Pfizer/Allergan confirm talks:
www.cnbc.com/2015/10/28/pfizer-allegan-considering-a-merger-dj-citing-sources.html
Between October 26, 2015 and October 29, 2015 in accordance with the Board’s directives, Jefferies contacted four additional strategic parties. One of these parties responded that it was not interested in pursuing a strategic transaction with Ocata because ophthalmology would not be a strategic fit. Two parties did not express interest in a transaction and did not give specific reasons. Jefferies had multiple conversations with a fourth party (which we refer to as “Company B”), indicating that Ocata was expected imminently to execute an agreement for a strategic transaction with a third party and that timing was of the essence. Although Company B indicated to Jefferies that it might have interest in considering a potential strategic transaction with Ocata, Company B did not promptly or actively act upon its stated interest. Ocata was aware through media reports that Company B was involved in its own evaluation of a potential strategic combination with a third party and assumed that this may in part have been a reason that its communications with Jefferies proceeded slowly.
[Nov 8th] Representatives of Jefferies noted for the Board that, while Ocata had substantially completed negotiation of a confidentiality and standstill agreement with Company B, the negotiations regarding that agreement had proceeded slowly and an agreement had not been executed between the parties. Given the slow pace of the discussions with Company B, despite repeatedly informing Company B that it would need to proceed quickly if it was interested in a strategic transaction with Ocata, the Board concluded that Company B either did not have serious interest in a strategic transaction with Ocata at this time or was unable at this time to devote the necessary resources to fully engage with Ocata.
