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Update to “The Bidding Process, Procedures for Sale of Assets and Intellectual Property of Adynxx, Inc.

Further to Gerbsman Partners sales letter of April 19, 2021 regarding the sale of Adynxx, Inc. (“Adynxx”)  I am attaching “Exhibit A Adynxx NDA”, “Adynxx Patent information”, the “Table of Contents” for Adynxx Data Room due diligence information, Adynxx presentation and Form S-1 information.

Please review the “Important Legal Notice” below in that potential purchasers should not rely on any information contained provided by Adynxx 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. 

Ken, Jim, Stephen and I will be following up to review the updated Bidding Process, schedule due diligence meetings and answer any questions regarding the “Date Certain M&A Process”.

Any and all the assets of Adynxx 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 Adynxx to solicit interest for the acquisition of all, or substantially all, the assets of Adynxx. 

 
The acquisition of Adynxx’s assets will enable immediate access to a broad portfolio of proprietary technology, a Phase 2 clinical stage product candidate for postoperative pain (brivoligide), and an early-stage product candidate for chronic pain (AYX2).  To date, Adynxx has raised a total of $64M in capital funding, including two rounds of private equity financing totaling $29M funded by a premier team of life science investors including Domain Associates and TPG Biotech, and $5M in secured debt from Oxford Finance.

The sale is being conducted with the cooperation of Adynxx.  Certain former Adynxx employees have advised that they will be available to assist purchasers with due diligence and assist with a prompt transfer of the Adynxx Assets. 

 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 Aynxx’s assets has been supplied by Adynxx.  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 Adynxx 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.

Adynxx, 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 Adynxx’s or Gerbsman Partners’ negligence or otherwise. 

Any sale of the Adynxx 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 Adynxx or Gerbsman Partners.  Without limiting the generality of the foregoing, Adynxx and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Adynxx 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 Adynxx 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 Adynxx, 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 Adynxx 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 Adynxx Assets.  Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, May 14, 2021at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Adynxx’s office, located at 44 Thama Street, San Francisco, CA 94105.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.  Bidders interested in specific Adynxx Assets must submit a separate bid for such assets.  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 Adynxx, 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.

Adynxx 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.

Adynxx will require the successful bidder to close within 7 business days.  Any or all of the assets of Adynxx 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 Adynxx Assets shall be the sole responsibility of the successful bidder and shall be paid to Adynxx 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

 Sale of Adynxx, Inc. 

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Adynxx, Inc. (Adynxx or the company) to solicit interest for the acquisition of all, or substantially all, of the assets of Adynxx.

Adynxx is a clinical stage biopharmaceutical company focused on the development of transcription factor decoy technology based in San Francisco.  Adynxx is dedicated to bringing to market novel, non-opioid, disease-modifying products to address unmet needs in the treatment of pain.  Please see attached Adynxx presentation and detail sales letter.

The acquisition of Adynxx’s assets will enable immediate access to a broad portfolio of proprietary technology, a Phase 2 clinical stage product candidate for postoperative pain (brivoligide), and an early-stage product candidate for chronic pain (AYX2).  

Adynxx has raised a total of $64M in capital funding, including $29M from venture capital investors, $20M in strategic partnership, and $5M in secured debt from Oxford Finance. Adynxx also received a grant award for up to $15M from the National Institutes of Health (NIH).

Adynxx completed a merger with Alliqua BioMedical, Inc. in 2019 that resulted in Adynxx becoming a publicly traded company.  Shortly after completion of the merger, however, Adynxx was informed by The Nasdaq Stock Market that the company’s shares would be delisted from The Nasdaq Capital Market due to noncompliance with the minimum round lot stockholders and the minimum stockholders’ equity requirement for an initial listing, despite the company having met with Nasdaq and presented a plan to satisfy the listing requirements. As a result of the delisting by Nasdaq and a change in listing requirements implemented by Nasdaq in August 2019, the company was unable to raise additional capital and unable to relist its shares on The Nasdaq Capital Market.  In May 2020, the company filed a Form 15 with the Securities and Exchange Commission to terminate their registration as a publicly traded company.  A copy of the Form S-1 registration statement filed by the company prior to terminating their status as a publicly traded company can be found here and attached.

