UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES
EXCHANGE ACT OF 1934
Amendment No. 2
BioDelivery Sciences International, Inc.
(Name of Subject Company)
BioDelivery Sciences International, Inc.
(Name of Person(s) Filing Statement)
Common
Stock, par value $0.001 per share
(Title of Class of Securities)
09060J106
(CUSIP Number of Class of Securities)
Jeffrey Bailey
Chief Executive Officer
BioDelivery Sciences International, Inc.
4131 ParkLake Avenue
Suite 225
Raleigh, NC 27612
(919) 582-9050
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
With copies to:
Robert E. Puopolo, Esq.
Blake Liggio, Esq.
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
(617) 570-1000
¨
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
This Amendment No. 2 (this “Amendment”)
amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 filed with the U.S. Securities and Exchange
Commission (the “SEC”) on February 18, 2022 (together with the exhibits thereto and as amended or
supplemented from time to time, the “Schedule 14D-9”) by BioDelivery Sciences International, Inc., a
Delaware corporation (the “Company”). The Schedule 14D-9 relates to the cash tender offer by Bristol
Acquisition Company Inc., a Delaware corporation (“Purchaser”) and a wholly owned subsidiary of Collegium
Pharmaceuticals, Inc., a Virginia corporation (“Collegium” or “Parent”), to acquire all
of the issued and outstanding shares of the Company’s common stock, par value $0.001 per share (the
“Shares”) at a price per Share equal to $5.60, in cash, subject to any applicable withholding taxes and without
interest. The terms of the tender offer are disclosed in the Tender Offer Statement on Schedule TO filed by Collegium and Purchaser
with the SEC on February 18, 2022, and is made upon the terms and subject to the conditions set forth in the Offer to Purchase
dated February 18, 2022, and in the related Letter of Transmittal, which were filed as Exhibits (a)(1)(A) and
(a)(1)(B) to the Schedule 14D-9, respectively.
Capitalized terms used, but not otherwise defined, in this Amendment
shall have the meanings ascribed to them in the Schedule 14D-9. The information in the Schedule 14D-9 is incorporated into this Amendment
by reference to all applicable items in the Schedule 14D-9, except that such information is hereby amended and supplemented to the extent
specifically provided herein.
Litigation Related to the Transactions
On
February 25, 2022, in connection with the Transactions, a purported individual stockholder of the Company filed a complaint in the
United States District Court for the Southern District of New York, captioned Stein v. BioDelivery Sciences International, Inc.,
et al., No. 1:22-cv-01600, naming as defendants the Company and each member of the Board as of the date of the Merger Agreement
(“Stein”). On February 28, 2022, two additional cases were filed by purported individual stockholders of the Company
in the same court, captioned Sanford v. BioDelivery Sciences International, Inc., et al., 1:22-cv-01676 (“Sanford”),
and Higley v. BioDelivery Sciences International, Inc., et al., No. 1:22-cv-01658 (“Higley”).
On March 2, 2022 and March 5, 2022, two additional cases were filed by purported individual stockholders of the Company in the
United States District Court for the Eastern District of New York, captioned Justice II v. BioDelivery Sciences International, Inc.,
et al., 1:22-cv-01145 (“Justice”) and Zomber v. BioDelivery Sciences International, Inc., et al.,
1:22-cv-01220 (“Zomber”). The Stein, Sanford, Higley, Justice, Zomber and any
similar subsequently filed cases involving the Company, the Board or any committee thereof and/or any of the Company’s directors
or officers relating directly or indirectly to the Merger Agreement, the Transactions or any related transaction, are referred to as the
“Transaction Litigations.”
The Transaction Litigations filed to date generally allege that the
Schedule 14D-9 is materially incomplete and misleading by allegedly failing to disclose purportedly material information relating to the
sale process leading to the Transactions, the Company’s financial projections, and the analyses performed by Moelis & Company
LLC in connection with the Transactions. The Transaction Litigations assert violations of Section 14(e) of the Exchange Act
and violations of Section 20(a) of the Exchange Act against the Board. Additionally, the Stein, Higley, Justice and Zomber
complaints assert violations of Section 14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder. The Transaction
Litigations seek, among other things: an injunction enjoining consummation of the Transactions, rescission of the Merger Agreement, a
declaration that the Company and the Board violated Sections 14(e) and 20(a) of the Exchange Act and Rule 14a-9 promulgated
thereunder, damages, costs of the action, including plaintiff’s attorneys’ fees and experts’ fees and expenses, and
any other relief the court may deem just and proper.
