Item 1.01 - Entry into a Material Definitive Agreement.
Merger Agreement
On September 20, 2022, Sesen Bio, Inc., a Delaware corporation ("Sesen Bio"),
Seahawk Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary
of Sesen Bio ("Merger Sub"), and CARISMA Therapeutics Inc., a Delaware
corporation ("Carisma"), entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement"), pursuant to which, among other things,
and subject to the satisfaction or waiver of certain conditions set forth in the
Merger Agreement, Merger Sub will merge with and into Carisma, with Carisma
continuing as a wholly-owned subsidiary of Sesen Bio and the surviving
corporation of the merger (the "Merger"). The Merger is intended to qualify for
federal income tax purposes as a tax-free reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
Subject to the terms and conditions of the Merger Agreement, at the closing of
the Merger, (a) each then outstanding share of Carisma common stock and Carisma
preferred stock (collectively, "Carisma capital stock") (including shares of
Carisma common stock issued in connection with the pre-closing financing
transaction described below) will be converted into the right to receive a
number of shares of Sesen Bio common stock calculated in accordance with the
Merger Agreement (the "Exchange Ratio"), and (b) each then outstanding Carisma
stock option to purchase Carisma common stock will be assumed by Sesen Bio,
subject to adjustment as set forth in the Merger Agreement.
Under the Exchange Ratio formula in the Merger Agreement, upon the closing of
the Merger, on a pro forma basis and based upon the number of shares of Sesen
Bio common stock expected to be issued in connection with the Merger, pre-Merger
Sesen Bio stockholders are expected to own approximately 41.7% of the combined
company and pre-Merger Carisma stockholders are expected to own approximately
58.3% of the combined company, in each case before giving effect to the
pre-closing financing transaction and the conversion of Carisma's $35.0 million
outstanding convertible note. For purposes of calculating the Exchange Ratio,
all shares of Sesen Bio common stock underlying outstanding Sesen Bio stock
options, restricted stock units and warrants outstanding as of immediately prior
to the closing of the Merger will be deemed to be outstanding and all shares of
Carisma common stock (a) underlying outstanding Carisma stock options, and (b)
to be issued in connection with the pre-closing financing transaction will be
deemed to be outstanding. The Exchange Ratio will be adjusted to the extent that
Sesen Bio's net cash at closing is less than or greater than $125.0 million and
based on the amount of the pre-closing financing transaction, as further
described in the Merger Agreement. Under the terms of the Merger Agreement, the
Sesen Bio board of directors may take action to accelerate the vesting of Sesen
Bio stock options or restricted stock units that are outstanding as of
immediately prior to the closing of the Merger, in accordance with the terms of
the Merger Agreement.
In connection with the Merger, Sesen Bio will seek the approval of its
stockholders to, among other things, (a) issue the shares of Sesen Bio common
stock issuable in connection with the Merger under the rules of The Nasdaq Stock
Market LLC ("Nasdaq"), and (b) amend its certificate of incorporation to effect
a reverse stock split of the outstanding shares of Sesen Bio common stock at a
ratio as mutually agreed to by Sesen Bio and Carisma and approved by the Sesen
Bio board of directors prior to the closing of the Merger (clauses (a) and (b),
collectively, the "Sesen Bio Voting Proposals").
Each of Sesen Bio and Carisma has agreed to customary representations,
warranties and covenants in the Merger Agreement, including, among others,
covenants relating to (a) using reasonable best efforts to obtain the requisite
approval of its stockholders, (b) non-solicitation of alternative acquisition
proposals, (c) the conduct of their respective businesses during the period
between the date of signing the Merger Agreement and the closing of the Merger,
(d) Sesen Bio using commercially reasonable efforts to maintain the existing
listing of Sesen Bio common stock on Nasdaq and to obtain approval of the
listing of the combined company's common stock on Nasdaq, and (e) Sesen Bio
filing with the U.S. Securities and Exchange Commission (the "SEC") and causing
to become effective a registration statement on Form S-4 to register the shares
of Sesen Bio common stock to be issued in connection with the Merger (the
"Registration Statement").
