DEFM14A: LAVA Therapeutics Board Backs XOMA Acquisition Offer

LAVA Therapeutics N.V. shareholders are invited to an Extraordinary General Meeting to vote on XOMA Royalty Corporation's offer to acquire all outstanding shares for cash and contingent value rights, a deal unanimously recommended by LAVA's Board.

Summary

• XOMA Royalty Corporation has offered to acquire all issued and outstanding common shares of LAVA Therapeutics N.V. for a cash amount of $1.16 to $1.24 per share, plus one Contingent Value Right (CVR) per share.
• The CVRs represent a contractual right to potential future cash payments, including 100% of LAVA's Closing Net Cash exceeding $31.5 million, 75% of net proceeds from existing collaborations with Pfizer and Johnson & Johnson, and 75% of net proceeds from future dispositions of certain CVR Products (e.g., LAVA-1266) for a period of 10 years.
• LAVA's Board of Directors unanimously recommends that shareholders accept the Offer and vote FOR all related proposals at the Extraordinary General Meeting (EGM).
• The EGM is scheduled for September 30, 2025, to vote on the conditional appointment of new directors designated by XOMA, the discharge of current Board members, and resolutions for a post-offer reorganization including a Dutch statutory merger.
• The Offer is contingent on several conditions, including a minimum tender of 80% (or 75% in certain circumstances) of LAVA's issued and outstanding share capital and LAVA having at least $31.5 million in Closing Net Cash.
• If the Offer is not completed, LAVA would remain an independent public company, but the Board concluded it does not have a viable standalone business plan, with liquidation being the most likely alternative.
• LAVA management's dissolution analysis estimated a liquidation distribution of $1.10 per share (discounted to October 31, 2025), which is less than the cash component of the Offer Consideration.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly positive given the circumstances. While the company is being acquired due to a lack of a viable standalone business plan, the Board has secured an offer that is deemed more favorable than liquidation and includes potential upside via CVRs, despite the buyer's low estimate for their value. It represents a managed exit rather than a collapse.

Positives

• The Offer provides immediate liquidity and certainty of value for LAVA shareholders through its cash component of $1.16 to $1.24 per share.
• The Board believes the Offer represents the highest price reasonably obtainable and offers maximum capital return with high deal certainty, especially compared to a potential liquidation.
• The transaction is not subject to a financing condition, increasing the likelihood of closing.
• Contingent Value Rights (CVRs) offer shareholders an opportunity to participate in future proceeds from existing collaborations with Pfizer and Johnson & Johnson, as well as dispositions of other CVR Products like LAVA-1266.
• XOMA has extensive experience in asset dispositions, which is expected to benefit the realization of CVR value.
• The likelihood of regulatory impediments is low, contributing to a high probability of closing the transaction.
• The Purchase Agreement allows LAVA to respond to unsolicited superior proposals, subject to a reasonable termination fee of $750,000.

Negatives

• The CVRs are non-transferable (except in limited circumstances), not registered with the SEC, and do not have voting or dividend rights, limiting shareholder flexibility and liquidity for this portion of the consideration.
• XOMA, the buyer, estimates the value of the CVRs to be approximately $0.00 per CVR, indicating significant uncertainty regarding potential future payments.
• LAVA shareholders will not participate in the future growth or earnings of a combined strategic entity, as the company is being acquired rather than merging with a complementary business.
• The company's Board concluded that LAVA does not have a viable standalone business plan, indicating underlying operational challenges.
• Shareholders who do not tender their shares in the Offer or Subsequent Offering Period, and whose shares are cancelled in the Post-Offer Reorganization, may be subject to a 15% Dutch dividend withholding tax on amounts exceeding the average paid-up capital of New Topco A Shares.
• The transaction involves substantial expenses, including a potential $750,000 termination fee payable by LAVA under certain circumstances, which would reduce LAVA's cash reserves if the deal fails.

Risks

• Significant uncertainty surrounds the Company's or Buyer's ability to attract a potential acquirer for the CVR Products and the potential for the receipt of net proceeds from the Pfizer and Johnson & Johnson collaborations in the future.
• The CVRs are non-transferable, limiting liquidity for holders.
• The Offer and Post-Offer Reorganization might not be consummated, leading to expended time and effort and employee distraction without the anticipated benefits.
• Potential lawsuits, actions, or proceedings may arise in respect of the Purchase Agreement or the Transactions.
• The interests of certain directors and executive officers of LAVA in the Transactions (e.g., accelerated vesting of equity awards, severance payments) may differ from, or be in addition to, the interests of other shareholders.
• The Company may be required to pay Buyer a fixed termination compensation of $750,000 if the Purchase Agreement is terminated under certain specified circumstances.

Future Outlook

LAVA Therapeutics N.V. does not have a viable standalone business plan, and its plan in the absence of a sale or merger is to pursue a dissolution and liquidation. The proposed acquisition by XOMA Royalty Corporation is presented as the most favorable path forward, offering immediate cash value and potential future contingent payments from existing collaborations and asset dispositions, with XOMA committing to commercially reasonable efforts to realize these CVR proceeds for a specified period.

Management Comments

• Stephen Hurly, Chief Executive Officer, urged shareholders to vote their shares prior to the EGM, emphasizing its importance.
• The Board determined that the Purchase Agreement and the transactions are in the best interests of LAVA and the sustainable success of its business, considering the interests of its shareholders, employees, and other relevant stakeholders.
• The Board believed the offer provided the highest price reasonably obtainable, maximum capital return, no financial risks, and a high degree of deal certainty.
• LAVA management believed there were other opportunities with greater potential for return to shareholders than liquidation, but ultimately pivoted to the XOMA offer due to challenges in fundraising for in-licensed assets and concerns about the commercial viability of other merger candidates.

