Always some interesting nuggets in the background section:
crxa/gsk
Background of the Merger
In 2000, Corixa acquired BEXXAR therapeutic regimen, which was approved by the FDA in June 2003 for the treatment of certain patients with non-Hodgkin’s lymphoma. Early in 2004, given the slow acceptance of BEXXAR in the marketplace and correspondingly low sales, Corixa’s management undertook a survey of late-stage clinical development or approved products that Corixa might in-license or acquire from third parties in order to leverage its sales force investment and increase the potential for commercial success of Corixa. An internal team of clinical oncologists, marketing, sales and licensing executives, together with an outside consultant, reviewed more than 200 late-stage clinical development or marketed product opportunities in the United States and overseas, the sales of which might be bolstered by the efforts of Corixa’s newly formed sales force. Corixa considered a number of opportunities to co-promote or in-license existing products or product candidates that were completing Phase III clinical trials. Corixa placed a priority on oncology product opportunities, but also reviewed product opportunities for supportive care of cancer patients. Corixa had discussions, and performed in-depth due diligence, regarding a number of such product opportunities, all of which were ultimately terminated by the other parties or Corixa.
On May 28, 2004, Corixa’s executive management presented these product opportunities to the Corixa board of directors, highlighting two that management felt were most appropriate for consideration by the board. These opportunities involved in one case the purchase of an existing oncology business from a diversified healthcare company and, in the other case, the acquisition of a company with an oncology supportive care product that had recently completed Phase III clinical trials. The Corixa board of directors considered and ultimately rejected these product acquisition opportunities. The board of directors concluded that the proposed business unit purchase would require a different point of call than the BEXXAR sales force and in turn would require too great an investment to provide a meaningful return. The board of directors also concluded that the supportive care product would likely not be approved in a time frame that would be of assistance in bolstering near-term product sales. At this meeting, the Corixa board of directors determined that Corixa should hire a financial advisor to assist Corixa in assessing its strategic opportunities. Specifically, the financial advisor would be asked to find potential product or company acquisition targets for Corixa, identify candidates for a potential merger of equals, and consider candidates that might be interested in purchasing Corixa or its BEXXAR therapeutic regimen program. The board of directors directed Corixa’s management to interview and identify appropriate investment banking firms for this project.
In June 2004, Corixa officers met with multiple investment banking firms, including firms with which Corixa had prior relationships and firms known to be active in biotechnology mergers and acquisitions. Corixa executive management evaluated the firms on the basis of their stated contacts within the pharmaceutical and biotechnology industry, their interest in taking on the assignment and their ability to assist Corixa in exploring its strategic alternatives. Corixa subsequently engaged Banc of America Securities LLC as its financial advisor.
From June 2004 through August 2004, in accordance with the directives of the Corixa board of directors, 34 biotechnology and pharmaceutical companies (which did not include GSK) were contacted by Corixa and Banc of America Securities regarding a potential acquisition of Corixa, acquisition of Corixa’s stake in BEXXAR or selected other assets, or a merger with or acquisition by Corixa. During this period, Corixa’s chairman and chief executive officer, Dr. Steven Gillis, coordinated with Banc of America Securities on a weekly basis and provided the Corixa board of directors with progress reports on each of June 22, July 6, July 9, July 23, July 27, and August 1, 2004.
In July and August 2004, Corixa entered into nondisclosure agreements with three of these parties and negotiated a nondisclosure agreement with a fourth party, which was not executed. One of these parties determined not to proceed with discussions after completing its due diligence and the other two parties entered into discussions with Corixa regarding a potential transaction. After multiple discussions with both of these parties, each of them determined that it was not interested in acquiring Corixa, with or without the BEXXAR therapeutic regimen. These parties were also not interested in acquiring the BEXXAR therapeutic regimen by itself. The primary reasons given by these parties for their determination not to move forward with a transaction included Corixa’s cash burn rate, general concerns regarding the commercial potential of radioimmunotherapy, the perceived market potential for BEXXAR, and the early development profile of Corixa’s other proprietary programs.
