DEFM14A: Repare Therapeutics to be Acquired by Xeno Acquisition Corp.

Repare Therapeutics Inc. shareholders will vote on a proposed acquisition by Xeno Acquisition Corp. for cash and contingent value rights, or a voluntary liquidation.

Summary

• A special meeting of shareholders will be held on January 16, 2026, at 10:00 a.m. (Montreal time) via live webcast to consider an arrangement.
• The arrangement involves Xeno Acquisition Corp. (Purchaser) acquiring all issued and outstanding common shares of Repare Therapeutics Inc. (Company).
• Shareholders will receive an estimated cash payment of US$1.82 per common share and one Contingent Value Right (CVR) for each common share.
• The final cash amount will be determined based on the Company's cash balance immediately prior to the Effective Date, after deducting certain transaction costs, outstanding liabilities, and a US$4,000,000 transaction fee to the Purchaser.
• CVRs entitle holders to contingent cash payments from future proceeds of existing partnerships (Bristol-Myers Squibb, Debiopharm, DCx) and potential future licenses or dispositions of product candidates (RP-1664, RP-3500, Polq program RP-3467) and intellectual property, as well as certain investment tax credits.
• All outstanding Incentive Securities (stock options and restricted share units) will vest unconditionally. In-the-money options will be exchanged for cash (Cash Amount minus exercise price) and one CVR, while restricted share units will be exchanged for cash (Cash Amount) and one CVR. Out-of-the-money options will be cancelled without payment.
• If the arrangement is not approved or is terminated, shareholders will vote on a special resolution for the voluntary liquidation and dissolution of the Company and the appointment of KPMG LLP as liquidator.
• The Board of Directors and an independent Transaction Committee unanimously recommend voting FOR the Arrangement Resolution, Compensation Resolution, Liquidation Resolution, and Liquidator Resolution.
• The arrangement requires approval by not less than 66 2/3% of votes cast by shareholders and a simple majority excluding certain related parties under Canadian securities law (MI 61-101).
• Following completion, the Company will become a private entity, delisted from Nasdaq, and deregistered from the U.S. Securities Exchange Act of 1934, ceasing public reporting obligations.

Sentiment

Score: 7

Explanation: Given the Company's strategic wind-down and prior workforce reductions, this acquisition provides a structured exit for shareholders with a certain cash component and potential upside via CVRs, which is presented as more favorable than an uncertain liquidation. The unanimous board recommendation and fairness opinion support this outcome.

Positives

• The arrangement provides certain and immediate cash value and liquidity to shareholders, estimated at US$1.82 per share.
• Contingent Value Rights (CVRs) offer potential additional value from existing partnerships and future monetization of intellectual property and product candidates.
• The transaction is the result of a thorough strategic review process, with no more advantageous alternative transactions identified by the Company.
• The acquisition is not subject to a financing condition, and XOMA Royalty Corporation (XRC) unconditionally and irrevocably guarantees the Purchaser's obligations.
• The transaction has a high level of certainty due to limited conditionality and no required regulatory approvals.
• The Company retains the ability to monetize its programs and intellectual property prior to closing, which may further enhance the value distributed to shareholders through CVRs.
• The Board and Transaction Committee unanimously recommend the arrangement, supported by a fairness opinion from Leerink Partners LLC.
• The arrangement is expected to maximize the amount of cash paid to shareholders and provide it sooner than a statutory liquidation.

Negatives

• A US$4,000,000 transaction fee will be retained by the Purchaser from the Company's cash balance.
• The cash payment per share is an estimate and will be finally determined based on the Company's cash balance after deducting various costs and liabilities.
• CVRs are contractual rights only, non-transferable (except in limited circumstances), not registered with the SEC, and do not represent any equity or ownership interest in the Purchaser, with no assurance of any payments.
• Out-of-the-money stock options will be cancelled without any payment.
• The Company will become a private entity, delisted from Nasdaq, and deregistered from the SEC, ending public reporting obligations.
• Directors and executive officers have interests in the arrangement that differ from general shareholders, including accelerated vesting and change-in-control bonuses.
• If the arrangement is not completed, the Company may incur significant costs, including a US$2,000,000 termination payment to the Purchaser under certain circumstances.
• The Company believes it was classified as a Passive Foreign Investment Company (PFIC) for 2024 and prior years, and expects to be for the current year, which could have adverse U.S. federal income tax consequences for U.S. Holders.
• If the arrangement fails and liquidation occurs, the future of the Company is uncertain, and shareholders may not realize any value or face significant delays.

