Business Context and Reporting Period
This Form 8-K, filed on November 29, 2018, covers events occurring on November 28, 2018, for OvaScience, Inc. (Note: The request metadata lists "Tempest Therapeutics, Inc.", but the filing text explicitly identifies the registrant as OvaScience, Inc.). The report details amendments to a post-closing financing agreement and provides supplemental disclosures regarding a planned merger with Millendo Therapeutics, Inc. (the "Millendo Transaction") and related stockholder litigation.
Key Financial Metrics and Transaction Details
- Post-Closing Financing: Approximately $20 million in common stock issuance planned to occur after the merger closing.
- Millendo Valuation Adjustment: Agreed pre-money valuation lowered from $191.9 million to $155.0 million to reflect investor terms for the post-closing financing.
- OvaScience Valuation Adjustment: Valuation lowered from $47.5 million to $45.5 million to reflect a lower premium on cash balance.
- Precedent Transaction Discrepancy: A discrepancy was noted in the enterprise value of the Wilson Therapeutics AB and Alexion Pharmaceuticals transaction cited in financial advisor opinions ($693.5 million vs. $788.4 million), attributed to exchange rate fluctuations between the Swedish krona and U.S. dollar.
Material Changes and Supplemental Disclosures
The filing addresses two primary material developments:
- Amendment to Stock Purchase Agreement: OvaScience, an institutional investor, and Millendo amended the November 1, 2018, securities purchase agreement. The amendment revises closing conditions and removes the investor's ability to waive certain conditions.
- Supplement to Definitive Proxy Statement: In response to two putative securities class actions (Cuenca Aubets v. OvaScience, Inc. and Kim v. OvaScience, Inc.), the company provided supplemental disclosures to avoid litigation delays. These disclosures clarify the financial projections used by the financial advisor (Ladenburg Thalmann) and explain the valuation adjustments made in the Second Amendment to the Merger Agreement.
Outlook, Risks, and Management Commentary
Management Commentary: OvaScience and Millendo deny any wrongdoing or legal violations regarding the stockholder litigation. The supplemental disclosures are made solely to minimize defense costs and prevent delays to the merger closing. Management asserts that the valuation adjustments and the additional $20 million in post-closing financing result in a transaction more favorable to OvaScience stockholders than the prior terms.
Risks and Contingencies:
- Litigation Risk: Two class actions allege false and misleading statements in the proxy statement, seeking injunctions against the merger and unspecified damages.
- Transaction Risk: Risks include failure to obtain stockholder approval (scheduled for December 4, 2018), failure to close the post-closing financing, and uncertainties regarding the timing of the merger.
- Financial Risk: Risks related to operating expense estimates, intellectual property protection, and potential adverse market reactions.
Investor Verification Checklist
- Verify the status of the special stockholder meeting scheduled for December 4, 2018, to approve the Millendo Transaction.
- Confirm the final terms of the $20 million post-closing financing and the identity of the institutional investor.
- Review the full text of the Definitive Proxy Statement and the First Amendment to the Stock Purchase Agreement (Exhibit 10.1) for detailed conditions.
- Monitor the status of the Cuenca Aubets and Kim class action lawsuits for any court rulings or settlements.
- Assess the impact of the valuation adjustments on the final exchange ratio for OvaScience stockholders.