In
addition, on February 24, 2022, February 28, 2022 and March 7, 2022, the Company received demand letters from three
purported stockholders of the Company seeking to inspect certain books and records of the Company related to the Merger
(collectively, the “Inspection Letters”). On March 4, 2022, March 9, 2022 and March 11, 2022,
the Company received demand letters from four purported stockholders of the Company alleging that the Schedule 14D-9 omits
purportedly material information relating to the Transactions (collectively, the “Demand Letters”).
While the Company believes that the Transaction
Litigations, Inspection Letters and Demand Letters are without merit and that the disclosures in the Schedule 14D-9 comply fully
with applicable law, solely in order to avoid the expense and distraction of litigation, the Company has determined voluntarily to supplement
the Schedule 14D-9 with the supplemental disclosures set forth below (the “Supplemental Disclosures”).
Nothing in the Supplemental Disclosures shall be deemed an admission
of the legal necessity or materiality under applicable law of the Supplemental Disclosures. To the contrary, the Company specifically
denies all allegations that any of the Supplemental Disclosures, or any other additional disclosures, were or are required.
The Board continues to unanimously recommend that the Company’s
stockholders accept the Offer and tender their Shares to Purchaser in the Offer.
Supplemental Disclosures to Schedule 14D-9
These Supplemental Disclosures should be read in conjunction with the
Schedule 14D-9, which should be read in its entirety. All page references in the information below are to pages in the Schedule
14D-9. Paragraph references
used herein refer to the Schedule 14D-9 before any additions or deletions resulting from the Supplemental Disclosures. As noted in the
Schedule 14D-9, Moelis’ fairness opinion was based upon market, economic and other conditions as they existed on, and could be evaluated
as of, February 13, 2022. Moelis assumed no responsibility for updating or revising its opinion based on events or circumstances
that may have occurred after February 13, 2022, and Moelis has not updated or revised its opinion subsequent to such date.
The
section of the Schedule 14D-9 titled “Arrangements between the Company, Collegium and Purchaser—Confidentiality Agreement”
is hereby supplemented by amending the paragraph on page 3 that begins “Collegium and the Company entered into
a mutual confidentiality agreement” to (i) insert the bold and italicized text and (ii) remove the text which has been
struck through:
Collegium and the Company entered into a mutual confidentiality
agreement, dated December 29, 2021 (the “Confidentiality Agreement”). Under the Confidentiality Agreement, Collegium
and the Company agreed, among other things, to keep certain non-public information concerning the other confidential (subject to certain
exceptions) for a period of five years from the date of the Confidentiality Agreement. Under the Confidentiality Agreement, Collegium
and the Company are also subject to a non-solicitation covenant and certain voting and standstill restrictions for one year with respect
to the securities of the other party, but the Confidentiality Agreement did not included
a fall-away provision upon the entry or public announcement of certain acquisition transactions.
The
section of the Schedule 14D-9 titled “Background of the Transaction; Reasons for the Recommendation of the Board—Background
of the Transactions” is hereby supplemented by amending the paragraph on page 13 that begins “Later on January 12,
2022” to insert the bold and italicized text:
Later on January 12, 2022, the Board held a meeting
via teleconference and videoconference, at which members of senior management and representatives of Moelis and Goodwin Procter LLP,
the Company’s outside legal counsel (“Goodwin”), were present. A representative of Goodwin reviewed with the
members of the Board their fiduciary duties in the context of the Initial Proposal. Following discussion, the Board directed management
to update management’s preliminary long-range plan and Moelis to prepare its financial analysis regarding the Initial Proposal.
