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  Convertible Debt Terms – Survey of Market Trends 2019/2020  
 
 

By Evan Bienstock and Alicia Ryan

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The convertible debt market has remained remarkably stable over the last 15 months, despite considerable economic uncertainty related to the COVID-19 pandemic. Fenwick’s latest Convertible Debt Terms – Survey of Market Trends analyzes more than 100 issuer-side convertible debt transactions covering the period from January 1, 2019, through March 30, 2020. Serving as a resource for startup founders, investors and others interested in convertible debt market trends, this report also includes a snapshot comparison of the full report period through Q2 2020.

Key Findings

  • Year over year, deal sizes are down slightly—from $1.62 million to $1.58 million—with the exception of late-stage deals.
  • Q2 2020, however, saw an increase in deal size and interest rate over the median from the 2019-2020 reporting period, likely a result of companies looking to extend their runway in response to COVID-19.
  • Conversion discounts remain the norm, even in later stage debt issuances.
  • Valuation caps remain standard practice for more than 80% of “first money” transactions, but drop steeply at later stages.
  • In change-of-control situations, such as the sale of a company, most deals provide for a premium payout that is a multiple on top of the repayment of the principal balance. In fact, as many as 68% of late-stage bridge transactions contain a change of control premium.

 

   
 
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One cannot and must not try to erase the past merely because it does not fit the present.

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Update to “The Bidding Process, Procedures for the Sale of Assets of Lycera Corp. Asset Portfolio”

Further to Gerbsman Partners sales letter of August 25, 2020 and “Updates” on September 1, 2020 and September 8, 2020 regarding the sale of Lycera Corp.  www.lycera.com(“Lycera”), I am attaching Exhibit A, Lycera NDA, detail Lycera Patent Estate Portfolio, a Table of Contents for Lycera Data Room due diligence, a non-confidential deck which details additional Lycera information and an updated slide presentation summarizing the potential for RORg Agonist as “Adjuvant” to cell therapy either in-vivo or ex-vivo settings and an Asset Purchase Agreement (“APA”).  Upon signing an NDA, interested parties can both access the on line data room and schedule a meeting with Lycera key intellectual capital.

I would encourage and recommend that all interested parties have their counsel speak with Brandon Fenn, Esq. counsel to Lycera, to discuss any questions or comments of a legal nature relating to the transaction.  Brandon is available at bfenn@cooley.com and 212 479 6626.

Please review the “Important Legal Notice” below in that potential purchasers should not rely on any information contained provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit. 

Ken, Jim and I will be following up to review the Bidding Process, schedule due diligence meetings and answer any questions regarding the “Date Certain Sale of the Lycera Asset Portfolio Process”.  Also, potential Bidders can bid of all or part of the Lycera Asset Portfolio.  

Any and all of the assets of Lycera will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

 

Gerbsman Partners has been retained by Lycera Corp. to solicit interest for the acquisition of all, or substantially all, the assets of Lycera Corp. 

Lycera Corp (Lycera) is a privately held biotechnology company located in Plymouth Meeting, Pennsylvania.  Since its founding in 2006, Lycera has focused on the development of novel small molecule immunomodulatory medicines for the treatment of autoimmune diseases and cancer.  Lycera has been supported by leading venture capital companies comprising Arch Venture Partners, Blackstone Ventures and InterWest Partners, as well as, through a partnership with Celgene for a total investment of $180M. The Board of Directors has approved the search for a strategic partner to continue the development of the Lycera assets.

The acquisition of Lycera’s asset portfolio enables immediate access to clinical and preclinical drug candidates.  Lycera has a patent portfolio comprising thirty-six (36) patent families, one hundred and twenty-one (121) patents and forty-four (44) provisional applications to protect the company’s preclinical and clinical assets.

The assets of Lycera will be sold in whole or in part (collectively, the “Lycera Assets”). The sale of these assets is being conducted with the cooperation of Lycera.  Lycera and its consultants will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership.

IMPORTANT LEGAL NOTICE:


The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Lycera’s assets has been supplied by Lycera.  It has not been independently investigated or verified by Gerbsman Partners or its agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Lycera, or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Lycera, Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Lycera’s or Gerbsman Partners’ negligence or otherwise.  

Any sale of the Lycera Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Lycera or Gerbsman Partners.  Without limiting the generality of the foregoing, Lycera and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Lycera Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent.  This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

 

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”).  Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Lycera Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Lycera, Inc., Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and neither Lycera nor Gerbsman Partners (or their respective, staff, agents, or attorneys) makes any representations as to the accuracy or completeness of the same.  

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Lycera Assets.  Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, September 25, 2020 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at  Gerbsman’s office, located at 211 Laurel Grove Ave, Kentfield, CA 94904.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. Lycera can accept bids for all or part of the Asset Portfolio.  Be specific as to the assets desired. 

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable.  All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Lycera, Inc.).  The winning bidder will be notified within 3 business days after the Bid Deadline.  Non-successful bidders will have their deposit returned to them.

Lycera reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest bid will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

Lycera will require the successful bidder to close within 7 business days.  Any or all of the assets of Lycera will be sold on an “as is, where is” basis, with no representation or warranties whatsoever. 

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Lycera Assets shall be the sole responsibility of the successful bidder and shall be paid to Lycera at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman                                                                        

steve@gerbsmanpartners.com 

 

Kenneth Hardesty

ken@gerbsmanpartners.com

 

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