Consummation of the Merger is subject to certain closing conditions, including,
among other things, (a) approval by Sesen Bio stockholders of the Sesen Bio
Voting Proposals, (b) approval by Carisma stockholders of, among other things,
the adoption of the Merger Agreement, (c) Nasdaq's approval of the listing of
the shares of Sesen Bio common stock to be issued in connection with the Merger,
(d) the effectiveness of the Registration Statement, and
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(e) Sesen Bio having net cash as of closing of the Merger greater than or equal
to $100.0 million. Each party's obligation to consummate the Merger is also
subject to other specified customary conditions, including regarding the
accuracy of the representations and warranties of the other party and the
performance in all material respects by the other party of its obligations under
the Merger Agreement required to be performed on or prior to the date of the
closing of the Merger.
The Merger Agreement contains certain termination rights of each of Sesen Bio
and Carisma. Upon termination of the Merger Agreement under specified
circumstances, Sesen Bio may be required to pay Carisma a termination fee of
$7.6 million and/or reimburse Carisma's expenses up to a maximum of $1.75
million, and Carisma may be required to pay Sesen Bio a termination fee of $5.49
million and/or reimburse Sesen Bio's expenses up to a maximum of $1.75 million.
At the effective time of the Merger (the "Effective Time"), the board of
directors of Sesen Bio is expected to consist of seven members, six of whom will
be designated by Carisma and one of whom will be designated by Sesen Bio.
Pre-Closing Financing Transaction
Concurrently with the execution and delivery of the Merger Agreement, certain
parties entered into agreements with Carisma pursuant to which they have agreed,
subject to the terms and conditions of such agreements, to purchase prior to the
consummation of the Merger shares of Carisma common stock for an aggregate
purchase price of approximately $30.0 million. The consummation of the
transactions contemplated by such agreements is conditioned on the satisfaction
or waiver of the conditions set forth in the Merger Agreement. Shares of Carisma
common stock issued pursuant to this pre-closing financing transaction will be
converted into shares of Sesen Bio common stock in the Merger in accordance with
the Exchange Ratio.
Contingent Value Rights Agreement
At or prior to the Effective Time, Sesen Bio will enter into a Contingent Value
Rights Agreement (the "CVR Agreement") with a rights agent ("Rights Agent")
pursuant to which Sesen Bio stockholders of record immediately prior to the
Effective Time will receive one contingent value right in the form of a dividend
(each, a "CVR") for each outstanding share of Sesen Bio common stock held by
such stockholders on such date. Each CVR will represent the contractual right to
receive contingent cash payments upon the receipt by Sesen Bio of certain
proceeds payable by Roche (as defined herein), if any, pursuant to the Asset
Purchase Agreement by and among Sesen Bio and F. Hoffmann-La Roche Ltd and
Hoffman-La Roche Inc. (collectively "Roche"), dated July 15, 2022 (the "Asset
Purchase Agreement"), upon the achievement by Roche of a specified milestone set
forth in the Asset Purchase Agreement, subject to certain customary deductions,
including for expenses and taxes.
The contingent payments under the CVR Agreement, if they become due, will be
payable to the Rights Agent for subsequent distribution to the holders of the
CVRs. In the event that no such proceeds are received, holders of the CVRs will
not receive any payment pursuant to the CVR Agreement. There can be no assurance
that any cash payment will be made or that any holders of CVRs will receive any
amounts with respect thereto.
The right to the contingent payments contemplated by the CVR Agreement is a
contractual right only and will not be transferable, except in the limited
circumstances specified in the CVR Agreement. The CVRs will not be evidenced by
a certificate or any other instrument and will not be registered with the SEC.
The CVRs will not have any voting or dividend rights and will not represent any
equity or ownership interest in Sesen Bio or any of its affiliates. No interest
will accrue on any amounts payable in respect of the CVRs.
