Item 2.01 Completion of Acquisition or Disposition of Assets.
Merger and Merger Agreement
On April 7, 2014, TetraLogic Pharmaceuticals Corporation, a Delaware corporation (TetraLogic), entered into a Merger Agreement (the Merger Agreement) with Shape Pharmaceuticals, Inc., a Delaware corporation (Shape Pharma), TLOG Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the TetraLogic (Acquisition Sub), and Augustus Lawlor solely in his capacity as the representative of the equity holders of Shape Pharma.
On April 14, 2014 (the Closing Date), TetraLogic acquired by merger 100% of Shape Pharma, a privately-held pharmaceutical company developing suberohydroxamic acid phenyl ester (SHAPE). SHAPE is a novel, clinical-stage tissue-targeted HDAC inhibitor in a topical gel formulation to treat stage IA-IIA Cutaneous T-Cell Lymphoma. Pursuant to the terms and conditions of the Merger Agreement, Acquisition Sub merged with and into Shape Pharma, with Shape Pharma surviving as a wholly-owned subsidiary of TetraLogic (the Merger). The aggregate purchase price paid to the equity holders of Shape Pharma at closing was $13 million in cash, as adjusted for certain indebtedness, any working capital shortfalls and actual unpaid transaction expenses of Shape Pharma as of the Closing Date. The purchase price paid on the Closing Date was funded from existing cash on hand.
As additional consideration, TetraLogic is also required to pay the former equity holders of Shape Pharma specified amounts upon the achievement of certain future development and commercialization milestones, as well as tiered earn-outs on product sales.
The Merger Agreement contains customary representations, warranties and covenants of TetraLogic, Shape Pharma and Acquisition Sub. Subject to certain limitations, the former equity holders of Shape Pharma are required to indemnify TetraLogic for damages resulting from any breaches of Shape Pharmas representations, warranties and covenants made in the Merger Agreement and certain other matters.
The representations, warranties and covenants contained in the Merger Agreement were made only for the purposes of the Merger Agreement, were made as of specific dates, were made solely for the benefit of the parties to the Merger Agreement and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties to the Merger Agreement. The assertions embodied in those representations and warranties may be subject to important qualifications and limitations agreed to by TetraLogic and Shape Pharma in connection with negotiating their respective terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders of TetraLogic. For the foregoing reasons, none of TetraLogics stockholders or any other person should rely on such representations and warranties, or any characterizations thereof, as statements of factual information at the time they were made or otherwise.
The above description of the Merger Agreement does not purport to be complete and is included solely as a summary of the material terms of the Merger Agreement, which shall be filed in a future filing of the Company with the United States Securities and Exchange Commission.
Material Relationships
Immediately prior to the Closing Date, HealthCare Ventures VIII, L.P., a Delaware limited partnership (HCVIII), owned approximately 71% of the outstanding equity interests of Shape Pharma. HealthCare Ventures VII, L.P., a Delaware limited partnership (HCVII), beneficially owns approximately 12% of TetraLogic. James H. Cavanaugh, Ph.D., Harold R. Werner, John W. Littlechild, Christopher Mirabelli, Ph.D. and Augustus Lawlor are each (i) a managing director of HealthCare Partners VIII, LLC, a Delaware limited liability company, which is the general partner of the general partner of HCVIII, and (ii) a general partner of HealthCare Partners VII, L.P., a Delaware limited partnership, which is the general partner of HCVII.
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