Omniab, Inc. current report, 23 March 2022

Full document

Business Context and Reporting Period

This Form 8-K, filed by Avista Public Acquisition Corp. II (APAC) on March 24, 2022, reports agreements signed on March 23, 2022, to combine APAC with OmniAb, Inc., Ligand Pharmaceuticals Incorporated’s antibody discovery business, through a Reverse Morris Trust transaction. The filing is transaction-focused and does not provide a reporting-period income statement, balance sheet, or cash flow statement for OmniAb.

Transaction Terms and Key Financial Metrics

  • OmniAb will be separated from Ligand, and Ligand will distribute 100% of OmniAb’s common stock to Ligand stockholders before the merger.
  • APAC will domesticate from the Cayman Islands to Delaware and merge with OmniAb, with OmniAb surviving as a wholly owned subsidiary of APAC.
  • The transaction implies a pre-money equity value for OmniAb of approximately $850 million.
  • Ligand will contribute $15 million of capital to OmniAb, less certain transaction-related and other expenses.
  • OmniAb stockholders and equity award holders will receive up to 15 million earnout shares. Half vest upon APAC’s post-transaction VWAP reaching $12.50 for 20 trading days in a consecutive 30-trading-day period, and the remainder upon reaching $15.00 under the same test, in each case within five years after closing.
  • The Sponsor agreed to purchase 1.5 million APAC common shares and warrants for 1,666,667 shares for $15 million.
  • The Sponsor may purchase up to an additional 10 million APAC shares and warrants for 1,666,667 shares for up to $100 million to backstop redemptions, if needed to ensure at least $100 million of cash proceeds from APAC’s trust account are available to OmniAb stockholders.
  • The filing does not provide OmniAb revenue, profit, cash flow, operating margins, debt, cash balance, or liquidity figures.

Material Changes Versus the Prior Comparable Period

The filing does not present historical financial results or a prior comparable period. The material change disclosed is the execution of the merger, separation, distribution, sponsor, employee matters, and forward purchase agreements that are intended to transform OmniAb into a separately traded public business under the anticipated ticker symbol OABI, with warrants under OABIW.

Outlook, Conditions, Risks, and Unusual Items

  • Closing is subject to customary conditions, including antitrust clearance, required governmental consents, APAC shareholder approval, effective Form S-4 and Form 10 registration statements, Nasdaq listing approval, tax opinions, completion of the separation and distribution, and APAC having at least $5,000,001 of net tangible assets.
  • OmniAb and Ligand’s obligation to close is also conditioned on completion of the forward purchase and redemption backstop, APAC director and officer resignations, and APAC’s domestication.
  • The transactions are intended to qualify as tax-free transactions, but the filing identifies tax opinions as closing conditions and does not guarantee the intended tax treatment.
  • The merger may be terminated if it is not completed within nine months after signing, required approvals are not obtained, specified breaches are not cured, or other customary termination events occur.
  • Ligand may terminate under specified circumstances to pursue another transaction involving at least 75% of Ligand, subject to a termination fee of approximately $40 million to $70 million, reimbursement of APAC expenses up to $7.5 million, and a Sponsor termination fee of up to $12.5 million.
  • Principal risks include failure or delay of the transaction, shareholder redemptions reducing available cash, failure to obtain regulatory or Nasdaq approvals, litigation, transaction costs, market volatility, changing economic conditions including COVID-19 and the Russia-Ukraine conflict, and failure to realize anticipated strategic or financial benefits.
  • Future results, market acceptance of OmniAb’s technology, addressable-market estimates, and potential milestone and royalty receipts are forward-looking and subject to substantial uncertainty.

Important Facts for Investors to Verify

  • Review the definitive Form S-4, Form 10, proxy statement and related SEC filings for transaction approval status, updated capitalization, dilution, redemption assumptions, and pro forma financial information.
  • Verify whether the $15 million Ligand capital contribution and the $15 million forward purchase were completed and determine the final cash available at closing.
  • Assess the impact of APAC shareholder redemptions and whether the redemption backstop was fully or partially utilized.
  • Confirm the final exchange ratio, post-closing share count, earnout terms, and treatment of Ligand and OmniAb equity awards.
  • Evaluate the conditions required for tax-free treatment and any indemnification, transition-service, or tax obligations between Ligand and OmniAb.
  • Determine whether the merger closed within the stated timetable and whether OmniAb began trading under the anticipated OABI and OABIW symbols.