Also at the meeting, the Board formed a Transaction Committee of independent directors to manage day-to-day matters related to the potential
strategic transaction in order to provide an efficient manner in which to actively supervise the process and to have the ability to meet
as often as needed, and also authorized the Transaction Committee to supervise and direct any outreach to additional parties (the “Transaction
Committee”). The Transaction Committee was established for efficiency and convenience and not to act as a special committee
with full authority over the transaction. The Transaction Committee consisted of Kevin Kotler, Todd C. Davis and Mark A. Sirgo.
The
section of the Schedule 14D-9 titled “Background of the Transaction; Reasons for the Recommendation of the Board—Background
of the Transactions” is hereby supplemented by amending the paragraph on page 14 that begins “Later on January 25,
2022” to insert the bold and italicized text:
Later on January 25, 2022, at the direction of the Board,
representatives of Moelis discussed with representatives of Jefferies the Board’s rejection of the Initial Proposal and Collegium
received access to a limited data room designed to respond to only their original diligence requests, as well as provide the Company’s
long-term forecasts and information on ELYXYB, see “—Certain Prospective Financial Information.”
The section of the Schedule 14D-9 titled “Background of the
Transaction; Reasons for the Recommendation of the Board—Background of the Transactions” is hereby supplemented by amending
the paragraph on page 15 that begins “Later on February 4, 2022, Mr. Bailey received a non-binding proposal from
Party A” to insert the bold and italicized text:
Later on February 4, 2022, Mr. Bailey received
a written non-binding proposal from Party A of $5.25 per share, comprised of $2.05 per share in cash and $3.20 per share in Party A common
stock (the “Party A Proposal”). The Party A Proposal was subject to completion of Party A’s confirmatory diligence
on the Company, including review of current and outstanding patent litigation, but did not include any indication of how the cash portion
of the offer price would be financed or expected synergy estimates for the combined company. The Party A Proposal also stated that Party
A had engaged Piper Sandler & Co. and Morgan Lewis & Bockius LLP as its financial advisor and outside legal counsel,
respectively. Later that day, representatives of Moelis shared the Company’s financial forecasts with representatives of Party
A, see “—Certain Prospective Financial Information.”
The
section of the Schedule 14D-9 titled “Background of the Transaction; Reasons for the Recommendation of the Board—Reasons for
the Recommendation of the Board” is hereby supplemented by amending the paragraph on page 18 that begins “Potentially
Interested Counterparties. The Board considered” to (i) insert the bold and italicized text and (ii) remove the text which
has been struck through:
Potentially
Interested Counterparties. The Board considered the process conducted by the Company, with the assistance of representatives
of Moelis, to identify potential buyers taking into account the expected interest of parties in hemophilia A and
opioid indications generally, their financial capability to pursue a transaction with the Company, and their ability to move quickly
and efficiently in a process. In particular, the Board considered the fact that another party, Party A, contacted by the
Company had expressed interest in potentially acquiring the Company and provided an best and final offer
as part of the process, but that the offer was non-binding, a combination of cash and stock bid (as opposed to Collegium’s
all-cash offer), did not include any indication as to how the cash portion would be financed, was 6% less in total consideration than
Collegium’s subsequent offer, and was subject to confirmatory diligence on the Company (including a review of current and outstanding
patent litigation). The Board further considered and also that, should any potential counterparty be interested
in pursuing a transaction on terms more favorable to the Company and its stockholders than those contemplated by the Merger Agreement,
such counterparty would be able to pursue such an offer for the Company despite the Company’s entry into a Merger Agreement with
Collegium.
The section of the Schedule 14D-9 titled “Opinion of the Company’s
Financial Advisor—Discounted Cash Flow Analysis” is hereby supplemented by amending the paragraphs on page 23 to insert
the bold and italicized text:
Moelis performed a discounted cash flow analysis of the
Company using the Financial Forecasts to calculate (i) the present value of the estimated future unlevered after-tax free cash flows
projected to be generated by the Company, (ii) the present value of the Company’s estimated terminal value, (iii) the
present value of ELYXYB, and (iv) the present value of the Company’s net operating losses (“NOLs”). For
purposes of the discounted cash flow analysis, the Company’s unlevered free cash flow was fully burdened by stock-based compensation.
