8-K: XOMA to Acquire Kinnate Biopharma for Up to $2.59 Per Share Plus CVR

XOMA Corporation has agreed to acquire Kinnate Biopharma for a base cash price of $2.3352 per share, an additional cash amount of up to $0.2527 per share, and a contingent value right.

Summary

• XOMA Corporation is set to acquire Kinnate Biopharma in a deal that includes a base cash payment of $2.3352 per share.
• An additional cash payment of up to $0.2527 per share may be added to the base price, bringing the total potential cash consideration to $2.5879 per share.
• Kinnate shareholders will also receive a contingent value right (CVR), entitling them to 85% of net proceeds from any out-license or sale of Kinnate programs within one year of closing, or 100% of net proceeds from any out-license or sale executed prior to closing.
• XOMA anticipates adding approximately $9.5 million in cash to its balance sheet upon closing, along with several early-stage programs.
• The acquisition is expected to close in April 2024, following a tender offer that is expected to commence by March 4, 2024.
• The tender offer is subject to conditions, including a minimum tender of a majority of Kinnate's outstanding shares and at least $120 million in net cash at closing.
• Kinnate shareholders holding approximately 46% of Kinnate common stock have agreed to tender their shares in the Offer and support the merger.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for XOMA, highlighting the potential benefits of the acquisition. However, the contingent nature of the CVR and the closing conditions introduce some uncertainty, preventing a higher score.

Positives

• XOMA will gain access to several early-stage precision oncology programs.
• The acquisition is expected to add to XOMA's cash balance.
• XOMA has a successful history of out-licensing assets and technologies.
• Kinnate's Board of Directors has unanimously approved the acquisition.
• The acquisition is expected to close in April 2024.

Negatives

• The CVR is contingent and may not result in any payment to Kinnate shareholders.
• The additional cash payment is not guaranteed and is capped at $0.2527 per share.
• The acquisition is subject to certain closing conditions, including a minimum tender of a majority of Kinnate's outstanding shares and at least $120 million in net cash at closing.

Risks

• The acquisition may not close if the tender offer conditions are not met.
• XOMA may not be able to successfully monetize Kinnate's programs.
• The CVR may not result in any payment to Kinnate shareholders if no out-license or sale occurs within the specified timeframe.
• XOMA may not achieve the anticipated net cash after winding down Kinnate's operations and concluding remaining clinical trial activities.

Future Outlook

XOMA intends to monetize Kinnate's precision oncology programs, potentially adding to its royalty portfolio. The acquisition is expected to close in April 2024, subject to certain conditions.

Management Comments

• Owen Hughes, Chief Executive Officer of XOMA, stated that the acquisition will further add to XOMA's cash balance and potentially add several programs to its royalty portfolio.
• He also mentioned that XOMA will look to monetize Kinnate's precision oncology programs.

Industry Context

This acquisition reflects a trend of consolidation in the biotech industry, where companies with strong cash positions are acquiring smaller firms with promising drug candidates to expand their portfolios and pipelines.

Comparison to Industry Standards

• The acquisition structure, with a combination of upfront cash and a contingent value right, is a common approach in biotech M&A deals, allowing the acquiring company to manage risk while providing potential upside to the acquired company's shareholders.
• The cash component of the deal is relatively low compared to some other biotech acquisitions, reflecting the early-stage nature of Kinnate's programs and the risk associated with their development.
• The CVR structure is similar to other deals where the acquired company has assets that are not yet fully developed or commercialized, allowing the acquiring company to share the potential upside with the acquired company's shareholders.

Stakeholder Impact

• Kinnate shareholders will receive cash and a contingent value right.
• XOMA shareholders may benefit from the potential upside of Kinnate's programs.
• Kinnate employees may be affected by the acquisition and subsequent wind-down of operations.

Next Steps

• XOMA will commence a tender offer by March 4, 2024.
• The acquisition is expected to close in April 2024.
• XOMA will look to monetize Kinnate's precision oncology programs.

Key Dates

Keywords

acquisition, biopharma, contingent value right, tender offer, merger, precision oncology, royalty portfolio, out-licensing, cash, XOMA, Kinnate