Item 2.01. Completion of Acquisition or Disposition of Assets.
On January 16, 2019, AMAG Pharmaceuticals, Inc., a Delaware corporation (“AMAG”), completed its previously announced acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”) through the merger of AMAG’s wholly-owned subsidiary, Magellan Merger Sub, Inc., a Delaware corporation (“Merger Sub”), with and into Perosphere, with Perosphere continuing as the surviving entity and a wholly-owned subsidiary of AMAG (the “Merger”).
As a result of the acquisition of Perosphere, AMAG has acquired the global rights to ciraparantag, an anticoagulant reversal agent, which is being investigated for patients treated with novel oral anticoagulants or low molecular weight heparin when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding.
The Merger was completed pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 12, 2018, by and among AMAG, Merger Sub, Perosphere and Bryan E. Laulicht, as the representative of holders of Perosphere common stock, preferred stock, stock options and warrants (the “Perosphere Equityholders”). Pursuant to the Merger Agreement, AMAG paid, at the effective time of the Merger (the “Effective Time”), an upfront purchase price (the “Upfront Merger Consideration”) of approximately $50.0 million, approximately $40.0 million of which was funded from AMAG’s available cash on hand and approximately $10.0 million of which was deemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 million issued to AMAG by Perosphere in October 2018 as part of an exclusivity arrangement. The purchase price is subject to customary post-closing adjustments under the Merger Agreement. In addition to the Upfront Merger Consideration, AMAG used available cash on hand to repay $12.0 million of Perosphere’s term loan indebtedness and assumed $6.2 million of Perosphere’s other liabilities.
As previously disclosed, under and subject to the terms and conditions set forth in the Merger Agreement, AMAG is obligated to pay future contingent consideration of up to an aggregate of $365.0 million (the “Milestone Payments”), including (a) up to an aggregate of $140.0 million that becomes payable conditioned upon the achievement of specified regulatory milestones for ciraparantag (the “Regulatory Milestone Payments”), including a $40.0 million milestone payment conditioned upon approval by the European Medicines Agency and (b) up to an aggregate of $225.0 million that becomes payable conditioned upon the achievement of specified sales milestones (the “Sales Milestone Payments”). If the final label approved for ciraparantag in the United States includes a boxed warning, the Regulatory Milestone Payments shall no longer be payable, and any previously paid Regulatory Milestone Payments shall be credited against 50% of any future Milestone Payment that otherwise becomes payable. The first Sales Milestone Payment of $20.0 million will be payable conditioned upon AMAG’s reporting annual net sales of ciraparantag of at least $100.0 million.
AMAG and the Perosphere Equityholders have agreed to indemnify each other for specified matters, including breaches of the representations, warranties and covenants contained in the Merger Agreement. The survival of the parties’ respective representations and warranties generally is limited to 18 months following the Effective Time, except that certain specified “fundamental representations” will survive until 180 days after the expiration of all respective statutes of limitations. AMAG will not be entitled to any indemnification for breaches of representations and warranties of Perosphere (other than fundamental representations) except to the extent the aggregate amount of losses incurred by AMAG exceeds $250,000. At the Effective Time, $7.5 million of the Upfront Merger Consideration (the “Escrow Amount”) was deposited into an escrow fund to secure the indemnification and other obligations of the Perosphere Equityholders under the Merger Agreement, 50% of which will be released 18 months after the Effective Time and the remainder of which will be released three years after the Effective Time (in each case, less any amounts for pending or resolved indemnification claims). The indemnification obligations of the Perosphere Equityholders generally are limited to the Escrow Amount except that, in certain circumstances, amounts may be offset against the Milestone Payments to satisfy indemnification obligations of the Perosphere Equityholders.
The above description of the Merger does not purport to be complete, provides only a summary of the material terms of the Merger and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1, which is incorporated herein by reference.
The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk among the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties
and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in AMAG’s public disclosures.