How do high-priced mergers and acquisitions get done in the biopharmaceutical industry?
In filing a 14D-9 with the Securities and Exchange Commission (SEC), Zogenix of California provided an interesting blow-by-blow of how the company came to the decision to sell to UCB of Brussels and what maneuvers UCB took to win out over other interested parties.
The purchase was unveiled two weeks ago and could turn out to be for as much as $1.9 billion. The impetus for the move was Zogenix’s epilepsy drug Fintepla, a potential blockbuster that the FDA approved in June of 2020 for Dravet syndrome. It also is under priority review for another rare and severe form of epilepsy, Lennox-Gastaut syndrome.
The deal was a strategic fit for UCB, which has four epilepsy drugs on the market but loses market exclusivity in the U.S. in March for the most successful one, Vimpat, which outsells the other three combined.
UCB contacted Zogenix in July of last year, but only after another company, identified in the SEC filing as “Party A,” had initiated talks with Zogenix about acquiring marketing rights to Fintepla. UCB’s discussions with Zogenix also were limited to gaining marketing rights for the drug.
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A few weeks after UCB approached, another major pharma player—identified in the filing as “Party B”—contacted Zogenix with an interest in either obtaining U.S. marketing rights to Fintepla or buying the company outright.
Zogenix CEO Stephen Farr, Ph.D., dismissed the possibility of selling the company. But, during a regularly scheduled board meeting a month later, on Sept. 15, management reviewed Zogenix’s “capital needs and capital raising alternatives,” according to the filing. In addition, the board heard from its financial adviser, BofA Securities, which provided an overview of the “biotechnology capital markets and recent mergers and acquisitions activity.”
On Sept. 23, 2021, UCB offered to buy Zogenix for $20.50 per share. After meeting to discuss the offer, the company informed UCB that the price was “materially inadequate,” according to the filing. Zogenix closed trading that day at $16.26.
On Oct. 6, 2021, UCB upped the offer to $23 per share. That same day, a Zogenix executive told an executive at Party A that another company had expressed an interest in buying out Zogenix.
Then, last November, Party B withdrew from talks with Zogenix, saying its assessment of the company was “paused due to the prioritization of other company initiatives.”
Soon afterward, Party A told Zogenix that it was assessing the company in preparation to make an offer. Then came another enhanced offer from UCB—$23 per share plus an added $2 per share for each of two incentives: if Fintepla is still an orphan drug when approved by the EU and if the drug’s sales reach $700 million in 2026.
On Dec. 7, 2021, Party A offered $21.50 per share, all in upfront cash. Then a bidding war ensued, with each day bringing a new development, all detailed in the filing.
And finally, Dec. 21, the day that Party A came with its final offer—$25 per share plus $1 per share if two contingent value rights were met—UCB and Zogenix reached an exclusivity agreement for four weeks.
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That allowed the companies to finalize their deal, which came to $26 per share, or a 72% premium to the company’s average share price over a 30-day period and a 66.2% premium over Zogenix's closing price the day before the announcement was made public on Jan. 19. The agreement also includes $2 per share if Fintepla gains approval from the EU for Lennox-Gastaut syndrome by 2023.
How did Zogenix’s executives come out on the deal? Farr will receive $4.55 million, and Chief Operating Officer Ashish Sagrolikar will get $3.1 million. The rest of Zogenix’s executive vice presidents—CFO Michael Smith, General Counsel Shawnte Mitchell, CMO Bradley Galer, M.D., and CDO Gail Farfel—will each receive between $1.53 million and $1.93 million.