Adynxx has a patent portfolio that consists of five families, including composition of matter and method of use for its drug candidates. The portfolio includes forty-nine patents already registered or published in the US and across major markets, plus three patents under active prosecution. See attachment.

Adynxx highlights: 

  • A novel technology platform with disease-modifying properties to treat pain
  • Lead compound, brivoligide for postoperative pain, has been studied in three Phase 2 clinical studies of postoperative and has been shown to provide long-term reduction in postoperative pain (up to four weeks) with a single administration at the time of surgery  
  • Development of brivoligide supported by a grant from NIH for up to $15M
  • Second product candidate, AYX2 for the treatment of chronic pain, is approximately 12 months from submitting an Investigational New Drug (IND) application
  • AYX2 has the potential to provide months of pain relief following a single administration, a unique and highly attractive therapeutic profile
  • Additional drug candidates can be developed from the platform for the treatment of other pain syndromes and other diseases

Adynxx has no recurring revenues, product or collaboration related. Its value lies in the clinical and preclinical assets produced by its underlying and proprietary technology.

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 Aynxx’s assets has been supplied by Adynxx.  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 Adynxx 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.

Adynxx, 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 Adynxx’s or Gerbsman Partners’ negligence or otherwise. 

Any sale of the Adynxx 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 Adynxx or Gerbsman Partners.  Without limiting the generality of the foregoing, Adynxx and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Adynxx 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.

CORPORATE HISTORY AND BACKGROUND

The acquisition of Adynxx’s assets will enable immediate access to a broad portfolio of proprietary technology, a Phase 2 clinical stage product candidate for postoperative pain (brivoligide), and an early-stage product candidate for chronic pain (AYX2).  To date, Adynxx has raised a total of $64M in capital funding, including two rounds of private equity financing totaling $29M funded by a premier team of life science investors including Domain Associates and TPG Biotech, and $5M in secured debt from Oxford Finance.

Adynxx also received a grant award for up to $15M from the National Institute on Drug Abuse (NIDA), part of the National Institutes of Health (NIH), to support clinical development of the company’s lead product candidate, brivoligide for postoperative pain.  Under this grant, the company can receive up to approximately $1.6M for funding a Phase 2 study of brivoligide in mastectomy and up to $9M for a Phase 3 study of brivoligide.

In May 2019, Adynxx completed a merger with Alliqua BioMedical, Inc. that resulted in Adynxx becoming a publicly traded company.  Shortly after completion of the merger, however, Adynxx was informed by The Nasdaq Stock Market that the company’s shares would be delisted from The Nasdaq Capital Market due to noncompliance with the minimum round lot stockholders and the minimum stockholders’ equity requirement for an initial listing, despite the company having met with Nasdaq and presented a plan to satisfy the listing requirements.

As a result of the delisting by Nasdaq and a change in listing requirements implemented by Nasdaq in August 2019, the company was unable to raise additional capital and unable to relist its shares on The Nasdaq Capital Market.  In May 2020, the company filed a Form 15 with the Securities and Exchange Commission to terminate their registration as a publicly traded company.  A copy of the Form S-1 registration statement filed by the company prior to terminating their status as a publicly traded company can be found here.

KEY ATTRIBUTES: WHY THE ADYNXX ASSETS ARE ATTRACTIVE

Adynxx believes its assets are attractive for multiple reasons:

  • Brivoligide is the only therapeutic that has shown potential for reducing postoperative pain and lowering opioid utilization in patients who are usually resistant to analgesic treatment and at risk for increased opioid usage
  • Those patients can be easily identified using the pain catastrophizing scale or PCS as part of the pre-surgical information packet completed by the patients in advance of surgery
  • Marketing and pricing studies support formulary access over 80% in both IDN and non-IDN hospitals without restriction due to easy identification of target patient population
  • Potential for very attractive commercial margins with no licensing fees
  • Phase 2 and Phase 3 clinical trials supported by a grant from NIH for up to $15M 
  • Substantially de-risked clinical development plan with clinical trial endpoints, brivoligide dose, and target patient population all identified in prior Phase 2 trials
  • Potential Phase 3 initiation in 2022 and NDA submission in 2024
  • Potential patent protection through 2038 plus extension
  • Second product candidate, AYX2 for the treatment of chronic pain, is approximately 12 months from submitting an IND and advancing to the clinic
  • AYX2 has the potential to provide months of pain relief following a single administration, a unique and highly attractive therapeutic profile
  • NO LICENSING FEES, all IP rights belong to Adynxx