Support Agreements and Lock-Up Agreements
Concurrently with the execution of the Merger Agreement, (a) certain
stockholders of Carisma (solely in their respective capacities as Carisma
stockholders) holding approximately 97.83% of the outstanding shares of Carisma
capital stock (subject to customary cutbacks in the event of certain triggering
events by the Sesen Bio board of directors) have entered into support agreements
with Sesen Bio and Carisma to vote, among other things, all of their shares of
Carisma capital stock in favor of adoption of the Merger Agreement and the
transactions contemplated thereby, and against any alternative acquisition
. . .
Item 7.01 - Regulation FD Disclosure.
On September 21, 2022, Sesen Bio and Carisma issued a joint press release
announcing the execution of the Merger Agreement. The press release is furnished
as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by
reference, except that the information contained on the websites referenced in
the press release is not incorporated herein by reference.
The investor presentation that will be used by Sesen Bio and Carisma in
connection with the Merger is furnished as Exhibit 99.2 to this Current Report
on Form 8-K and is incorporated herein by reference.
The information furnished in this Item 7.01 and Exhibits 99.1 and 99.2 attached
hereto shall not be deemed to be "filed" for the purposes of Section 18 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of such section, nor shall such information
be deemed incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such a filing.
Cautionary Note on Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements concerning
the proposed Merger, the pre-closing financing transaction, the CVRs and other
matters, including without limitation: statements relating to the satisfaction
of the conditions to and consummation of the proposed Merger, the expected
timing of the consummation of the proposed Merger and the expected ownership
percentages of the combined company, Sesen Bio's and Carisma's respective
businesses, the strategy of the combined company, future operations, advancement
of the combined company's product candidates and product pipeline, clinical
development of the combined company's product candidates, including expectations
regarding timing of initiation and results of clinical trials of the combined
company, the ability of Sesen Bio to remain listed on Nasdaq, the completion of
the pre-closing financing transaction and the receipt of any payments under the
CVRs. Actual results may differ materially from those indicated by such
forward-looking statements as a result of various important factors, including
without limitation: (i) the risk that the conditions to the closing of the
proposed Merger are not satisfied, including the failure
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to obtain stockholder approval of matters related to the proposed Merger in a
timely manner or at all; (ii) uncertainties as to the timing of the consummation
of the proposed Merger and the ability of each of Sesen Bio and Carisma to
consummate the proposed Merger, including completing the pre-closing financing
transaction; (iii) risks related to Sesen Bio's ability to correctly estimate
its expected net cash at closing and Sesen Bio's and Carisma's ability to
correctly estimate and manage their respective operating expenses and expenses
associated with the proposed Merger; (iv) risks related to Sesen Bio's continued
listing on Nasdaq until closing of the proposed Merger; (v) the risk that as a
result of adjustments to the Exchange Ratio, Sesen Bio stockholders or Carisma
stockholders could own less of the combined company than is currently
anticipated; (vi) the risk that the conditions to payment under the CVRs will
not be met and that the CVRs may otherwise never deliver any value to Sesen Bio
stockholders; (vii) risks associated with the possible failure to realize
certain anticipated benefits of the proposed Merger, including with respect to
future financial and operating results; (viii) uncertainties regarding the
impact any delay in the closing the proposed Merger would have on the
anticipated cash resources of the combined company upon closing and other events
and unanticipated spending and costs that could reduce the combined company's
cash resources; (ix) the occurrence of any event, change or other circumstance
or condition that could give rise to the termination of the Merger Agreement;
(x) the effect of the announcement, pendency or completion of the proposed
Merger on Sesen Bio's or Carisma's business relationships, operating results and
business generally; (xi) costs related to the proposed Merger; (xii) the outcome
of any legal proceedings that may be instituted against Sesen Bio, Carisma or
any of their respective directors or officers related to the Merger Agreement or
the transactions contemplated thereby; (xiii) the ability of Sesen Bio or
Carisma to protect their respective intellectual property rights; (xiv)
competitive responses to the proposed Merger and changes in expected or existing
competition; (xv) the success and timing of regulatory submissions and
pre-clinical and clinical trials; (xvi) regulatory requirements or developments;
(xvii) changes to clinical trial designs and regulatory pathways; (xviii)
changes in capital resource requirements; (xix) risks related to the inability
of the combined company to obtain sufficient additional capital to continue to
advance its product candidates and its preclinical programs; and (xx)
legislative, regulatory, political and economic developments, among other risks
and uncertainties. A further description of the risks and uncertainties relating
to the business of Sesen Bio is contained in Sesen Bio's most recent Annual
Report on Form 10-K and its Quarterly Reports on Form 10-Q, as well as any
amendments thereto reflected in subsequent filings with the SEC. Sesen Bio
undertakes no duty or obligation to update any forward-looking statements
contained in this Current Report on Form 8-K as a result of new information,
future events or changes in its expectations.
