eine spannende hintergrund-story zur iomai akquisition....
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Background of the
Merger
In August 2007, we announced interim data from a Phase 2 field trial of
our needle-free travelers’ diarrhea vaccine that indicated that people who received the vaccine before
traveling to Mexico or Guatemala were significantly less likely to report clinically significant
diarrhea. In that study, we observed that travelers who received our needle-free travelers’ diarrhea
vaccine were significantly less likely to be sickened as compared with travelers who received a placebo.
Based on the results from this trial, we planned to move quickly to complete our Phase 2 work for our
travelers’ diarrhea vaccine in 2008, which could allow a Phase 3 efficacy study in travelers to
Guatemala and Mexico during summer of 2009, when the travelers’ diarrhea season in Latin America is at
its peak.
At that time, we recognized that the remaining development program and potential
commercialization of our travelers’ diarrhea vaccine would require substantial additional cash to
fund those expenses. In particular, we estimated that our Phase 3 program could cost in the range of $30
to $45 million in third-party expenses, and given our limited cash reserves, we would need additional
funding prior to the commencement of our Phase 3 clinical trial of our needle-free travelers’ diarrhea
vaccine. Accordingly, we adopted a strategy to identify and select leading pharmaceutical and
biotechnology companies as potential collaborators to assist us in furthering development and potential
commercialization of this product candidate.
As part of this process, we commissioned a market
study for the travelers’ diarrhea market which determined that there was a large market for an
effective travelers’ diarrhea vaccine; potentially between approximately $660 million and $800
million in annual sales. In the fall of 2007, armed with the market study and the recent Phase 2
field trial data, we contacted a number of leading pharmaceutical and biotechnology companies as
potential collaborators for this program. During this period, we underwent program due diligence visits
by several potential collaborators.
To increase the likelihood of contacting as many potential
partners as possible, in late November 2007, we engaged a global transaction advisory firm with
relationships with a large number of pharmaceutical and biotechnology companies to run an auction process
to maximize our value for this program. With the advisor’s assistance, we systematically contacted
89 potential collaborators to apprise their interest in our travelers’ diarrhea program.
Ultimately, after contacting 89 companies, providing confidential materials to 17 of those
companies, and conducting discussions with nine of those companies, we ended up with
four offers: two modest proposals for our travelers’ diarrhea program and two offers
to acquire the entire company.
As part of this process, one of the companies we
contacted was Intercell. Since 2001, we have had periodic discussions with Intercell regarding
possible opportunities for collaboration on various programs, including a face-to-face meeting in
February 2007 between members of both companies’ senior management for an in-depth review of
both companies’ programs. At an industry conference in early January 2008, our president,
Stanley C. Erck, met with Intercell’s chief executive officer, Gerd Zettlmeissl, and our chief
financial officer, Russell P. Wilson, met separately with Intercell’s chief financial officer, Werner
Lanthaler. At these meetings, Intercell stated that it was interested in a strategic combination
of the two companies. At the time, we indicated that Iomai was not for sale and that our
preference was for a travelers’ diarrhea vaccine partnership, which could complement Intercell’s
travelers’ vaccine to prevent Japanese Encephalitis.
On January 22 and 23, 2008, Mr. Erck,
Mr. Wilson, our chief scientific officer, Gregory Glenn, and our vice president of business development,
Kai Chen, visited Intercell’s offices in Vienna, Austria to meet with Dr. Zettlmeissl, Dr. Lanthaler,
Intercell’s chief scientific officer, Alexander von Gabain, and others from Intercell, to explore
possible collaborative opportunities. After the two days of discussions, Intercell once again
indicated that it was interested in a combination of the two companies. Again, we indicated that Iomai
was not for sale and that we were evaluating other potential offers for supporting our
travelers’ diarrhea program, which still remained our preference. At the February 14, 2008
meeting of our board of directors, our president, Mr. Erck, summarized for the board of directors the
status of various partnering discussions, focusing on particular terms under negotiation. The discussion
also
14
covered Intercell’s expression of interest regarding a potential business
combination transaction. Our board of directors confirmed that the company was not for sale and
intended to remain independent, and charged management to encourage Intercell to focus on
partnering transactions.