Industry Context

The acquisition of LAVA Therapeutics by XOMA Royalty Corporation reflects a trend in the biotechnology sector where companies with promising but early-stage assets, facing significant cash constraints and challenges in securing further financing, opt for strategic exits. XOMA, as a biotech royalty aggregator, specializes in acquiring economic rights to future milestone and royalty payments, providing a structured exit for companies like LAVA that may lack the capital or strategic focus to advance their pipeline independently. LAVA's decision to discontinue its LAVA-1207 program and reprioritize LAVA-1266, coupled with difficulties in fundraising for in-licensing opportunities, underscores the high-risk, capital-intensive nature of clinical-stage immuno-oncology development and the increasing pressure on smaller biotechs to find strategic partners or acquirers.

Comparison to Industry Standards

• The Board's extensive strategic review process, involving outreach to 99 potential interested parties and evaluating 44 non-binding proposals, demonstrates a thorough exploration of alternatives, which is a standard practice for companies considering a sale or significant strategic shift.
• The offer consideration, including a cash component and a Contingent Value Right (CVR), is a common structure in biotech acquisitions, particularly when the acquired company has early-stage or partnered assets with uncertain future value.
• The Board's comparison of the Offer to a statutory liquidation scenario, with the Offer's cash component ($1.16-$1.24 per share) exceeding the estimated liquidation distribution ($1.10 per share discounted to Oct 31, 2025), aligns with fiduciary duties to maximize shareholder value in a distressed context.
• The engagement of Leerink Partners LLC as a financial advisor, a firm with a strong reputation and experience in the pharmaceutical industry, is consistent with industry best practices for evaluating complex strategic transactions.

Management Changes

Corporate Governance

Legal Proceedings

• The possibility of lawsuits, actions, or proceedings in respect of the Purchase Agreement or the Transactions is acknowledged.
• The Company has agreed to control any Transaction Litigation but will give Buyer the right to participate in defense and settlement, with Buyer's consent required for settlement (not to be unreasonably withheld, conditioned, or delayed).

Related Party Transactions

• LAVA's directors and executive officers have interests in the Offer and Post-Offer Reorganization that may differ from general shareholders, including accelerated vesting and payment of in-the-money stock options at Closing.
• Current executive officers may receive severance payments and benefits under their respective employment agreements upon certain terminations during the Change in Control Period.
• LAVA's directors and executive officers (Stephen Hurly, Fred Powell, Charles Morris, Kapil Dhingra, Jay T. Backstrom, Peter A. Kiener, James J. Noble, Christy J. Oliger, Mary E. Wadlinger, and Karen J. Wilson) entered into Tender and Support Agreements, agreeing to tender their shares and vote in favor of the EGM proposals. These shares comprise approximately 0.5% of outstanding shares as of August 14, 2025.

Stakeholder Impact

• Shareholders: Will receive cash consideration ($1.16-$1.24 per share) and CVRs, providing immediate liquidity and potential future payments. Those not tendering will be subject to a post-offer reorganization and potential Dutch dividend withholding tax.
• Employees: Executive officers may receive accelerated vesting of equity awards and severance payments. LAVA will take action to terminate 401(k) plans unless Buyer directs otherwise. Buyer has limited obligations for post-retirement/post-service benefits.
• Customers/Partners: Existing collaborations with Pfizer and Johnson & Johnson will continue, with 75% of net proceeds from these partnerships contributing to CVR payments.
• Creditors: Will be able to recover claims from New Topco after the Downstream Merger, as they could from LAVA before the merger.
• Management: Current CEO Stephen Hurly and other directors will step down, while XOMA-designated directors will join the Board, shifting management control.

Next Steps

• Shareholders are urged to vote on the EGM proposals by September 29, 2025, 11:59 p.m. ET.
• The Extraordinary General Meeting (EGM) will be held on September 30, 2025, to vote on the Offer-related proposals.
• The Offer is expected to expire on October 3, 2025, unless extended.
• If conditions are met, a Subsequent Offering Period of five business days will commence after the Offer expires.
• Following the Offer and Subsequent Offering Period, a Post-Offer Reorganization, including a Dutch statutory merger and cancellation of shares, will be effectuated.
• Buyer will use commercially reasonable efforts to enter into Disposition Agreements for CVR Products during the two-year Efforts Disposition Period following closing.
• Buyer will use commercially reasonable efforts to maintain and prosecute intellectual property relating to CVR Products until December 31, 2026.
• LAVA will cooperate with Buyer to delist shares from Nasdaq and deregister under the 1934 Act as promptly as practicable after the Subsequent Offering Period.

Key Dates

Recommendation

The filing details an acquisition offer for LAVA Therapeutics by XOMA Royalty Corporation, with a cash component of $1.16 to $1.24 per share and a Contingent Value Right (CVR) that the buyer explicitly estimates to be worth approximately $0.00. On September 2, 2025, LAVA's shares closed at $1.56. Given that the current market price is significantly above the maximum guaranteed cash component of the offer ($1.24) and the CVR is estimated at zero value by the buyer, a seasoned investor would likely sell their shares on the open market to realize a higher immediate value than what is guaranteed by tendering into the offer. While the Board recommends acceptance as the best alternative to liquidation, the market's current valuation suggests a better immediate exit for shareholders through open market sales.

Keywords

LAVA Therapeutics, XOMA Royalty Corporation, Acquisition, Tender Offer, Contingent Value Rights, CVR, Biotechnology, Immuno-oncology, Merger, SEC Filing, Corporate Governance, Shareholder Vote, Liquidation Analysis, Biotech Royalty Aggregator