Moelis utilized a range of discount rates of 7.00% to 11.25%
based on an estimated range of the Company’s weighted average cost of capital (“WACC”). The estimated WACC range
was derived using the Capital Asset Pricing Model using (i) a risk-free rate based on 20-year U.S. government bonds; (ii) a
selected range of unlevered betas and debt to total capitalization informed by the selected publicly traded companies described below;
(iii) an equity risk premium; and (iv) a size premium. Moelis used the foregoing range
of discount rates to calculate the present values as of March 31, 2022 of (i) the Company’s estimated after-tax unlevered
free cash flows excluding ELYXYB for calendar years 2022 through 2028 (in each case, discounted using the mid-year discounting convention
to a valuation date of March 31, 2022) and (ii) the estimated terminal values excluding ELYXYB derived by applying a perpetuity
growth rate range of (35%) to (15%) to the Company’s estimated terminal year after-tax unlevered free cash flow. For purposes of
selecting a perpetuity growth rate range, which range was selected based on Moelis’ professional judgment and experience,
Moelis took into account, based on the Company’s management guidance, the decline in the Company’s free cash flow
after loss of exclusivity. Moelis noted that the implied midpoint terminal values of the Company in its discounted cash flow analysis
represented 6.1% and 6.0% of total enterprise value in the Base Case and Upside Strategic Plan, respectively. Moelis’ discounted
cash flow analysis does not reflect the impact of ongoing or potential future patent litigation.
Moelis performed a separate valuation of ELYXYB utilizing
commercial risk-adjusted forecasts for ELYXYB provided by management and the discount rate range described above, which yielded
a range of $0.34 to $0.85 per share of Common Stock. Moelis also separately valued the Company’s NOLs based on the Company’s
estimated NOL balance of $210 million and projected NOL utilization, in each case as provided by the Company’s
management, and by using the discount rate range described above.
Based on the foregoing, Moelis derived implied per share
value ranges for the Common Stock (which included the implied value ranges of ELYXYB and the NOLs) of $4.65 to $5.95 per
share for the Company’s management Base Case, and $4.85 to $6.20 for the Company’s management Upside Strategic Plan. Moelis
compared the implied per share value ranges to the Merger Consideration of $5.60 per share.
The section of the Schedule 14D-9 titled “Certain Prospective
Financial Information” is hereby supplemented by amending the paragraph on page 26 that begins “In addition to the Base
Case Forecasts and Upside Strategic Plan Forecasts” to insert the italicized text:
In addition to the Base Case Forecasts and Upside Strategic
Plan Forecasts, which excluded ELYXYB, certain members of the Company’s senior management provided the Board, Moelis, and Collegium
a risk-adjusted forecast for ELYXYB (including a commercial revenue risk-adjustment of 35%) by estimating future sales
metrics, market growth and expenses with respect to ELYXYB. These prospective forecasts excluded revenue from potential pediatric
label expansion and were based on certain internal assumptions about the commercial success, pricing, commercial launch
timing, market access, market share, market penetration, competition, the commercial life of ELYXYB, and other relevant factors
including the impact of COVID-19, (the “ELYXYB Forecasts”, and together with the Base Case Forecasts and Upside Strategic
Plan Forecasts, the “Forecasts”). The Forecasts were adjusted to reflect partial year nine month 2022 financial
performance, from the second quarter 2022 through the fourth quarter 2022, to exclude operating periods prior to Closing.
Item 8. Additional Information
Item 8 (“Additional Information—Legal Proceedings”)
of the Schedule 14D-9 is hereby amended and supplemented by replacing the first three paragraphs therein with the first three paragraphs
set forth above under “Litigation Related to the Transaction.”
Item 8 (“Additional Information—Annual and Quarterly
Reports”) of the Schedule 14D-9 is hereby amended and restated in its entirety as follows:
For additional information regarding the business and
financial results of the Company, please see the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and correct.
Dated: March 11, 2022 |
BioDelivery Sciences International, Inc. |
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By: |
/s/ Jeffrey Bailey |
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Name: |
Jeffrey Bailey |
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Title: |
Chief Executive Officer |
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