Business Context and Reporting Period
This Form 8-K, dated June 11, 2021, is filed by Millendo Therapeutics, Inc. (MLND) to provide supplemental disclosures regarding its proposed merger with Tempest Therapeutics, Inc. The filing addresses eleven shareholder lawsuits challenging the transaction and updates the background of the merger process, including prior failed negotiations and the valuation analysis performed by financial advisor SVB Leerink.
Key Financial Metrics
- Millendo Cash Position: As of December 31, 2020, Millendo held approximately $38.7 million in cash.
- Estimated Closing Net Cash: Management estimated closing net cash of $17.0 million, assuming total expenses of $21.7 million through a June 30, 2021 closing date.
- Millendo Valuation: The merger agreement attributes an equity value of $36 million to Millendo.
- Tempest Valuation: The merger agreement attributes an equity value of $158.4 million to Tempest, inclusive of $30 million in committed concurrent financing.
- Liquidation Value: Millendo management estimated that in a liquidation scenario (projected for July 2021), stockholders would receive approximately $0.81 per share, based on $15.4 million of estimated cash available for distribution.
- Merger Implied Value: The merger agreement implies a value of $1.89 per share of Millendo common stock.
Material Changes and Process Updates
The filing details significant updates to the merger background previously disclosed in the Proxy Statement/Prospectus:
- Shareholder Litigation: Eleven purported complaints have been filed against Millendo and its directors in various federal districts (Delaware, Pennsylvania, Michigan, New York) challenging the merger.
- Failed Prior Transaction: Millendo entered into a non-binding letter of intent with "Party A" in November 2020, which included a proposed $89 million private placement. Party A terminated discussions on December 12, 2020, without specifying a reason.
- Board Changes: Effective February 1, 2021, Dr. Julia C. Owens was appointed Executive Chair and Louis J. Arcudi III was appointed President and CEO. Two directors resigned, and the Transaction Committee was reconstituted.
- Valuation Methodology: SVB Leerink did not perform a discounted cash flow analysis, deeming it uninformative due to the early stage of Tempest and lack of projections. Instead, they relied on comparable IPO step-ups and public company valuations, applying a 25% liquidity discount to Tempest's valuation.
Guidance, Risks, and Management Commentary
Management Commentary: Millendo states it is providing these supplemental disclosures solely to minimize litigation expenses and avoid disruption to the merger, without admitting liability. The board unanimously approved the merger after receiving an opinion from SVB Leerink that the exchange ratio was fair from a financial point of view.
Risks and Contingencies:
- Transaction Closing: The merger is conditioned on stockholder approval and the completion of a $30 million financing by Tempest prior to closing.
- Litigation: Ongoing shareholder actions could delay or disrupt the transaction.
- Cash Resources: Risks exist regarding the ability to correctly estimate operating expenses and the impact of closing delays on the combined company's cash resources.
- Forward-Looking Statements: Actual results may differ materially due to regulatory developments, financing failures, or unanticipated costs.
Investor Verification Checklist
- Verify the status of the eleven shareholder lawsuits and any potential impact on the merger timeline.
- Confirm the completion of Tempest's required $30 million concurrent financing.
- Review the full Proxy Statement/Prospectus for detailed risk factors and the complete list of comparable companies used in the valuation analysis.
- Monitor Millendo's cash burn rate to ensure the estimated $17.0 million closing net cash remains accurate.
- Check for any updates regarding the resignation of directors and the composition of the Transaction Committee.