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In July 2004, Corixa announced execution of a long-term MPL adjuvant supply agreement with GSK that, subject to certain conditions, guaranteed increasing sales of MPL to GSK through 2012. MPL is Corixa’s flagship adjuvant designed to increase the effectiveness of vaccines, including vaccines manufactured and sold by GSK. The agreement provided for GSK’s eventual purchase of the then-maximum MPL output from Corixa’s Hamilton, Montana facility and was assignable by Corixa to a third-party acquiror of Corixa or Corixa’s business. The agreement also provided for a price increase in MPL, as well as guaranteed annual price increases based on cost of living adjustments. The agreement further extended the royalty term under which royalties would be paid to Corixa upon the sale of GSK vaccines containing MPL, and provided GSK with a license to produce MPL in a second facility in any year in which GSK had purchased the maximum output from the Hamilton, Montana facility.
In connection with the MPL supply agreement, GSK and Corixa agreed to amend an existing $5,000,000 outstanding loan from GSK to Corixa such that Corixa may repay the loan in cash or 1,099,000 shares of Corixa common stock, at approximately $4.55 per share, which was the average per share closing price of Corixa common stock on The Nasdaq National Market for the 30-day trading period immediately preceding the effective date of the MPL supply agreement.
On August 13, 2004, Banc of America Securities informed Dr. Gillis that the remaining companies from the original list of 34 had either failed to convey further interest in discussions with Corixa or had declined interest in discussions with Corixa regarding a merger, acquisition or selected asset purchase, including the purchase of Corixa’s rights to BEXXAR. Dr. Gillis reported this discussion to the Corixa board of directors later that day.
On September 9, 2004, at the Corixa board of directors meeting, the board and executive management had further discussions regarding remaining opportunities for increasing stockholder value.
On October 4, 2004, Orrick Herrington & Sutcliffe, LLP, Corixa’s outside counsel, furnished to the board of directors a package of memoranda regarding the board of directors’ fiduciary duties and other considerations in the context of a potential strategic transaction.
On October 6, 2004, the Corixa board of directors held a special meeting to discuss strategies for protecting and enhancing stockholder value in light of the limited interest that Corixa had received in connection with a strategic transaction and its continued stock price decline at the time. For information on Corixa’s stock price through the periods discussed in this section, see “MARKET PRICE AND DIVIDEND DATA” on page 8. The alternatives discussed and considered included (a) the purchase of GSK’s interest in the BEXXAR therapeutic regimen in order to consolidate future BEXXAR sales and earnings within Corixa, (b) the sale of Corixa’s interest in the BEXXAR therapeutic regimen to GSK or another third party in order to eliminate the costs associated with BEXXAR commercialization, including maintaining the Corixa sales force and performing Food and Drug Administration mandated clinical trials, and (c) the sale or spin-off of Corixa’s non-BEXXAR, or non-oncology, assets to a third party. The board of directors also considered and discussed financing alternatives to raise additional funds to sustain Corixa while it pursued the commercialization of BEXXAR and other proprietary programs, including a follow-on offering of common stock as a private placement of common stock, but ultimately determined that such a financing transaction was unlikely and unattractive in light of Corixa’s stock price and capital market conditions for small-capitalization biotechnology companies. The board of directors also concluded that consolidation of all BEXXAR rights within Corixa was too risky and unlikely to enhance stockholder value in the near term given the slow pace of market acceptance of BEXXAR and the continuing cash burn associated with further BEXXAR development. Accordingly, the board of directors determined that the sale of Corixa’s rights to BEXXAR to a third party or to GSK was preferable to other alternatives.
In October 2004, Corixa discussed with GSK various alternatives to address the significant expense associated with continued commercialization of BEXXAR, including the sale of the program to GSK and purchase of the entire program from GSK followed by a subsequent sale of all BEXXAR rights to a third party. GSK provided Corixa with input as to potential pricing at which it might consider selling its share of the BEXXAR rights. Corixa and GSK discussed, but were unable to agree on, a price for these rights. The parties also discussed the possible joint abandonment of further BEXXAR clinical and commercial development.
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On October 29, 2004, Corixa entered into a nondisclosure agreement with GSK with respect to a potential transaction in which GSK would acquire from Corixa all of the assets associated with the BEXXAR therapeutic regimen. In early November 2004, GSK and Corixa agreed in principle on certain financial terms for such a transaction, subject to board approval, due diligence and negotiation of mutually acceptable definitive documentation. On November 11, 2004, the Corixa board of directors met and discussed the potential transaction with GSK. The Corixa board of directors directed management to move forward with negotiations of a transaction to sell Corixa’s rights in the BEXXAR therapeutic regimen to GSK. During these negotiations with GSK, Corixa was approached by a new party with respect to a strategic transaction and began negotiating a nondisclosure agreement with this party, but the party failed to respond after initial negotiations over the terms of the nondisclosure agreement.