PRODUCTS OVERVIEW

BRIVOLIGIDE

Lead phase 2 drug candidate for the treatment of post-operative pain in patients who score ≥16 on the pain catastrophizing scale 

Key innovations of brivoligide include:

  • The first drug that has the potential to reduce postoperative pain and reduce opioid utilization in patients with a catastrophizing phenotype who are usually resistant to analgesic treatment and at risk for increased opioid usage
  • The patients who respond to brivoligide can be easily identified in advance of surgery using the Pain Catastrophizing Scale or PCS
  • These patients represent approximately one-third of the surgical population 

·         In these patients, a single administration of brivoligide at the time of surgery has been shown to produce a sustained and clinically meaningful reduction in pain and reduction in opioid usage that lasts for weeks following surgery

·         Brivoligide is a non-opioid treatment that has the potential to eliminate the need for up to 360 million 5 mg hydrocodone (or equivalent fast-acting opioid) tablets in the US annually and have a potentially significant effect on reducing the incidence of postoperative opioid use disorders

·         Next Phase 2 study and potentially one Phase 3 study supported by a grant from NIH for up to $15M (up to approximately $1.6M for next Phase 2 trial and up to $9M for a Phase 3 trial)

AYX2 

Second product candidate for the treatment of chronic pain syndromes

Key innovations of AYX2 include:

  • Transformative therapeutic profile for the treatment of chronic pain syndromes 
  • Non-clinical data supports weeks to months of pain reduction with a single administration
  • Administered approximately one to three times per year
  • Non-addictive, non-opioid compound
  • Received a ~$600K grant as part of the HEAL initiative for non-clinical development
  • Approximately 12 months from submitting an IND
  • Mechanism of action and preclinical pharmacology published in peer reviewed journal Molecular Pain

MARKET SIZE FOR BRIVOLIGIDE – see sales letter

MARKET SIZE FOR AYX2 – see sales letter

BRIVOLIGIDE CLINICAL TRIAL SUMMARY

  • Completed one Phase 1 and three Phase 2 clinical studies
  • Showed a robust, long term and statistically significant effect in ADYX-003 study
  • Showed treatment effect was most prevalent in patients that scored 16 or higher on the PCS scale in the ADYX-004 study
  • Efficacy in target patient population (patients that score 16 or higher on the PCS scale) to be confirmed in next Phase 2 study
  • Next Phase 2 study and potentially one Phase 3 study supported by a grant from NIH for up to $15M
  • Potential NDA by 2024

BRIVOLIGIDE CLINICAL DATA

Safety

Brivoligide was well tolerated in patients in all four clinical trials conducted to date, including ADYX-001, ADYX-002, ADYX-003 and ADYX-004. Refer to the Form S-1 for details.

Efficacy

ADYX-003: The second Phase 2 study, ADYX-003, was a randomized, double-blind, placebo-controlled, two-stage study to evaluate the safety and efficacy of two dose/volume levels of brivoligide injection administered intrathecally at one of two potential lumbar spinal interspace injection sites before surgery in patients undergoing primary unilateral total knee arthroplasty.

Brivoligide 660 mg/6 mL significantly reduced pain with walking (15 meters) during the Day 7 to Day 28 period (2.0 ± 0.2 vs. 2.9 ± 0.3, p=0.026) following surgery as illustrated in the Figure below. Neither dose of brivoligide gave statistically significant reduction of pain with walking (5 meters) during the zero to 48 hour period. This early period (0-48 hours) is consistent with the time required for the effect of EGR1-driven gene regulations to show effects on neuronal activity and pain. NRS (numerical rating scale) pain scores with brivoligide 1,100 mg/10 mL did not show statistical significance compared with placebo 10 mL for pain scores with walking.  An explanation of the dose response based on increased metabolism at higher dose levels was published in the peer reviewed journal Molecular Pain.  A copy of the article can be found here.

ADYX-004: ADYX-004 was a multicenter, Phase 2, randomized, double-blind, placebo-controlled study to evaluate the safety and efficacy of brivoligide injection 660 mg/6 mL compared to placebo 6 mL administered intrathecally before surgery in patients undergoing primary unilateral TKA. 