Risks

• There is no certainty that all conditions precedent to the arrangement will be satisfied.
• The market price of the common shares may be materially adversely affected if the arrangement is not completed.
• The arrangement agreement may be terminated under certain circumstances, potentially requiring the Company to pay a US$2,000,000 termination payment to the Purchaser.
• Directors and officers of the Company have interests in the arrangement that may be different from those of shareholders generally.
• The Purchaser and the Company may be targets of legal claims, securities class actions, derivative lawsuits, and other claims related to the transaction.
• The relative trading price of common shares prior to the Effective Date may be volatile.
• Shareholders will no longer have any rights or interest in the Company following the completion of the arrangement.
• Potential adverse U.S. and Canadian federal income tax consequences for shareholders.
• If the arrangement is not consummated and the Company proceeds with liquidation, the future of the Company will be uncertain, and shareholders may not realize any value for their common shares, or face significant delays.
• Uncertainty of liquidation distribution amounts due to unpredictable costs, liabilities, and potential contingent claims.
• Potential liability of shareholders under the Business Corporations Act (Quebec) if a liquidation claim is successful after distributions have been made and company funds are insufficient.

Future Outlook

The Company intends to discontinue and wind up its business. The proposed arrangement is expected to maximize the cash distributed to shareholders and provide it sooner than a statutory liquidation. Following the arrangement, the Company will become a private entity, delisted from Nasdaq, and deregistered from the SEC, thereby ceasing its public reporting obligations. If the arrangement is not completed, the Company will proceed with voluntary liquidation and dissolution, which carries an uncertain future and potential delays or no value realization for shareholders.

Management Comments

• "We believe that holding the Special Meeting as a completely virtual meeting will enable us to avoid the costs and complexities associated with meetings held in a hybrid format while preserving a format that encourages U.S. and Canadian Shareholder inclusion and participation."
• "The Board unanimously recommends that Shareholders vote FOR the Arrangement Resolution."
• "The Board unanimously recommends that Shareholders vote FOR the Compensation Resolution, FOR the Liquidation Resolution and FOR the Liquidator Resolution."
• "The Company believes that the Consideration to be paid to the Shareholders in the Arrangement is more favorable to such holders than the potential value that might be distributable to the Shareholders if the Company were to effect a statutory liquidation..."
• "The Company believes that the level of transaction certainty associated with the Arrangement is high, including as a result of its limited conditionality and the absence of any required regulatory approvals."
• "The Company retains the ability to monetize its programs and intellectual property in the interim period, which may further enhance the value available for distribution to Shareholders at the Effective Time or following the Effective Time through the CVR."
• "The Transaction Committee believes the Arrangement is in the best interest of the Company and the Agreement includes terms and conditions that are reasonable in the judgment of the Transaction Committee."
• "Repare advised Leerink Partners that it intended to discontinue and wind up the business of Repare and did not have a standalone business plan."
• "If the Liquidation Resolution and the Liquidator Resolution are not approved and the Arrangement is terminated, the future of the Company will be uncertain, and you may not realize any value for your Common Shares."

Industry Context

Repare Therapeutics Inc., a precision medicine oncology company, announced a strategic re-prioritization in January 2025, followed by a significant workforce reduction (approximately 75% by Q4 2025) and out-licensing of its discovery platforms and programs. This indicates a shift away from active drug development and a move towards asset monetization. The proposed acquisition by Xeno Acquisition Corp., a subsidiary of a research foundation focused on xenotransplantation, and XOMA Royalty Corporation, a biotech royalty aggregator, aligns with this strategic pivot. This transaction reflects a broader industry trend where smaller biotech companies facing high R&D costs and uncertain clinical outcomes may opt to divest non-core or early-stage assets to larger players or specialized royalty firms, rather than continuing as standalone entities.

Comparison to Industry Standards

• The filing does not provide specific comparisons to other companies' acquisition terms or liquidation outcomes.
• Leerink Partners' fairness opinion notes that traditional valuation methodologies for a going concern were not applicable, implying the Company's situation is not standard for an actively developing biotech.
• The transaction fee of US$4,000,000 and the termination fee of US$2,000,000 are specific to this deal and are not benchmarked against industry averages within the filing.
• The Contingent Value Right (CVR) structure, with varying payout percentages for different asset types and timeframes, is a common mechanism in biotech acquisitions to provide contingent upside to selling shareholders when asset values are uncertain, but no specific comparable CVR deals are detailed.