On December 12, 2004, a special meeting of the Corixa board of directors was held and the proposed asset sale to GSK was approved. On the same day, Corixa and SKB entered into an Asset Purchase Agreement with respect to the sale of all of the assets relating to the BEXXAR program to SKB. Corixa also announced a significant reduction in force based on its coincident decisions to eliminate Corixa’s sales and marketing organizations as well as the decision to reduce and re-direct its other research and development efforts away from oncology product development. The restructuring eliminated approximately 160 filled and unfilled positions and represented the fourth restructuring Corixa had undertaken since the acquisition of Coulter Pharmaceutical, Inc. and BEXXAR in December 2000. In conjunction with the restructuring, Corixa announced its intention to re-orient Corixa’s efforts to focus on its adjuvant business, as well as further development of a proprietary class of compounds that affect innate immunity through interaction with toll-like receptor 4. The transaction closed on December 31, 2004.
On December 22, 2004, the chief executive officer of GSK, Dr. J-P Garnier, contacted Dr. Gillis to discuss the possibility of GSK purchasing Corixa’s adjuvant manufacturing plant in Hamilton, Montana. Dr. Gillis indicated that such a transaction would be problematic for Corixa given the importance of the Montana asset and adjuvant business to Corixa, particularly following its sale of the BEXXAR program and associated exit from oncology product development. Dr. Gillis suggested that if GSK wanted access to additional MPL that Corixa might be willing to invest in additional manufacturing facilities and infrastructure in Montana, if GSK would guarantee the purchase of the output of such additional manufacturing facilities or, alternatively, that GSK could consider an acquisition of Corixa in its entirety. Dr. Garnier suggested that Dr. Gillis contact GSK executives responsible for operation of GSK Biologicals in Rixensart, Belgium (GSK’s vaccine development organization) early in the new year to further discuss these possibilities.
In January 2005, Corixa requested Banc of America Securities to identify a list of immune system regulator and innate immunity companies that might be interested in acquiring or combining with Corixa. Banc of America Securities, working with Corixa management, identified 18 such companies that had not been previously approached, and which the working group believed would be most likely to be interested in acquiring or combining with Corixa and, in accordance with Corixa’s instructions, began contacting them to discuss a potential strategic transaction with Corixa, including a potential merger with Corixa. Corixa also discussed with Banc of America Securities capital market conditions and possible financing alternatives, which were ultimately deemed inadvisable at the time in light of Corixa’s stock price and capital market conditions for small-capitalization biotechnology companies.
On January 24, 2005, Dr. Gillis and Corixa’s chief operating officer, David Fanning, together with Corixa manufacturing executives, met with GSK Biologicals regarding the possibility of Corixa’s future expansion of its manufacturing facilities and increased supply of the MPL adjuvant to GSK. During this meeting, the parties discussed alternatives that included an arrangement whereby GSK would guarantee its purchase of the output of expanded manufacturing facilities in Hamilton, Montana and a potential acquisition by GSK of Corixa. The parties also acknowledged that these discussions had arisen due to GSK’s active interest in purchasing the Hamilton, Montana plant. Corixa provided GSK with certain information obtained from publicly available sources regarding premiums paid in comparable acquisition transactions. On February 15, 2005, Dr. Gillis and Dr. Garnier spoke again about the potential for increasing the manufacturing capacity of the Hamilton, Montana plant and the potential of GSK’s
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acquisition of Corixa itself. Dr. Garnier indicated to Dr. Gillis that he would discuss the alternatives internally at GSK and provide a further update on GSK internal deliberations to Dr. Gillis by February 25, 2005.