The following assessments were used to evaluate efficacy: NRS pain assessment at rest; a defined distance walk (5 meters inpatient, 15 meters outpatient), with NRS for pain during the walk; NRS pain assessment with rising from a seated position and worst, least and average pain over the last 24 hours (collected by subjects daily via eDiary); and collection of analgesic medication data through Day 90.

A total of 210 subjects were dosed with either brivoligide 660 mg/6 mL (108 subjects) or placebo (102 subjects). A total of 198 subjects completed the study.

Efficacy

For the primary endpoint, no significant difference was observed between the brivoligide 660 mg/6 mL and placebo 6 mL treated groups. The results of the analyses of the secondary and additional endpoints in the total mITT population also did not show a clinically relevant effect of brivoligide 660 mg/6 mL vs. placebo 6 mL. Although results of the analyses were not clinically relevant, several prespecified secondary and additional endpoints based on the stratification factor of pain catastrophizing score ≥20 vs. <20 suggested efficacy of brivoligide when compared with placebo in subjects with pain catastrophizing score ≥20. These endpoints included time to achieve an NRS pain score ≤3 for worst pain over the previous 24 hours and opioid utilization over the period of 48 hours to Day 90.

A Kaplan-Meier analysis of time to achieve an NRS pain score of ≤3 for worst pain is available in the due diligence room and subject to an NDA.

ADYX-003 and ADYX-004 Data Combination and Meta-analysis by PCS

Due to the similar study design and brivoligide dose used in studies ADYX-003 and ADYX-004, these studies were combined and analyzed for consistency of pain catastrophizing score effect on brivoligide efficacy. Data for the combined studies analyzed by pain catastrophizing score ≥16 suggested a consistent therapeutic effect of brivoligide in patients scoring ≥16 on the pain catastrophizing scale and are presented in the Figures below.

In summary, high scores on the preoperative pain catastrophizing scale identifies people that may benefit from brivoligide administration before surgery. The post-hoc results from the ADYX-003 and ADYX-004 studies suggest that brivoligide allows normalization of the of the post-surgical pain response course to that observed in the majority of people with low PCS scores.

Upcoming trial(s)

ADYX-005 study

ADYX-005 is a Phase 2 randomized double-blind, placebo-controlled study to evaluate the safety and efficacy of a single intrathecal preoperative administration of brivoligide injection in patients with a PCS score ≥16 undergoing unilateral total knee arthroplasty.

The study protocol calls for approximately 122 subjects to be enrolled in the study and randomized 1:1 into two treatment groups (brivoligide injection 660 mg/6 mL and placebo 6 mL) with randomization stratified by study center. Subjects will receive study drug just prior to administration of spinal anesthesia, via the same needle.

Safety and laboratory assessments will be performed in the standard manner up to Day 28. Concomitant medications will be collected through Day 28; analgesic medications will be collected through Day 42. Pain at rest and with walking will be recorded by study staff postoperatively at follow-up visits. Daily ratings of worst pain over the previous 24 hours will be collected via electronic diary, or eDiary, by subjects every evening from Day 1 until the Day 42 visit. Analgesic medication use will be collected via eDiary by subjects daily after discharge until the Day 42 visit. Follow-up visits will occur on Days 7, 14, 21, 28 and 42 The primary endpoint will be reduction in pain with walking from Day 7 to Day 28 as measured using the NRS pain measuring tool.

ADYX-006 study (supported by up to approximately $1.6M in NIH funding)

Phase 2 randomized double-blind, placebo-controlled study to evaluate the safety and efficacy of a single intrathecal preoperative administration of brivoligide injection in patients with a PCS score ≥16 undergoing mastectomy with immediate tissue expander or implant placement.

The study protocol calls for approximately 126 subjects to be enrolled in the study and randomized 1:1 into two treatment groups (brivoligide injection 660 mg/6 mL and placebo 6 mL). Subjects will receive study drug in the lumbar intrathecal space and briefly positioned to distribute brivoligide to the thoracic region just before induction of general anesthesia.

