Item 1.01.
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement
As previously disclosed, on April
12, 2020, Entasis Therapeutics Holdings Inc., a Delaware corporation (the “Company”), entered into a securities purchase
agreement (the “Securities Purchase Agreement”) with Innoviva, Inc. (“Innoviva”), pursuant to which the
Company agreed to issue and sell to Innoviva, in a private placement under the applicable Nasdaq Stock Market LLC rules (“Nasdaq”),
up to 14,000,000 newly issued shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”)
and warrants (the “Common Warrants”) to purchase up to 14,000,000 shares of Common Stock, with an exercise price per
share of $2.50 (the “Private Placement”). The Common Warrants, at an exercise price per share of $2.50, will be exercisable
immediately and will have a five year term. Each share of Common Stock and Common Warrant (together, a “Common Unit”)
will be issued and sold together at price per Common Unit of $2.50.
First Closing
The Private Placement is occurring
in two tranches. The first closing (the “First Closing”) occurred on April 22, 2020, at which time Innoviva purchased
1,322,510 shares of Common Stock and 1,322,510 Common Warrants, which was the maximum number of shares of Common Stock and Common
Warrants issuable to Innoviva in compliance with any and all applicable laws and without the requirement for the prior receipt
of the stockholders’ approval under the listing requirements of Nasdaq, in exchange for an aggregate gross purchase price
of approximately $3.3 million. The First Closing was subject to the satisfaction or waiver of certain previously disclosed closing
conditions (including obtaining voting agreements (the “Voting Agreements”) from stockholders of the Company representing
at least 45% of the outstanding shares of Common Stock). As of April 22, 2020, the Company had obtained Voting Agreements from
stockholders representing approximately 60.6% of the Company’s outstanding Common Stock.
Second Closing
At the closing of the second tranche
(the “Second Closing”), Innoviva will purchase 12,677,490 shares of Common Stock and 12,677,490 Common Warrants for
an aggregate purchase price of approximately $31.7 million. The Second Closing is expected to occur in the second quarter of 2020,
subject to the satisfaction of certain closing conditions previously disclosed, including the Company’s stockholders’
voting in favor of the Second Closing. At the effective time of the Second Closing, assuming the exercise of all of the Common
Warrants, Innoviva will hold approximately 67.8% of the Company’s outstanding Common Stock.
Registration Rights Agreement
At the First Closing, the Company
entered into a registration rights agreement (the “Registration Rights Agreement”) with Innoviva, pursuant to which,
among other things, the Company must prepare and file with the Securities and Exchange Commission (the “SEC”), a registration
statement with respect to resales of the shares of Common Stock and Common Warrants purchased by Innoviva under the Securities
Purchase Agreement..
Investor Rights Agreement
At the First Closing, the Company
also entered into an investor rights agreement (the “Investor Rights Agreement”) with Innoviva. The Investor Rights
Agreement provides that for so long as Innoviva and its affiliates hold at least 15% of the outstanding shares of Common Stock
on a fully-diluted basis, Innoviva shall have the right to designate two directors to the board of directors of the Company (the
“Board”), and for so long as Innoviva and its affiliates hold at least 8% of the outstanding shares of Common Stock
on a fully-diluted basis, Innoviva shall have the right to designate one director to the Board, subject to certain qualifications
and conditions in the Investor Rights Agreement. The Investor Rights Agreement also provides for participation rights for Innoviva
to participate pro rata in future offerings of securities by the Company.
The foregoing descriptions of the
Registration Rights Agreement and Investor Rights Agreement, as well as the transactions contemplated therein, do not purport to
be complete and are qualified in their entirety by reference to the full text of such agreements, copies of which are filed as
Exhibits 4.1 and 10.1, respectively, to this Current Report on Form 8-K (the “Current Report”), and incorporated by
reference herein.
The Securities Purchase Agreement,
a Form of Voting Agreement and a Form of Warrant Certificate were filed as Exhibits 10.1, 10.2 and 4.1, respectively, to the Current Report on Form 8-K, filed by the Company on April 13, 2020, and are incorporated by reference herein.