On February 22, 2008, we received a letter from Intercell
expressing its interest in engaging in discussions regarding a potential acquisition of our
company. The letter included a non-binding term sheet that proposed a cash merger at a per share price
of approximately $2.86. Intercell noted its view that there are significant synergies
between the two companies, such as excellent product fit in the travelers’ vaccine segment,
a territorial fit between Europe and the United States and a complementary technology basis
between Intercell’s antigen and adjuvant discovery programs and our transcutaneous immunization
technology.
On March 7, 2008, members of senior management from both Iomai and
Intercell, including Mr. Erck, Mr. Wilson, Dr. Zettlmeissl and Intercell’s head of finance, Reinhard
Kandera, met to further explore potential strategic opportunities. At the time, we explored with
Intercell potential collaboration scenarios beyond the proposed transaction structure. Intercell
continued to press for an acquisition of our company and verbally offered an increased per share
price to $4.50 through a combination of cash and stock. Intercell also indicated that since it was
not interested at this time in becoming a registrant under U.S. securities laws, its shares would only
be issued in the U.S. in a private placement to a limited number of our stockholders. Our management
indicated that the company was not for sale, but that they would convey Intercell’s proposal to our
board of directors.
That same day, we received an indication of interest from a division
of a global pharmaceutical company (Company A), which proposed an acquisition of all of the
outstanding shares of the company in cash. During the next several days, our management consulted
with members of our board of directors individually. Based on the input from those conversations,
management conveyed to Company A that the company was not for sale and, in any event, had received an
acquisition proposal from another party at a significantly higher price.
On March 20,
2008, our board of directors met to review the status of our recent discussions with potential commercial
partners. Mr. Erck updated the board of directors on the proposals from Intercell and Company A, both
of whom had expressed interest in a business combination as opposed to a partnering arrangement. At
that time, the board of directors confirmed that our company was not currently for sale, but that
management should explore the interest in potential business combinations. The board of directors
determined that pursuing those discussions would inform the company’s evaluation of options, and
enhance the company’s alternatives, in the event a partnering transaction could not be negotiated that
addressed the company’s financial situation. Mr. Erck then discussed recent negotiations for a
potential partnering transaction with a global pharmaceutical company (Company B). After a detailed
discussion, our board of directors charged management with pursuing improved terms for a partnering
transaction. In light of the terms then proposed by Company B, the board of directors also
charged management with seeking to negotiate improved proposals from the entities expressing interest
in potential business combination transactions.
On March 26, 2008, our board of directors met
again to review the status of partnering discussions, along with other business development initiatives.
During the meeting, the directors discussed recent interactions with particular commercial partners,
including negotiations around partnering the travelers’ diarrhea program and other programs with
Company B. The discussion then turned to the companies that had expressed specific interest in a
business combination with our company. The discussion covered the interactions during the last month, the
status of discussions, and options going forward. The directors and management also discussed the
company’s cash position, which was expected to fund current operations through late July
or perhaps early August 2008.
The board of directors confirmed our company’s
strategic goal of remaining independent, but charged management with learning about potential
alternatives and the possibility of pursuing one of those alternatives; consideration of which would
depend upon the outcome of negotiations with potential commercial partners and other developments.
On April 2, 2008, we received a second unsolicited offer from Company A. At this time,
Company A provided us with a non-binding indication of interest proposing that Company A would acquire,
in a negotiated transaction, all of the outstanding shares of Iomai for cash, at a price per share that
was an increase from Company A’s prior all cash offer.
During March and April
2008, we actively engaged in discussions with Company B and another global pharmaceutical company
(Company C) to improve the terms of potential collaborations involving our programs. We exchanged
multiple term sheets with Company B for various programs; however, in the end, the proposals from
Company B were modest and did not provide sufficient funding to allow us to stay independent
without a dilutive financing.
At the same time, we had multiple discussions with
Company C, seeking to have Company C provide some level of up-front funding and coverage of our
costs for one, or more, of our influenza programs. Both Company B and Company C rejected
proposals to consider strategic alternatives with us, such as a potential acquisition at or above
price levels then being proposed by Company A and Intercell.
15
On April 4, 2008, the board of directors met again to review developments
in discussions with possible commercial and strategic partners that had occurred since the March 20, 2008
meeting of the board of directors, including Company B possibly re-emerging as a potential serious
candidate for a partnering arrangement. Our board of directors discussed the existing partnering
proposals and the two business combination proposals. Our board of directors considered alternative
potential paths, as well as uncertainties on various fronts, and judged that, at this time, remaining
independent remained the strategic goal, but acknowledged that this conclusion would require
reconsideration. Our board of directors then provided management with guidance for responding to existing
indications of interests for potential partnering and strategic transactions.