Safety and laboratory assessments will be performed in the standard manner up to Day 21. Concomitant medications will be collected through Day 21; analgesic medications will be collected through Day 21. Data for pain at rest with general movement involving the chest and upper body, and worst pain over the last 24 hours, with deep full inspiration and forceful effective cough, will be collected by subjects via eDiary every evening from Day 1 until the Day 21 visit. NRS pain assessment upon 90-degree abduction of the ipsilateral arm (subject-selected index arm for bilateral surgery) will be collected by subjects via eDiary from Day 14 to 21 as allowed by the subject’s surgeon after drain removal. Analgesic medication use will be recorded after discharge until the Day 21 visit by subjects daily via eDiary. The Physical Well-being  BREAST-Q will be collected at screening and at the Day 21 follow-up visit by study staff. Follow-up visits will occur on Days 7 and 21. The primary endpoint will be mean pain rating with general movement involving the chest and upper body from Day 3 to Day 14.

REGULATORY

The Brivoligide IND is active and in good maintenance. An end of phase 2 (EOP2) would be requested following the next phase 2 trial(s). The target label is for the treatment of postoperative pain in all patients who score 16 or higher on the PCS. Following the EOP2 and subsequent Phase 3 pivotal trial(s), an NDA could be submitted as early as 2024.

MANUFACTURING

Adynxx relies on third-party CMOs for its drug substance and drug product needs.  Enough API is available for the upcoming phase 2 trial(s). Drug product manufacturing process is rapid, well established and can be performed in parallel to the ramp up activities of clinical trial initiation.

EXECUTIVE OFFICER/BOARD OF DIRECTORS

Matthew Ruth currently the Chief Executive Officer of Adynxx and has served as a member of our board of directors since May 2019 Mr. Ruth previously was the Senior Vice President, US Chief Commercial Officer for Adapt Pharma, a division of Emergent Bio Solutions commercializing Narcan Nasal Spray, a product that can reverse the effects of opioid and heroin overdoses. From 2012 to 2015, Mr. Ruth was Chief Operating Officer for RightCare Solutions. Mr. Ruth earned a Bachelor of Science degree from Missouri State University.

Rick Orr – Chairman of the Board. Previously Mr. Orr has served as President and Chief Executive Officer from December 2010 to June 2020. Prior to joining Adynxx, Mr. Orr was Chief Operating Officer at Corthera, Inc., a private, clinical-stage biopharmaceutical company focused on developing therapies for acute heart failure, from May 2009 to July 2010. Corthera was acquired by Novartis Pharmaceuticals Corporation in February 2010. Prior to Corthera, Mr. Orr served as Sr. Vice President of Operations at Cerexa, Inc., a wholly owned subsidiary of Forest Laboratories, Inc. focused on developing novel anti-infective therapies, from October 2007 to May 2009. Mr. Orr was part of the management team that founded Cerexa in July 2005 and served as General Counsel from the company’s inception until October 2007. Forest Laboratories acquired Cerexa in January 2007. Mr. Orr received a B.A. from The Ohio State University, an M.A. from the University of California, Santa Barbara, and a J.D. from the University of San Francisco School of Law.

Julien Mamet, Ph.D.  Board member. Dr. Mamet founded Adynxx and served as a member of its board of directors since its inception in October 2007 and as Chief Scientific Officer since December 2010 until June 2020. Previously, Dr. Mamet served as President and Chief Executive Officer of Adynxx from its inception to December 2010. Prior to founding Adynxx, Dr. Mamet completed his post-doctoral work at the Scripps Research Institute, a nonprofit biomedical research institute, from September 2006 to December 2006, and at the Genomics Institute of the Novartis Research Foundation, a research institute of Novartis International AG, a global pharmaceutical company, from February 2004 to September 2006. Dr. Mamet received a B.S. and M.S. from the University Claude Bernard in Lyon, France and a Ph.D. from the Institute of Molecular and Cellular Pharmacology in Nice-Sophia Antipolis, France.

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 Adynxx 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 Adynxx, 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 Adynxx 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 Adynxx Assets.  Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Friday, May 14, 2021at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Adynxx’s office, located at 44 Thama Street, San Francisco, CA 94105.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.  Bidders interested in specific Adynxx Assets must submit a separate bid for such assets.  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 Adynxx, 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.

Adynxx 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.

