Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On
August 7, 2017, Galena Biopharma, Inc., a Delaware corporation (
Galena
), SELLAS Life Sciences Group Ltd, a Bermuda exempted company (
SELLAS
), Sellas Intermediate Holdings I, Inc., a Delaware
corporation and a wholly-owned subsidiary of Galena (
Holdings I
), Sellas Intermediate Holdings II, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings I (
Holdings II
) and Galena
Bermuda Merger Sub, Ltd., a Bermuda exempted company and a wholly-owned subsidiary of Holdings II (
Merger Sub
), entered into an Agreement and Plan of Merger and Reorganization (the
Merger
Agreement
), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SELLAS, with SELLAS becoming an indirect wholly-owned
subsidiary of Galena and the surviving corporation of the merger (the
Merger
). The SELLAS shareholders and Galena will treat the Merger as a taxable sale and purchase of the shares of SELLAS for all U.S. federal, state and
local income tax purposes unless otherwise required by applicable legal requirements. The Merger is not expected to be a taxable transaction to stockholders of Galena, and the shares of Galena common stock, par value $0.0001 per share (the
Galena Common Stock
), held by Galena stockholders will remain outstanding after the Merger.
Subject to the
terms and conditions of the Merger Agreement, at the effective time of the Merger (the
Effective Time
), (a) each outstanding share of SELLAS (excluding shares held by Galena, Merger Sub or SELLAS and dissenting shares) will
be converted into the right to receive shares of Galena Common Stock based on an exchange ratio specified in the Merger Agreement after giving effect to the reverse stock split discussed below and (b) each outstanding SELLAS stock option and
restricted stock unit award will be assumed by Galena. No fractional shares will be issued in connection with the Merger and Galena will pay cash in lieu of any such fractional shares. Immediately following the Effective Time, (a) Galena
stockholders immediately prior to the Effective Time are expected to own approximately 32.5% of the aggregate number of shares of Galena Common Stock, (b) SELLAS shareholders immediately prior to the Effective Time are expected to own
approximately 67.5% of the aggregate number of shares of Galena Common Stock, each calculated on a fully-diluted basis for the combined company, except for the exclusion of 2,556,851
out-of-the
money Galena warrants. Though the allocation percentage between SELLAS and Galena will remain the same, both SELLAS and Galena are subject to dilution from
(i) any shares of Galena Common Stock issued in connection with a potential third party financing that SELLAS has consented to, and (ii) Galena Common Stock underlying certain Galena warrants (other than the warrants outstanding as of
immediately prior to the Effective Time that were issued by Galena under the Warrant Agreement dated February 13, 2017). Upon closing of the Merger, the name of the combined company will become SELLAS Life Sciences Group, Inc. and shares of the
combined company are expected to continue trading on the NASDAQ Capital Market under a new the ticker symbol, SLS.
Consummation of the
Merger is subject to customary closing conditions for transactions of this type. The Merger Agreement contains specified termination rights for both Galena and SELLAS, and further provides that, upon termination of the Merger Agreement under
specified circumstances, either party may be required to pay the other party a termination fee of $750,000 and, under specified circumstances, reimbursement for various expenses incurred up to a maximum of $100,000.
In connection with the Merger, Galena will seek stockholder approval of:
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the change of control of Galena resulting from the Merger;
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the issuance of shares of Galena Common Stock to the SELLAS shareholders pursuant to the terms of the Merger Agreement;
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an amendment of Galenas certificate of incorporation to effect the reverse stock split at a ratio of
30-for-one
or as otherwise
mutually agreed by Galena and SELLAS;
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the amendment and restatement of Galenas bylaws to update them;
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if certain conditions are met, a new equity incentive plan and a new employee stock purchase plan for the combined company post-Merger; and
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an amendment to Galenas certificate of incorporation to allow the Galena board of directors to approve amendments to Galenas bylaws (currently, only stockholders have this right).
