DEFA14A: Singular Genomics Faces Lawsuits Over Merger Disclosures, Voluntarily Supplements Proxy Statement

Singular Genomics Systems, Inc. is supplementing its proxy statement related to its merger with a subsidiary of Deerfield Private Design Fund IV, L.P. following lawsuits alleging misleading omissions.

Summary

• Singular Genomics Systems, Inc. is facing lawsuits alleging that its proxy statement regarding the proposed merger with Singular Genomics Parent, LLC and Saturn Merger Sub, Inc. contains misleading information.
• The lawsuits, filed by purported stockholders, seek to enjoin the merger until additional disclosures are made.
• To avoid potential expense and delay, Singular Genomics is voluntarily supplementing its proxy statement without admitting any liability or wrongdoing.
• The supplemental disclosures relate to the engagement of TD Securities, standstill provisions in non-disclosure agreements, the discounted cash flow analysis performed by Houlihan Lokey, and the treatment of net operating losses (NOLs).
• The special meeting of Singular stockholders to vote on the merger is scheduled for February 19, 2025.
• The company maintains that the claims are without merit and no supplemental disclosures are required under applicable law.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative due to the lawsuits and the need for supplemental disclosures, although the company maintains the claims are without merit. The merger itself could be seen as positive, but the legal challenges introduce uncertainty.

Positives

• Singular Genomics is proactively addressing concerns raised in the lawsuits by providing supplemental disclosures.
• The company believes the claims asserted in the lawsuits are without merit.
• All standstill provisions in non-disclosure agreements fell away automatically upon the signing or announcement of the Merger Agreement.

Negatives

• Singular Genomics is facing lawsuits alleging misleading omissions in its proxy statement.
• The lawsuits could potentially delay or prevent the consummation of the merger.
• The company is incurring expenses to defend against the lawsuits and prepare supplemental disclosures.

Risks

• The merger may not be consummated in a timely manner, if at all.
• The company may be required to pay a termination fee if the merger agreement is terminated.
• The announcement of the merger could negatively impact the company's business relationships and operating results.
• Legal proceedings could result in judgments or settlements that are unfavorable to the company.
• The company's net operating losses (NOLs) are subject to significant limitations under Section 382 of the Internal Revenue Code.

Future Outlook

The company is focused on completing the merger with Singular Genomics Parent, LLC, subject to stockholder approval and other customary closing conditions.

Management Comments

• Singular believes that the claims asserted in the Matters are without merit and that no supplemental disclosures are required under applicable law.
• Singular specifically denies all allegations in the Matters that any additional disclosure was or is required under applicable law.

Industry Context

The life sciences tools industry is currently seeing increased M&A activity, driven by a need for companies to expand their product offerings and gain access to new technologies. The merger of Singular Genomics with a Deerfield-backed entity aligns with this trend, as it provides Singular with additional capital and resources to further develop its sequencing platform.

Comparison to Industry Standards

• The discounted cash flow analysis used by Houlihan Lokey, with discount rates ranging from 25.0% to 35.0%, is within the typical range for high-growth companies in the genomics sector.
• Comparable companies like Pacific Biosciences and Oxford Nanopore Technologies have also experienced significant volatility in their stock prices, reflecting the inherent risks and uncertainties associated with the development and commercialization of new sequencing technologies.
• The $20.00 per share merger consideration represents a premium to Singular Genomics' recent trading price, but it is lower than the high end of Houlihan Lokey's implied value reference range.

Legal Proceedings

• Two lawsuits were filed alleging that the Proxy Statement omitted material information that rendered it false or misleading.
• The Complaints generally allege that the Proxy Statement is misleading and omits and/or misrepresents certain purportedly material information in violation of applicable federal or state law.

Stakeholder Impact

• Shareholders are impacted by the proposed merger and the potential outcomes of the lawsuits.
• Employees face uncertainty regarding their future employment following the merger.
• Customers and suppliers may be affected by changes in the company's operations and strategy following the merger.

Next Steps

• Singular Genomics will hold a special meeting of stockholders on February 19, 2025, to vote on the merger agreement.
• The company will continue to defend against the lawsuits and provide any necessary supplemental disclosures.
• The company will work to satisfy the remaining conditions to the consummation of the merger.

Key Dates

Keywords

Merger, Proxy Statement, Lawsuits, Singular Genomics, Deerfield, Disclosure, Stockholders, TD Securities, Houlihan Lokey, NOLs