Adynxx will require the successful bidder to close within 7 business days.  Any or all of the assets of Adynxx 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 Adynxx Assets shall be the sole responsibility of the successful bidder and shall be paid to Adynxx 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

L

Advantages of ‘Date-Certain M&A Process over Standard M&A’

Every venture capital investor hopes that all his investment will succeed. The reality is, however, that a large percentage of venture investments eventually are shut down. 

In the extreme they end in bankruptcy or assignment to creditors. The majority falls into the category of the “living dead.” Such companies are not complete failures, but their prospects do not justify continued investment, yet they are rarely shut down quickly.

Once reality has been recognized, most investors engage investment bankers to sell their investment off through prevailing M&A processes. Unfortunately, seldom with good results.

REASON #1

The main reason for that sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only by force of competitive pressure. 

Potential buyers of the highest probability are those already familiar with the company for sale, such as competitors, existing investors customers and vendors. Once a sales process starts the seller is very much a diminishing asset. Both financially and organizationally.  Unless compelled to act, potential buyers simply start to draw out the process, submit a low-ball offer when the seller runs out of cash, or try to pick up key employees and customers at no cost. 

REASON #2

The second reason is usually a misunderstanding of the psychology and methods of investment bankers.

Most investment bankers do best at selling “hot” companies. Companies whose value is perceived by buyers to be increasing quickly over time, and where there are multiple bidders.

They tend to be more motivated and work harder on such cases because transaction sizes –and resulting commissions– are larger and surrounding publicity can bring in new assignments, among others. They also tend to be more effective in maximizing value in such situations by using time to their advantage, pitting buyers against each other and setting very high expectations. 

In a situation where time is not your friend, the actions of standard investment banking practices often make a bad situation much worse. Such actions include assigning less experience B-Teams to smaller transaction size cases, “playing out the process” which works against the seller, and pitting multiple players against each other which can drive away potential buyers who often know far more about the seller than does the banker.

THE GERBSMAN PARTNERS ‘DATE-CERTAIN’ M&A PROCESS

The most effective solution in situations where time is not on your side is a Date-Certain Merger and Acquisition Process

Under this proprietary process, the company’s board of directors hires a crisis management/private investment banking firm (‘advisor’) to wind down business operations in an orderly fashion and to maximize the value of their intellectual properties and tangible assets. The Advisor works closely with board and corporate management to:

Focus on Control, Preservation and Forecasting of CASH

Develop a Strategy/Action Plan and Presentation to Maximize Value of Assets.

Plans to include Sales Materials, Due Diligence access. a list of all possible Interested Buyers for Intellectual Properties and Assets and Identify and Retain Key Employees on a go-forward basis.

Stabilize and provide Leadership, Motivation and Moral to all Employees.

Communicate with the Board of Directors, Senior Management, Senior Lender, Creditors, Vendors and all other Stakeholders in Interest.

THE PROCESS:

The company attorney prepares a simple “As-Is/Where –Is” asset sale documents. This document is very important and includes a “No-Reps or Warrantee” Agreement, as the board, officers and investors typically do not want any additional exposure on a deal. 

The advisor then follows up systematically with ALL potentially interested parties and coordinates their interactions with company personnel, including on-site visits. 

Typical terms for a Date-Certain M&A asset sale exclude representations and warranties and include a sales date –typically four to six weeks – from the point of readying sales materials for distribution, a refundable CASH deposit in the range of $200,000, a strong preference for cash consideration and with the ability to close a deal in seven business days. 

Date-Certain M&A terms can be varied to suit needs unique to given situations. For instance, the board may choose not to accept any bids, or to allow re-bids if there are multiple competitive bids, and/or allow early bids. 

The typical workflow timeline from advisor hiring to transaction close and receipt of consideration is four to six weeks. Such timelines may be extended as circumstances warrant. Upon receipt of considerations, the restructuring/insolvency attorney then distributes funds to creditors and shareholders (if there is sufficient consideration to satisfy creditors), and takes all needed steps to wind down the remaining corporate shell. Typically in coordination with the CFO.

PROCESS ADVANTAGES:

Speed:   – The entire Date-Certain M&A Process can typically be concluded in 4 to 6 Weeks. Creditors and investors receive their money quickly. A negative PR impact on investors and board members related to a drawn out process is eliminated. Where required, such timelines can be reduced to as little as two to three weeks, however severely compressing the process often impacts the final value received during asset auction.

