Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On November 13, 2022, Opiant Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Indivior Inc., a Delaware corporation (“Parent”), and Olive Acquisition Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Pursuant to the Merger Agreement and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, whereupon the separate corporate existence of Merger Sub shall cease and the Company shall survive as a wholly owned subsidiary of Parent (the “Merger”).
At the effective time of the Merger (the “Effective Time”), by virtue of the Merger and without any action on the part of the parties or the holders of any securities of the parties, each of share common stock, par value $0.001 (the “Company Common Stock”) of the Company issued and outstanding immediately prior to the Effective (other than Cancelled and Dissenting Shares (as such terms are defined in the Merger Agreement)) shall be automatically converted into the right to receive (i) $20.00 net to the seller in cash, without interest (the “Upfront Consideration”) and (ii) one contingent value right per share (a “CVR”) which shall represent the right to receive the Milestone Payment Amounts (as defined in the CVR Agreement), net to the seller in cash, without interest at the times provided in the CVR Agreement (as defined below).
At or prior to the Effective Time, Parent and a rights agent selected by Parent and the Company will enter into a contingent rights agreement (the “CVR Agreement”), a form of which is attached to the Merger Agreement, governing the terms of each CVR. Each CVR entitles the holder thereof to receive four contingent cash payments with an aggregate maximum amount payable of $8.00, without interest (each, a “Milestone Payment”) if the following milestones are achieved:
•$2.00 per CVR upon achievement of net sales of OPNT003 of $225 million or more during any period of four consecutive quarters prior to the seventh anniversary of the U.S. commercial launch of OPNT003.
•$2.00 per CVR upon achievement of net sales of OPNT003 of $250 million or more during any period of four consecutive quarters prior to the third anniversary of the U.S. commercial launch of OPNT003.
•$2.00 per CVR upon achievement of net sales of OPNT003 of $300 million or more during any period of four consecutive quarters prior to the seventh anniversary of the U.S. commercial launch of OPNT003.
•$2.00 per CVR upon achievement of net sales of OPNT003 of $325 million or more during any period of four consecutive quarters prior to the seventh anniversary of the U.S. commercial launch of OPNT003.
The foregoing description of the CVR Agreement does not purport to be complete and is qualified in its entirety by the full text of the CVR Agreement, a copy of which is included as an exhibit to the Merger Agreement attached hereto as Exhibit 2.1 and incorporated by reference herein.
Effective immediately prior to the Effective Time, by virtue of the Merger, each option to purchase Company Common Stock granted under any Company Equity Plan (as defined in the Merger Agreement) or otherwise (each, a “Company Stock Option”), that is outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, shall be cancelled and terminated and treated as follows:
•with respect to each Company Stock Option that has a per share exercise price that is less than or equal to the Upfront Consideration (each, an “In the Money Option”), converted into the right of the holder to receive (without interest, and less any applicable withholding taxes) (i) an amount in cash equal to the product of (A) the excess, if any, of the Upfront Consideration over the applicable per share exercise price of such cancelled In the Money Option multiplied by (B) the number of shares of Company Common Stock subject to such In the Money Option immediately prior to the Effective Time; and (ii) a CVR with respect to each share of Company Common Stock subject to such In the Money Option immediately prior to the Effective Time.
•with respect to each Company Stock Option which has a per share exercise price that is greater than the Upfront Consideration but less than $28.00 (each, an “Out of the Money Option”), converted into the right of the holder to receive (without interest, and less any applicable withholding taxes) such cash payments, if any, from Parent with respect to each share of Company Common Stock subject to the Out of the Money Option upon any Milestone Payment Date, equal to the product of (i) (a) the amount by which the Per Share Value Paid (as defined in the Merger Agreement) as of the Milestone Payment Date exceeds the exercise price payable per share of Company Common Stock under such Out of the Money Option, less (b) the amount per share of Company Common Stock of all payments previously made with respect to such Out of the Money Option, multiplied by (ii) the number of shares of Company Common Stock subject to such Out
of the Money Option as of immediately prior to the Effective Time. If no contingent payment becomes payable with respect to the CVRs under the CVR Agreement that would result in the Per Share Value Paid as of the applicable Milestone Payment Date exceeding the exercise price per share of such Out of the Money Option, then no payment shall be made hereunder in respect of such Out of the Money Option following the Effective Time.