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Pursuant to the Merger Agreement, at the Effective Time, the board of directors of the combined company is expected to consist of seven
members, five designated by SELLAS, two of whom will be independent directors, and two designated by Galena subject to SELLAS approval. The current Chief Executive Officer of SELLAS, Angelos Stergiou, M.D., ScD h.c., is expected to serve as
Chief Executive Officer of the combined company as of the Effective Time.
Pursuant to the terms of the Merger Agreement, all warrants of
Galena will remain outstanding pursuant to their terms. Galena stock options (
Galena Options
) are to remain outstanding after the Merger pursuant to their original terms, except that if a holder of a Galena Option (other
than a holder who is a member of the Galena board of directors) is terminated other than for cause within the meaning of the Galena 2016 Incentive Plan, then any Galena Options held by such holder may be exercised for a period of time equal to the
lesser of (i) one year (formerly three months) after such termination and (ii) the original expiration date of the Galena Option.
In accordance with the terms of the Merger Agreement, (a) officers and directors of Galena owning or controlling, in the aggregate, less
than 1% of the outstanding Galena Common Stock, have each entered into support agreements with SELLAS (the
Galena Support Agreements
), and (b) officers, directors and specified shareholders of SELLAS owning or
controlling, in the aggregate, approximately 71% of SELLASs outstanding capital stock, have each entered into support agreements with Galena (the
SELLAS Support Agreements
, together with the Galena Support Agreements,
the
Support Agreements
). The Support Agreements place certain restrictions on the transfer of the shares of Galena and SELLAS held by the respective signatories and include covenants as to the voting of such shares in favor
of approving the transactions contemplated by the Merger Agreement and against taking specified actions that could adversely affect the consummation of the Merger.
The preceding summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, the form of
Galena Support Agreement and the form of SELLAS Support Agreement, which are filed as Exhibits 2.1, 10.1 and 10.2, respectively, to this Current Report on
Form 8-K
and which are incorporated
herein by reference.
JGB Consent
On August 7, 2017, Galena and JGB (Cayman) Newton Ltd., a Cayman Islands exempted company (the
Holder
) entered
into a Consent (the
Consent
) to that certain Amended and Restated 9% Original Issue Discount Senior Secured Debenture due November 10, 2018 (the
Debenture
) in the original principal amount of
$25,350,000. Pursuant to the terms of the Consent, the Holder consented to Galenas entry into the Merger Agreement and the Merger. In addition, the Consent amends the terms of the Debenture as follows:
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(a)
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Galena shall not prepay all or any portion of the Debenture prior to the first anniversary of the consummation of the Merger.
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(b)
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The Holder may increase the dollar amount of the Monthly Allowance up to the outstanding principal balance of the Debenture by written notice to Galena and may deliver an unlimited number of Holder Redemption Notices
during any calendar month.
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(c)
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To the extent commercially reasonable under the circumstances the Holder shall limit the Holder Redemption Amounts for any given Trading Day to fifteen percent (15%) of the greater of (1) the daily dollar trading
volume for the Common Stock on the Principal Market (or other applicable Trading Market) for such Trading Day and (2) the average daily dollar trading volume for the Common Stock on the Principal Market (or other applicable Trading Market) for
the five (5) consecutive Trading Days preceding such Trading Day.
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In addition, upon consummation of the Merger, SELLAS shall enter into a joinder to the Subsidiary
Guaranty (but shall not be required to execute a joinder to the Security Agreement).
The foregoing description of the material terms of
the Consent does not purport to be complete and is qualified in its entirety by reference to the Consent, which is filed as Exhibit 10.3 on this Current Report on Form
8-K
and which is incorporated herein by
reference.
Additional Information about the Proposed Merger between Galena and SELLAS and Where to Find It
In connection with the proposed merger, Galena and SELLAS intend to file relevant materials with the Securities and Exchange Commission (the
SEC
), including a registration statement on Form
S-4
that will contain a proxy statement / prospectus / information statement.
