Item 1.01.
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Entry into a Material Definitive Agreement.
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Merger Agreement
On August 10, 2020, Ligand
Pharmaceuticals Incorporated (Ligand), entered into an Agreement and Plan of Merger (the Merger Agreement) with Pelican Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Ligand (Acquisition
Sub), and Pfenex Inc., a Delaware corporation (Pfenex). Ligands board of directors has unanimously approved the Merger Agreement.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Acquisition Sub has agreed to commence, no later than
August 31, 2020, a cash tender offer (the Offer) to acquire all of the outstanding shares of common stock, par value $0.001 per share, of Pfenex (the Pfenex Common Stock) for a purchase price of (i) $12.00
per share, in cash, without interest (the Cash Portion), and (ii) a non-transferrable contractual right (a CVR), pursuant to the Contingent Value Rights Agreement (as it may be
amended from time to time, the CVR Agreement), to receive a contingent payment upon the achievement of a certain milestone as set forth in the CVR Agreement and described below, without interest (the CVR Portion, and together
with the Cash Portion, the Offer Price), subject to any required tax withholding and upon the other terms and subject to the conditions of the Merger Agreement. The Offer will expire at midnight (New York City time) at the end of the day
on the date that is twenty (20) business days following the commencement of the Offer, unless extended in accordance with the terms of the Merger Agreement, including as required by the applicable rules and regulations of the U.S. Securities
and Exchange Commission.
Following the completion of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger
Agreement, Acquisition Sub will merge with and into Pfenex, with Pfenex surviving as a wholly owned subsidiary of Ligand (the Merger). The Merger Agreement contemplates that, if the Offer is completed, the Merger will be effected
pursuant to the procedure provided for under Section 251(h) of the Delaware General Corporation Law (the DGCL), which permits completion of the Merger without a vote of the Pfenex stockholders upon the acquisition by Acquisition Sub
of a majority of the aggregate voting power of Pfenex Common Stock issued and outstanding. In the Merger, each outstanding share of Pfenex Common Stock issued and outstanding immediately prior to the effective time of the Merger (the Effective
Time) (other than (i) Pfenex Common Stock owned by Ligand, Acquisition Sub or Pfenex, or any of their respective wholly owned subsidiaries, or (ii) Pfenex Common Stock held by stockholders who have validly exercised their appraisal
rights under the DGCL) will be converted into the right to receive the Offer Price, without interest, less any applicable withholding taxes.
Upon the
terms and subject to the conditions set forth in the Merger Agreement, each option to purchase shares of Pfenex Common Stock (a Pfenex Option) with an exercise price equal to or less than the Cash Portion that remains outstanding as of
immediately prior to the Effective Time, whether vested or unvested, will be cancelled and converted into a right to receive, with respect to each share of Pfenex Common stock subject to such Pfenex Option, an amount in cash, without interest, equal
to the excess, if any, of (i) the Cash Portion over the per share exercise price of such Pfenex Option, plus (ii) the CVR Portion (the Option Consideration). All Option Consideration will be paid without interest and less any
applicable tax withholdings.
Under the Merger Agreement, Acquisition Subs obligation to accept and pay for shares of Pfenex Common Stock that are
tendered in the Offer is subject to customary conditions, including, among others: (i) the condition that, prior to the expiration of the Offer, there have been validly tendered and not validly withdrawn a number of shares of Pfenex Common
Stock, that, upon the completion of the Offer, together with the shares of Pfenex Common Stock then owned by Ligand, Acquisition Sub, and Pfenex would represent at least a majority of the aggregate voting power of Pfenex Common Stock outstanding
immediately after the completion of the Offer; (ii) the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the absence of legal restraints on
Acquisition Subs ability to accept and pay for shares of Pfenex Common Stock tendered into the Offer; and (iv) certain other customary conditions set forth in the Merger Agreement. The Offer is not subject to any financing condition.
The Merger Agreement contains certain termination rights for each of Ligand and Pfenex if the Offer is not consummated on or prior to February 10, 2021.
Upon termination of the Merger Agreement under specified circumstances, including Ligands termination due to a change in the recommendation of Pfenexs board of directors, Pfenex will be required to pay to Ligand a termination fee of
$17,500,000.