•with respect to each Company Stock Option which has a per share exercise price that is equal to or greater than $28.00 (each, an “Underwater Option”), cancelled at the Effective Time without any consideration.
Effective as of immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof:
•each award of restricted stock units that corresponds to Company Common Stock granted under any Company Equity Plan or otherwise that vests solely on the passage of time (each, a “Company RSU Award”) that is outstanding immediately prior to the Effective Time shall be automatically cancelled and terminated and converted into the right of the holder thereof to receive (without interest, and less any applicable withholding taxes): (i) an amount in cash equal to the product of (A) the Upfront Consideration multiplied by (B) the number of shares of Company Common Stock subject to such Company RSU Award immediately prior to the Effective Time; and (ii) a CVR with respect to each share of Company Common Stock subject to such Company RSU Award immediately prior to the Effective Time.
•each award of restricted stock units, performance stock units or performance units that corresponds to Company Common Stock granted under any Company Equity Plan or otherwise and that vests based on the achievement of performance goals (each, a “Company PSU Award”) that is outstanding immediately prior to the Effective Time shall automatically be cancelled and terminated and converted into the right of the holder thereof to receive (without interest, and less any applicable withholding Taxes) in accordance with the terms of the Merger Agreement and subject to achievement (or deemed achievement) of the applicable thresholds for vesting under the Company PSU Award (i) an amount in cash equal to the product of (A) the Upfront Consideration multiplied by (B) the Company PSU Shares (as defined in the Merger Agreement) and (ii) a CVR with respect to each Company PSU Share.
In addition, pursuant to the terms of the Merger Agreement, from and after the Effective Time, each outstanding and unexercised warrant to purchase shares of Company Common Stock (a “Company Warrant”), by virtue of the Merger and without any action on the part of Parent, will no longer be exercisable by the former holder thereof, shall be cancelled and shall only entitle such holder to receive (a) a cash payment equal to (i) the excess, if any, of (A) the Upfront Consideration over (B) the exercise price payable per share of Company Common Stock under such Company Warrant, multiplied by (ii) the number of shares of Company Common Stock such holder could have purchased (assuming full vesting of all warrants) had such holder exercised such Company Warrant in full immediately prior to the Effective Time, and (b) a CVR with respect to each share of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time.
The Merger is subject to customary closing conditions, including the (i) absence of certain legal impediments, (ii) the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) clearance by the Committee on Foreign Investment in the United States, (iv) the resolution or conclusion, of any informal enquiry by, and in the case of a formal review, clearance and approval from the Competition and Markets Authority in the United Kingdom (“CMA”) under the United Kingdom Enterprise Act 2002, as amended, and (v) the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote upon the adoption of the Merger Agreement (the “Company Stockholder Approval”).
The Merger Agreement contains customary representations, warranties and covenants of each party, including covenants of the Company (i) to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the closing of the Merger, (ii) not to engage in specified types of transactions during such closing period unless agreed to in writing by Parent, (iii) to convene and hold a meeting of its stockholders for the purpose of obtaining the Company Stockholder Approval, and (iv) subject to certain exceptions, not to withdraw, qualify or modify in a manner adverse to Parent or Merger Sub the recommendation of the Board of Directors of the Company (the “Board”) that the Company’s stockholders adopt the Merger Agreement.
Subject to certain limited exceptions, the Merger Agreement provides that the Company, its subsidiaries, and its and their respective representatives are prohibited from, among other things, soliciting, initiating or knowingly encouraging or facilitating the making or submission of any alternative acquisition proposals from third parties or providing information to or participating in any discussions or negotiations regarding an alternative acquisition proposal with any person that has made an alternate acquisition proposal, in each case subject to certain fiduciary duties of the Board to the Company’s stockholders under applicable laws.