From April 7
through April 10, 2008, members of Intercell, including Dr. von Gabain, Intercell’s Chief Operating
Officer, Thomas Lingelbach, Dr. Kandera and other members of its senior management team, along with their
legal and financial advisors, visited our offices to conduct due diligence on our operations, finances
and development programs.
On April 18, 2008, we received a third proposal from
Company A. Once again, Company A provided us with a non-binding indication of interest. In this
letter, Company A indicated that it would acquire, in a negotiated transaction, all of the outstanding
shares of Iomai for cash, at a price per share that was an increase from Company A’s two prior all
cash offers.
On April 19, 2008, we communicated to Intercell that its proposal
was substantially below another indication of interest.
Intercell wanted to enter
into exclusive negotiations, so Mr. Erck, after conferring with members of our board of directors,
indicated that we would not enter into exclusive negotiations unless Intercell’s offer were well
above $6.00 per share.
Intercell then proposed a transaction at $6.60 per share
in cash and Intercell common stock, but insisted that its proposal was conditioned upon us entering
into exclusive negotiations with Intercell until July 21, 2008 and was further conditioned on
obtaining the agreement of certain of our large stockholders to vote their shares of our common
stock in favor of the transaction.
At a meeting on April 20, 2008, our board of directors met
to review developments in discussions with possible commercial and strategic partners that had occurred
since the April 4, 2008 meeting of the board, including substantial increases in the prices proposed by
potential business combination counter-parties. Mr. Erck recounted the background to our collaboration
discussions and outlined the current status of those discussions, focusing on the most recent proposal
from Company B. Mr. Erck noted management’s disappointment with the terms of this proposal and
outlined the potential risks and benefits of pursuing this licensing transaction, with particular
focus on the impact on our cash needs and resources, including the fact that, at the end of March
2008, we had approximately $9.8 million in cash and about $1.4 million in receivables due from the
U.S. Department of Health and Human Services that we could reasonably expect to receive over the next few
months.
Based on our monthly expenses, we estimated that we would, absent changes in
operations, run out of cash in late July, or possibly early August 2008.
Our directors
and management also discussed several matters, including the lack of progress in licensing negotiations
with Company C, which management had earlier thought might lead to a significant licensing
transaction.
Mr. Erck then reviewed with the board of directors the two business combination
inquiries and noted the following developments. Intercell began with a $2.86 per share
proposal, and had, through a series of increasing offers, ultimately increased its proposal to $6.60 per
share.
Company A had initially indicated an interest at buying Iomai at $2.70
per share, and had, through a series of increasing offers, ultimately increased its proposal to
$5.15 per share.
Mr. Erck also reviewed the considerable back and forth discussions
with Intercell and Company A and provided an update as to the status of those discussions as of April 20,
2008. He noted that the offer from Intercell would expire at midnight on April 20,
2008 and
that the offer from Company A would expire at 5:00 p.m. on the same day. Mr. Erck also noted that
Intercell stated that it would only proceed, however, if the company agreed to negotiate exclusively
with them.
The board of directors discussed the terms being proposed by Intercell and
highlighted for management the board’s views on terms for a potential transaction. While the board of
directors considered many factors other than market prices, it noted that the proposed $6.60 price
represented a premium of (1) 191% to the closing price of Iomai common stock on April 18, 2008 and
(2) 517% to the closing price of Iomai common stock the day prior to Intercell’s first acquisition
proposal. Legal counsel then briefly described the board of directors’ fiduciary duties in a sale of
the company.
At the end of this discussion, management recommended that the board of
directors approve entering into exclusive negotiations with Intercell. Our directors expressed
support for this approach but determined that Intercell’s request for exclusivity through July 21, 2008
represented too long a period, particularly in light of the company’s financial position. Mr. Erck
again noted the significant price increases in the proposals over the last several weeks and his
perception of the risk of losing the Intercell proposal if we were unwilling to commit to exclusive
negotiations at that time. Our board of directors then charged management to negotiate a possible
business combination transaction with Intercell, including agreeing to exclusivity for a period of up to
30 days. Our directors insisted that any contract that was negotiated contain a “fiduciary out” to
enable us to accept a superior bid, subject to paying a break-up fee.
