Business Context and Reporting Period
Company: Aerpio Pharmaceuticals, Inc. (Note: Metadata listed Whitehawk Therapeutics, but filing text confirms Aerpio Pharmaceuticals, Inc.)
Filing Date: May 16, 2021
Event: Entry into a Material Definitive Agreement (Merger) with Aadi Bioscience, Inc.
Reporting Period: Current Report (8-K) covering events on May 16, 2021.
Key Financial Metrics and Transaction Terms
- Merger Structure: Aadi Bioscience, Inc. will merge with a subsidiary of Aerpio, with Aadi surviving as a wholly-owned subsidiary of Aerpio.
- Ownership Split (Pre-PIPE): Former Aadi securityholders expected to own ~66.8%; former Aerpio securityholders expected to own ~33.2%.
- Ownership Split (Post-PIPE): PIPE Investors ~55.7%; Former Aadi securityholders ~29.6%; Former Aerpio securityholders ~14.7%.
- PIPE Financing: Aerpio agreed to sell shares and pre-funded warrants for an aggregate purchase price of $155,000,000.
- Termination Fees: Aerpio may be required to pay Aadi a termination fee of $2,000,000 plus out-of-pocket fees up to $750,000 under specified circumstances.
- Cash Condition: Closing is conditioned on Aerpio's net cash not being less than $10,000,000.
- Contingent Value Rights (CVRs): Existing Aerpio shareholders receive rights to 90% of net proceeds from the Amended Gossamer License Agreement and Aspen Legacy Assets.
Material Changes and Governance
- Corporate Name Change: Upon closing, Aerpio intends to change its name to "Aadi Bioscience, Inc."
- Leadership: The combined company will be led by Aadi's Chief Executive Officer.
- Board Composition: The new board will consist of seven directors: three designated by Aadi, three by Aerpio, and one mutually agreed upon.
- Lock-up Agreements: Aadi stockholders (controlling ~96.08% of voting securities) and Aerpio directors serving on the new board are subject to a 180-day lock-up on share sales.
- By-law Amendment: Aerpio amended its by-laws to designate U.S. federal district courts as the exclusive jurisdiction for Securities Act litigation.
Outlook, Risks, and Contingencies
- Conditions to Closing: Transaction requires Aerpio stockholder approval, satisfaction of the $10 million net cash condition, and completion of the PIPE Financing.
- Regulatory Filings: Aerpio intends to file a Proxy Statement and a resale registration statement for PIPE investors within 30 days of closing.
- Key Risks:
- Failure to obtain stockholder approval or complete PIPE financing.
- Adjustments to the exchange ratio based on Aerpio's net cash levels at closing.
- Uncertainty regarding the value of Contingent Value Rights (CVRs), which depend on future milestone and royalty payments.
- Operational risks associated with integrating the two companies and retaining personnel.
Investor Verification Checklist
- Verify the final ownership percentages post-PIPE, as they depend on the exact closing cash position of Aerpio.
- Review the upcoming Proxy Statement for detailed terms of the Merger Agreement and CVR Agreement.
- Confirm the status of the $155 million PIPE Financing and the identity of the investors.
- Assess the likelihood of Aerpio meeting the $10 million net cash condition at closing.
- Monitor the progress of the Gossamer Bio collaboration and Aspen Legacy Assets to evaluate potential CVR payouts.