Item 2.01
Completion of Acquisition or Disposition of Assets.
Description of Acquisition
As contemplated by the final prospectus dated May 3, 2017 (the Prospectus) in connection with the initial public offering of the common shares of Biohaven Pharmaceutical Holding Company Ltd. (the Registrant or the Company), including the section of the Prospectus titled Use of Proceeds, on January 5, 2018, the Company purchased 1,375,000 shares of common stock, $0.0001 par value (the Shares) of Kleo Pharmaceuticals, Inc., a privately-held Delaware corporation (Kleo) in satisfaction of the fourth and final of a series of the Companys purchase commitments pursuant to the Securities Purchase Agreement between Kleo and the Company, dated as of August 29, 2016 (the Purchase Agreement). The total consideration paid by the Company to Kleo for the Shares was $1,375,000.
As described in the Prospectus, under the Purchase Agreement, the Company committed to purchase an aggregate of 8,500,000 shares of Kleos common stock, at a purchase price of $1.00 per share, in a series of closings. The initial closing occurred on August 29, 2016, at which date the Company purchased 3,000,000 shares of Kleos common stock. Pursuant to a schedule set forth in the Purchase Agreement, the Company was obligated to purchase the remaining 5,500,000 shares in four equal installments. The Company satisfied the first, second and third installments by purchasing 1,375,000 shares on each of March 30, 2017, June 8, 2017 and October 5, 2017 for total consideration of $4,125,000.
The Purchase Agreement includes an anti-dilution provision whereby Kleo shall issue additional shares of its Common Stock to the Company in the event Kleo issues or sells any additional stock for a consideration per share less than the share price paid by the Company. On October 5, 2017, the Company also purchased an additional 2,049,543 shares of Kleo common stock at a purchase price of $1.0993 per share, for total consideration of $2,253. This additional transaction allowed the Company to maintain its relative ownership percentage in Kleo.
The acquisition on January 5, 2018 described above satisfied the fourth and final installment obligation (the Fourth Installment Purchase). As of January 5, 2018, the Company owned a 46.6% interest in the issued and outstanding equity of Kleo.
For all periods for which the Company has owned shares of Kleo common stock, the Company has accounted, and following the completion of the Fourth Installment Purchase, the Company expects to continue to account, for its ownership of Kleos common stock utilizing the equity method of accounting in accordance with accounting principles generally accepted in the United States of America.
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed on June 14, 2017 and incorporated herein by reference.
Material Relationships
David A. Spiegel, M.D., Ph.D. is a co-founder of Kleo. On March 30, 2017, the Company purchased 500,000 shares of Kleos common stock directly from Dr. Spiegel for consideration consisting of $249,750 in cash and 32,500 common shares of the Company.
Two members of the Companys board of directors, Declan Doogan, M.D. and John W. Childs, also serve as members of Kleos board of directors. Vlad Coric, M.D., the chief executive officer and a director of the Company, and Gregory H. Bailey, M.D., another member of the Companys board of directors, serve as board observers for Kleo.