During April 20 through
April 23, 2008, we had further discussions with Intercell regarding the requirements of Intercell’s
proposal that certain large stockholders agree to exchange their Iomai common stock for Intercell common
stock at the $6.60 value and vote their shares of our common stock in favor of the transactions, as
well as the terms of the exclusivity letter required by Intercell.
On April 23, 2008, we
entered into an exclusivity agreement with Intercell and commenced negotiating the merger agreement.
Between April 23, 2008 and signing of the merger agreement, Iomai and Intercell and their respective
outside counsel spent considerable time negotiating terms of the merger agreement and exchanged multiple
drafts of the merger agreement in the process of these negotiations.
On April 24, 2008, Mr.
Erck, Mr. Wilson, Dr. Zettlmeissl and Dr. Lanthaler met with New Enterprises Associates, one of
our large stockholders and an affiliate of M. James Barrett, our chairman of the board, to discuss the
proposed terms of the transactions. On April 25, 2008, Dr. Zettlmeissl and Dr. Lanthaler met with
Essex Woodlands Health Ventures, another of our large stockholders, to discuss the proposed terms
of the transactions. Based on these discussions, each of these stockholders separately indicated that, if
Intercell were able to negotiate a definitive contract with us on the proposed terms, they likely would
be amenable to supporting the transaction, including by entering into the voting agreement and
participating in the share exchange on negotiated terms. On May 8, 2008, Dr. Zettlmeissl and Mr.
Kandera spoke telephonically with Technology Partners, ProQuest Investments and Gruber and McBaine
Capital Management, other of our large stockholders, to discuss the proposed terms of the
transactions.
On May 9, Mr. Kandera conducted follow-up conversations with these
stockholders. Based on these discussions, each of Technology Partners, ProQuest Investments and Gruber
and McBaine Capital Management agreed to enter into the voting agreement, and Gruber and McBaine Capital
Management agreed to participate in the share exchange with Intercell.
Prior to a
board meeting on May 7, 2008, the directors were provided with the then current draft of the merger
agreement. At the meeting, Mr. Erck summarized the process of negotiation with Intercell since the April
20, 2008 meeting of the board of directors. Management noted key negotiating points and the proposed
resolution of those points. Outside counsel outlined other proposed terms of the transaction and reminded
the directors of certain legal issues to consider in evaluating the process and the potential merger
agreement with Intercell. The directors asked questions about the negotiations and provided feedback to
management on proceeding with the negotiations. Mr. Wilson, noted that Cowen and Company, LLC
(“Cowen”) had commenced analysis of the consideration to be received in the potential transaction but
that we had not yet formally engaged Cowen. After discussion, the board of directors authorized
management to engage Cowen to provide a fairness opinion to our board of directors.
A special
meeting of our board of directors was held telephonically on May 12, 2008 to discuss the proposed terms
of the transaction, with representatives of Cowen present for a portion of the meeting. In advance of
this telephonic meeting, a final draft of the merger agreement and related materials were circulated to
our board of directors, along with materials from Cowen relating to their analysis. At the meeting, Cowen
explained the analysis they had performed and delivered to our board of directors an oral opinion, which
was subsequently confirmed in writing, that, as of the date of its opinion and based upon and subject to
the factors and assumptions set forth in its written opinion dated May 12, 2008, the $6.60 in cash per
share of our common stock to be received by the holders of our common stock (other than Intercell and its
affiliates and the holders of our common stock party to the share exchange agreement) pursuant to the
merger agreement was fair, from a financial point of view, to such holders. Our board of directors also
engaged in a review of the key provisions of the merger agreement and business considerations related to
the potential transaction. On the basis of our activities to date and our prior efforts to explore third
party interest in potential transactions, and after extensive discussion, our board of directors
determined that the price then being proposed by Intercell for each share of our common stock outstanding
was the best per share price then obtainable.
After further discussion among the participants
on the call of various matters related to the potential transactions with Intercell, our board of
directors approved the merger, the proposed merger agreement and the transactions contemplated by the
merger agreement (including the related share exchange agreement). The merger agreement, among Intercell,
Merger Sub and us, and other transaction-related documents were signed and such execution was announced
on May 12, 2008 in a joint press release.
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