On February 22, 2005, during Corixa’s regularly scheduled board meeting, management described its and Banc of America Securities’ ongoing efforts to identify potential strategic transaction partners for Corixa as well as the status of discussions with GSK. Also at this meeting, Dr. Gillis reviewed with the Corixa board of directors certain historical information compiled by Banc of America Securities from publicly available sources regarding premiums paid in acquisition transactions in the biotechnology industry over the four-year period ending in May 2004 with transaction values greater than $20,000,000, which, for all-cash transactions, showed an average premium paid over the trading price of the targets’ stock on the date that was one-day, one-week, one-month and one-year prior to the public announcement of such transactions of approximately 36%, 50%, 66.2% and 95.9%, respectively.
On February 25, 2005, Dr. Gillis received a phone call from Dr. Garnier indicating that GSK was proceeding with a financial analysis of both the acquisition and manufacturing expansion alternatives. With respect to the manufacturing expansion, Dr. Garnier indicated that GSK would be willing to provide low-cost financing for such expansion and would guarantee expanded plant MPL purchases, but that precise details would have to be negotiated with GSK Biologicals executives. Dr. Garnier requested that Corixa authorize initial expenditures on expanded plant design. On February 28, 2005, Dr. Gillis provided an update to the Corixa board of directors regarding the status of discussions with GSK, and requested and received by email board approval from each director to spend up to $350,000 on expanded Hamilton, Montana plant design activities.
On March 1, 2005, Dr. Gillis and Mr. Fanning spoke with GSK Biologicals executives regarding the expansion of the Hamilton, Montana plant and, on March 8, 2005, provided representatives of GSK and GSK Biologicals with a proposed term sheet calling for GSK financing of plant construction, a tripling of the manufacturing capacity at the Hamilton, Montana manufacturing plant and guaranteed GSK purchase of a vast majority of the expanded plant’s MPL output.
On March 3, 2005, a nondisclosure agreement concerning GSK and its affiliates was executed between SKB and Corixa regarding further discussions.
On March 7, 2005, a nondisclosure agreement was executed between Corixa and a small-capitalization biotechnology company that was one of the previously identified 18 companies. This company was subsequently provided with certain non-public financial information concerning Corixa, but did not respond further following its receipt of this financial information.
On March 15, 2005, an executive management team from Corixa met with representatives from both GSK’s and GSK Biologicals’ teams at Corixa’s headquarters in Seattle, Washington to negotiate the business terms of an agreement whereby GSK would agree to a guaranteed purchase of an increased amount of the MPL adjuvant in exchange for Corixa’s agreement to expand the Hamilton, Montana manufacturing plant, but were unable to agree on terms. The parties also discussed the alternative of GSK’s acquisition of Corixa and reviewed certain of GSK’s assumptions regarding the costs that would be incurred in connection with such an acquisition. On March 19, 2005, Dr. Gillis provided a status update to the Corixa board of directors regarding management’s discussions with GSK regarding potential transactions.
In late March and early April 2005, Banc of America Securities representatives informed Corixa that the additional 18 companies that had been contacted had not expressed any further interest in pursuing a strategic transaction with Corixa. Banc of America Securities explained that the reasons given by such parties for their lack of interest in further discussion included the early development stage of many of Corixa’s proprietary products, the competitive programs of the contacted companies and the likelihood that any new entity formed as a result of a transaction with Corixa would need to seek additional financing in an uncertain market environment. Dr. Gillis contacted two additional companies directly, one of which, a large pharmaceutical company, declined interest in discussions with Corixa and the second of which, a biotechnology company, failed to respond after initial contact.
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On April 1, 2005, a meeting was held between Corixa and a private biotechnology company regarding a potential business combination. As a result of the meeting, Corixa determined that the combination would not provide a satisfactory strategic opportunity as it would result in an increased cash burn rate without providing commercially available products in the near term. The parties executed a nondisclosure agreement on April 13, 2005, but no further discussions took place.
On April 11, 2005, Dr. Garnier contacted Dr. Gillis and indicated that GSK was more interested in an acquisition of Corixa than the guaranteed supply agreement transaction. Dr. Gillis suggested the parties meet in the near term to pursue further discussions and indicated that Corixa might consider a transaction relating to the sale of the plant alone, but only if the parties were unable to arrive at satisfactory terms for GSK’s acquisition of Corixa as a whole.