The Merger Agreement provides certain termination rights for both the Company and Parent, including, among others, the right of either party to terminate if (i) the Merger has not been consummated by May 15, 2023 (the “Outside Date”) (subject to a right of either party to extend such date to August 15, 2023 if the Company Stockholder Approval has been obtained and all other closing conditions other than those related to regulatory approvals are satisfied at any time in the five business days prior to the Outside Date) (unless a breach of the Merger Agreement by the party seeking termination was the primary cause of the failure of the Merger to be consummated); (ii) a governmental authority of competent jurisdiction, acting pursuant to any other law other than antitrust law, has issued a final non-appealable governmental order permanently restraining, enjoining or prohibiting the consummation of the Offer or the Merger; or (iii) the Company Stockholder Approval has not been obtained.
The Merger Agreement further provides that a termination fee of $4,711,000 will be payable to Parent by the Company upon termination of the Merger Agreement under certain circumstances, including, among others, termination of the Merger Agreement by Parent as a result of an adverse change in the recommendation of the Board that the Company’s stockholders adopt the Merger Agreement or as a result of the Company’s breach of its non-solicitation obligations under the Merger Agreement, and termination of the Merger Agreement by the Company to enter into an agreement providing for a “superior proposal.”
In connection with the Merger, concurrently with entering into the Merger Agreement, Parent and Merger Sub entered into Voting Agreements, dated November 13, 2022 (the “Voting Agreements”), with each of the current directors of the Company (each, a “Supporting Stockholder”). The Voting Agreements obligate each Supporting Stockholder to vote such Supporting Stockholders voting securities in favor of the transactions contemplated by the Merger Agreement. The Supporting Stockholders collectively own approximately 4.5% of the outstanding shares of the Company Common Stock as of November 9, 2022. The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Note Purchase Amendment attached to this Form 8-K as Exhibit 10.4 and incorporated herein by reference.
The Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger) are fair to and in the best interests of the Company and its stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby (including the Merger), (iii) directed that the adoption of the Merger Agreement be submitted to a vote at a meeting of the stockholders of the Company and (iv) resolved to recommend the adoption of the Merger Agreement by the stockholders of the Company.
Amended and Restated License and Settlement Agreement
On November 13, 2022, the Company and Emergent Operations Ireland Limited (“EOIL”) entered into an Amended and Restated License and Settlement Agreement, effective as of November 13, 2022 (the “A&R License Agreement”). Pursuant to the A&R License Agreement and the SWK Termination Agreement (as described below), the Company and SWK will receive a one-time cash payment from EOIL of $25 million, and in exchange the Company will grant EOIL a worldwide, sublicensable, irrevocable, perpetual, fully paid, exclusive license to the licensed patents and licensed know-how for Products (as defined therein), including NARCAN® (naloxone hydrochloride) Nasal Spray. The Company’s rights under the Adapt License Agreement, dated as of December 15, 2014 (as amended from time to time, the “Adapt License Agreement”), by and between the Company and Adapt Pharma Operations Limited (“Adapt”), to receive any unpaid or future payments under the Adapt License Agreement, including royalties related to Net Sales of Products (as defined therein), including NARCAN® (naloxone hydrochloride) Nasal-Spray, were terminated upon the effective date of the A&R License Agreement. SWK Holdings, LLC ("SWK") will receive 10% of the cash payment from EOIL in respect of its 10% interest in the royalties under the Adapt License Agreement.
The foregoing description of the A&R License Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the A&R License Agreement attached to this Form 8-K as Exhibit 10.1 and incorporated herein by reference.
First Amendment to Note Purchase and Security Agreement
On November 13, 2022, the Company entered into a First Amendment (the “Note Purchase Amendment”) to the Note Purchase Agreement dated as of December 10, 2020 (the “Note Purchase Agreement”), among the Company, Opiant Pharmaceuticals UK Ltd., the lenders party thereto (the “Lenders”) and Pontifax Medison Finance GP, L.P., as administrative agent and collateral agent for itself and the Lenders (the “Agent”). The Note Purchase Amendment will permit the Company to (i) enter into and perform its obligations under the A&R License Agreement, (ii) enter into and perform its obligations under the Merger Agreement, and (iii) prepay the outstanding term loans under the Note Purchase Agreement upon the consummation of the transactions contemplated under the Merger Agreement. In addition, pursuant to the Note Purchase Amendment, the Company will be required to maintain a minimum cash balance of $10 million which will be held at all times in a deposit account.
The foregoing description of the Note Purchase Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Note Purchase Amendment attached to this Form 8-K as Exhibit 10.2 and incorporated herein by reference.