Important Additional Information
In connection with the proposed Merger, Sesen Bio will file materials with the
SEC, including the Registration Statement, which will include a document that
serves as a proxy statement/prospectus of Sesen Bio and an information statement
of Carisma, and other documents regarding the proposed Merger. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THESE MATERIALS, INCLUDING THE REGISTRATION
STATEMENT AND THE PROXY STATEMENT/PROSPECTUS, WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND
THE PARTIES TO THE PROPOSED MERGER. Investors and security holders will be able
to obtain the Registration Statement, the proxy statement/prospectus and other
materials filed by Sesen Bio with the SEC free of charge from the SEC's website
at www.sec.gov or from Sesen Bio at the SEC Filings section of www.sesenbio.com.
No Offer or Solicitation
This Current Report on Form 8-K shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction. No offering of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities Act of
1933, as amended. Subject to certain exceptions to be approved by the relevant
regulators or certain facts to be ascertained, a public offer will not be made
directly or indirectly, in or into any jurisdiction where to do so would
constitute a violation of the laws of such jurisdiction, or by use of the mails
or by any means or instrumentality (including without limitation, facsimile
transmission, telephone or internet) of interstate or foreign commerce, or any
facility of a national securities exchange, of any such jurisdiction.
Participants in the Solicitation
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Sesen Bio and Carisma and their respective directors, executive officers and
other members of management may be deemed to be participants in the solicitation
of proxies in respect of the proposed Merger. Information about Sesen Bio's
directors and executive officers is available in Sesen Bio's Annual Report on
Form 10-K for the fiscal year ended December 31, 2021, its definitive proxy
statement dated April 28, 2022 for its 2022 Annual Meeting of Stockholders and
its Current Report on Form 8-K filed with the SEC on August 31, 2022. Other
information regarding the participants in the proxy solicitation and a
description of their interests in the transaction, by security holdings or
otherwise, will be included in the proxy statement/prospectus and other relevant
materials to be filed with the SEC regarding the proposed Merger when they
become available. Investors should read the proxy statement/prospectus carefully
when it becomes available before making any voting or investment decisions. You
may obtain free copies of these documents from Sesen Bio or the SEC's website as
indicated above.
Item 9.01 - Financial Statements and Exhibits.
(d) Exhibits.
2.1* Agreement and Plan of Merger and Reorganization, dated as of September
20 , 2022, by and among Sesen Bio, Inc., Seahawk Merger Sub, Inc., and
CARISMA Therapeutics Inc.
10.1 Form of Contingent Value Rights Agreement
10.2 Form of Carisma Support Agreement
10.3 Form of Sesen Bio Support Agreement
10.4 Form of Lock-Up Agreement
99.1 Joint Press Release issued on September 21, 2022
99.2 Investor Presentation dated September 21, 2022
99.3 Social Media Posts posted by CARISMA Therapeutics Inc. on September 21, 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Exhibits and/or schedules have been omitted pursuant to Item 601(a)(5) of
Regulation S-K. The registrant hereby undertakes to furnish supplementally
copies of any of the omitted exhibits and schedules upon request by the SEC;
provided, however, that the registrant may request confidential treatment
pursuant to Rule 24b-2 under the Exchange Act, for any exhibits or schedules so
furnished.
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