On April 14, 2005, Corixa held a telephonic board of directors meeting to discuss the status of discussions with GSK. Dr. Gillis also discussed with the board the option of pursuing a sale of the Hamilton, Montana plant alone if SKB and Corixa were unable to arrive at satisfactory terms relating to GSK’s acquisition of Corixa. The board of directors directed Corixa’s management to proceed with discussions with GSK. On that day, Corixa and Banc of America Securities also discussed via conference call a strategy for Corixa’s upcoming negotiations with GSK.
On April 19, 2005, Dr. Gillis and Corixa’s chief financial officer, Michelle Burris, met Dr. Garnier and additional representatives of GSK’s and GSK Biologicals’ management teams in Philadelphia, along with representatives from Banc of America Securities, and the parties discussed general terms of an acquisition of Corixa. The parties also briefly discussed the possibility of GSK buying the Hamilton, Montana plant separately, but the parties were far apart on terms for an acquisition of the Hamilton, Montana plant. The parties negotiated the price that would be paid by GSK in an acquisition of Corixa, including the possibility of a portion of the consideration being contingent upon the occurrence of future events. Ultimately, the parties agreed to take to their respective boards a proposed acquisition of Corixa at a price per share for Corixa common stock of $4.40, subject to due diligence, approval by both boards and negotiation of additional terms and conditions to be embodied in mutually satisfactory definitive documentation. Later that day, Dr. Gillis called a special telephonic board of directors meeting to discuss the terms that were discussed with GSK and to assess the board of directors’ support of the proposed acquisition price. Dr. Gillis and Ms. Burris, in response to a question from the board, expressed their view that, based on discussions with GSK, additional price negotiations were unlikely to be successful, as GSK had indicated that it would not increase its price beyond $4.40 per share. The Corixa board of directors expressed its support for the proposed transaction and directed management to move forward with due diligence and negotiation of final terms and documentation to bring back to the Corixa board for consideration and approval.
On April 23, 2005, Orrick distributed a draft of the merger agreement to GSK and its counsel.
On April 24, 2005, GSK and its counsel began due diligence on Corixa at Orrick’s Seattle office, which continued until April 28, 2005. On April 26, 2005, GSK conducted due diligence on Corixa’s plant in Hamilton, Montana.
Between April 24, 2005 and April 29, 2005, Corixa, GSK and each party’s counsel negotiated the terms of the merger agreement, including, among other things, the scope, nature and language for representations and warranties to be made by each party, the conditions to closing, certain aspects of the material adverse effect definition, certain terms of the Corixa board’s right to hold discussions with other potential acquirors and to withdraw its recommendation of the merger in certain cases and the amount and triggers of the termination fee payable by Corixa, the possibility of a breakup fee payable by SKB and whether, if so, it would be the sole remedy for a breach by SKB, the representations and covenants regarding possible expansion of the Hamilton, Montana plant and other covenants of Corixa regarding its operations between the date of the merger agreement and the effective time of the merger.
On April 25, 2005, Dr. Gillis distributed a draft of the proposed merger agreement to the Corixa board of directors for its review and consideration.
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On April 27, 2005, the GSK board approved proceeding with the transaction and negotiating final documentation.
On April 28, 2005, the Corixa board of directors held a special meeting to discuss the proposed transaction. At this meeting, Banc of America Securities reviewed with the board of directors financial aspects of the transaction. The board of directors also received an update from Corixa’s management and outside counsel on the status of negotiations of the merger agreement and the support agreements that would be required from certain holders of Corixa common stock. The board also discussed the treatment of Corixa’s preferred stock and other common stock equivalents in the merger. On April 28, 2005, the board of directors received for review an updated draft of the merger agreement and the support agreements.
At approximately 1:00 p.m. Pacific time on April 29, 2005, the Corixa board of directors held another special meeting and discussed the proposed transaction with management and Corixa’s legal and financial advisors. Also at this meeting, Banc of America Securities reviewed with the Corixa board of directors its financial analysis of the merger consideration and delivered to the Corixa board an oral opinion, which was confirmed by delivery of a written opinion dated April 29, 2005, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the merger consideration to be received by holders of Corixa common stock (other than SKB and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Based on the considerations and reasons described below, the board of directors unanimously concluded that the GSK proposal was in the best interests of Corixa’s stockholders and, accordingly, approved the merger agreement and related transactions.
Following the market close and the Corixa board meeting on April 29, 2005, SKB and Corixa executed the merger agreement and Corixa and GSK issued press releases announcing the proposed transaction. |