Galena and SELLAS will mail the final proxy statement
/ prospectus / information statement to their respective stockholders.
Investors and stockholders of Galena and SELLAS are urged to read these materials when they become available because they will contain important information about Galena,
SELLAS and the proposed Merger.
The proxy statement / prospectus / information statement and other relevant materials (when they become available), and any other documents filed by Galena with the SEC, may be obtained free of charge at the SEC
web site at
www.sec.gov
. In addition, copies of the documents filed with the SEC by Galena will be available free of charge on the Companys website at
www.galenabiopharma.com
(under Investors
Financials) or by directing a written request to: Galena Biopharma, Inc., 2000 Crow Canyon Place, Suite 380, San Ramon, CA 94583, Attention: Investor Relations or by email to
ir@galenabiopharma.com
. Investors and stockholders are urged to read the proxy statement / prospectus / information statement and the
other relevant materials when they become available before making any voting or investment decision with respect to the proposed Merger.
Non-Solicitation
This communication shall not constitute an offer to sell or the solicitation of an
offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities in connection with the proposed Merger shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
Galena
and its directors and executive officers and SELLAS and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Galena in connection with the proposed transaction. Information
regarding the special interests of these directors and executive officers in the proposed Merger will be included in the proxy statement / prospectus / information statement referred to above. Additional information regarding the directors and
executive officers of Galena is also included in the Galena Annual Report on Form 10-K for the year ended December 31, 2016 and the proxy statement for its 2017 Annual Meeting of Stockholders, which was filed with the SEC on April 20, 2017.
These documents are available free of charge at the SECs website (
www.sec.gov
) the Investors section of Galenas website at the address above and from Investor Relations at Galena at the addresses provided above.
Forward-Looking Statements
This Form
8-K
contains statements that include the words expect, intend, plan, believe, project, estimate, may, should,
anticipate, will and similar statements of a future or forward looking nature identify forward-looking statements for purposes of the federal securities laws and otherwise. Forward-looking statements are neither historical
facts nor assurances of future performance.
All statements, other than statements of historical facts, included in this Form
8-K
regarding strategy, future operations, future financial position, prospects, plans and objectives of management are forward-looking statements. Examples of such statements include, but are not limited to,
statements relating to the structure, timing and completion of the proposed Merger; the combined companys listing on the NASDAQ Capital Market after closing of the proposed Merger; expectations regarding the capitalization, resources and
ownership structure of the combined company; the combined companys ability to successfully initiate and complete clinical trials; anticipated milestones; the nature, strategy and focus of the combined company; the development and commercial
potential of
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any product candidates of the combined company; the executive and board structure of the combined company; and expectations regarding voting by Galenas and SELLAS stockholders. The
combined company may not actually achieve the plans, carry out the intentions or meet the expectations or projections disclosed in the forward-looking statements and you should not place undue reliance on these forward-looking statements. Such
statements are based on managements current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors, including,
without limitation, risks and uncertainties associated with stockholder approval of and the ability to consummate the proposed Merger through the process being conducted by Galena and SELLAS, the ability to project future cash utilization and
reserves needed for contingent future liabilities and business operations, the availability of sufficient resources of the combined company to meet its business objectives and operational requirements, the fact that the results of earlier studies
and trials may not be predictive of future clinical trial results, the protection and market exclusivity provided by SELLAS intellectual property, risks related to the drug discovery and the regulatory approval process and the impact of
competitive products and technological changes. Additional risks and uncertainties relating to Galena and its business can be found under the caption Risk Factors and elsewhere in the Companys SEC filings and reports, including in
Galenas Annual Report on Form
10-K,
filed with the SEC on March 15, 2017 and the Quarterly Report on Form
10-Q,
filed with the SEC on May 10, 2017 and in
subsequently filed Form
10-Qs.
Galena and SELLAS each disclaim any intent or obligation to update these forward-looking statements to reflect events or circumstances that exist after the date on which they
were made.