Management Changes

Corporate Governance

Legal Proceedings

• The Company and the Purchaser may be targets of legal claims, securities class actions, derivative lawsuits, and other claims related to the Arrangement (Transaction Litigation).
• The Company will notify the Purchaser of any Transaction Litigation and allow the Purchaser to participate in the defense, but will not settle without the Purchaser's prior written consent.

Related Party Transactions

• Certain directors and executive officers are considered 'related parties' and are entitled to 'collateral benefits' in connection with the Arrangement, including accelerated vesting of stock options and restricted share units, termination and change of control benefits, and indemnification.
• Steve Forte and Michael Zinda are identified as related parties whose collateral benefits exceed 5% of the value of consideration they expect to receive, meaning their shares will be excluded from the minority approval vote under Multilateral Instrument 61-101 (MI 61-101).
• Voting and Support Agreements were entered into by directors, executive officers, and certain affiliated entities (BVF Partners L.P., Blue Owl Healthcare Opportunities, and OrbiMed) to vote their shares in favor of the Arrangement.

Stakeholder Impact

• Shareholders will receive an estimated cash payment of US$1.82 per share and one CVR per share, providing immediate liquidity and potential future upside from asset monetization.
• Holders of in-the-money Incentive Securities (Options and RSUs) will receive cash and CVRs, while out-of-the-money Options will be cancelled without payment.
• The Company's workforce was reduced by approximately 75% by Q4 2025 as part of a strategic re-prioritization, impacting employees.
• Executive officers are eligible for change-in-control payments and severance benefits.
• The Company will cease to be a publicly traded entity, reducing administrative and financial burdens associated with public reporting.
• The Purchaser (Xeno Acquisition Corp.) will acquire all outstanding common shares and retain a US$4,000,000 transaction fee from the Company's cash balance.
• XOMA Royalty Corporation (XRC) guarantees the Purchaser's obligations, indicating its role in monetizing the acquired assets and intellectual property.

Next Steps

• Hold a Special Meeting of Shareholders on January 16, 2026, to vote on the Arrangement Resolution, Compensation Resolution, Liquidation Resolution, and Liquidator Resolution.
• If the Arrangement Resolution is approved, apply to the Superior Court of Quebec for a Final Order approving the Arrangement (expected January 23, 2026).
• If the Final Order is granted, file Articles of Arrangement with the Enterprise Registrar.
• Expect the Effective Date of the Arrangement to occur on or about January 30, 2026.
• Following completion of the Arrangement, the Company will become a private entity, delist from Nasdaq, and deregister under the U.S. Securities Exchange Act of 1934.
• The Company is expected to apply to cease being a reporting issuer in Quebec.
• If the Arrangement is not approved or terminated, and the Liquidation Resolution is approved, the Liquidator will file a notice of liquidation and oversee the voluntary liquidation and dissolution of the Company.
• The Company continues to engage with Party A for the potential disposition of RP-3467.

Key Dates

Recommendation

The Company is undergoing a strategic wind-down, and this acquisition offers a structured exit for shareholders with a fixed cash component and potential upside through CVRs. While the cash component provides certainty, the CVRs are highly speculative. The alternative is an uncertain liquidation process. Given the Company's prior announcements of significant workforce reductions and out-licensing, this transaction appears to be the most viable path to maximize shareholder value under the circumstances. Investors should hold to receive the cash and CVRs, but recognize the speculative nature of the CVRs and the Company's cessation of independent operations.

Keywords

Repare Therapeutics Inc., Xeno Acquisition Corp., XenoTherapeutics Inc., XOMA Royalty Corporation, Arrangement Agreement, Acquisition, Merger, Contingent Value Rights (CVR), Liquidation, Dissolution, SEC Filing, Proxy Statement, Biotechnology, Oncology, Synthetic Lethality, RP-3467, RP-1664, RP-3500 (Camonsertib), Nasdaq Delisting, Shareholder Vote, Corporate Governance, Risk Factors, Financial Analysis, Leerink Partners, Quebec Business Corporations Act (QBCA), MI 61-101