Reduced Cash Requirements:  – Owing to the Date-Certain M&A process’ compressed turn-around time, there is a significantly reduced need for any additional investor cash to support the company during the process.

Maximized Value:  – A quick and effective process during wind-down mode minimizes strain and rapid asset depreciation and thereby preserves enterprise value. The fact that an auction will occur on a certain date typically brings truly interested and qualified parties to the table. In our considerable experience, this process strongly aids in maximizing the final value received. 

Cost:  – Advisory fees consist of a retainer and a performance fee, which is a percentage of the sales proceeds.

Control:  – At all time during the process, the board of directors retains complete control. For instance, it can modify the auction terms, or discontinue the auction at any point, thereby preserving all options for as long as possible.

Public Relations:  – As the entire sales process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all terms kept confidential. Accordingly investors can list the company in their portfolios as sold vs. having gone out of business.

A Clean Exit:  – Upon closing of the auction, considerations received are distributed and the advisor, under the leadership of the insolvency counsel, then takes all remaining steps to effect an orderly shut-down of the remaining corporate entity.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 112 companies in a wide and diverse spectrum of industries, ranging from technology, life science, medical device, digital marketing, consumer to cyber security, to name only a few.

Since inception in 1980, Gerbsman Partners has successfully restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations, and has been involved in over $2.3 billion of financings, restructuring and M&A transactions.

Gerbsman Partners has offices and strategic alliances  in San Francisco, Orange County CA, Boston, New York, Washington  DC, Mc Lean VA,  Europe and Israel.

The Shipping Container Industry Has Gamed Out What the Coronavirus May Do. Take a Seat.

Container Ship/Wiki Media Commons

Wall Street seems to be filled with Nancy Boys, swells, head-cases and drama queens. With every whiff of a problem, they sell off to beat a possible rush – thus creating a rush. There are very few people around like those who tried to blow the whistle in “The Big Short,” for example.

With the Left and their buddies in the media hoping for a crash in the market to douse President Trump’s unrivaled economic prosperity leading up to the election, you can’t really trust the mainstream media to tell you the truth. They almost always over-inflate the importance of everything – especially if it could be twisted to make Trump look bad.

With Jim Acosta telling you the story, could you hope to get a fair treatment of the president and the coronavirus?

Is there a legitimate fear of an existential threat to our country – and others – by it? Could our economy do a full belly flop?

The economy is dynamic. Where a slowdown occurs in one place, the counterweight hurry-up occurs in another. President Trump has talked about executing a plan to get U.S. manufacturers to make face masks to make up for the world shortage, for example.

But there is a lag time.

Assuming the coronavirus is around awhile, one industry, the crucial shipping container industry, gamed out what is likely to happen.

It ain’t pretty.

We get an extraordinary amount of products in shipping containers. You see containers on docks, stretched for miles on trains and hanging from mechanized cranes on tracks as they’re loaded onto huge “container” ships.

In his piece called “Coronavirus container impact to spread far beyond blank sailings,” Lars Jensen, CEO of Sea-Intelligence Consulting, outlines several dominoes that are happening or about to happen in this crucial industry. Though he says the shipping container industry has proven resilient, there’s the potential for much mischief-making:

However, what we are seeing now is the impact of a much larger systemic risk. Blocking a large number of vital nodes in the system for all players at the same time threatens to create a disproportionately large impact, lingering longer than usual. The last time we saw an event with systemic impact was more than a decade ago during the financial crisis. Not even an event such as the sudden bankruptcy of Hanjin Shipping, at the time the seventh-largest carrier worldwide, nor the 2017 cyberattack on Maersk Line, which disrupted operations at the world’s largest carrier for two weeks, had such an impact.

Here are his projected dominoes:

  1. Chinese manufacturing facilities didn’t open after Chinese New Year. A lag followed by a lag which “created massive shortfall in Chinese exports and, therefore, a drop in container demand.”
  2. Sailings were canceled, which caused “staggering” demand shortfall for containers.
  3.  “Blank sailings” lead to more blank sailings back to Asia creating 3 – 10 weeks’ more lag time.
  4. Pre-Chinese New Year peak of delivered cargo results in excess containers building up in places “such as Europe and North America.” Repatriating containers takes time and money.
  5. “Backhauls to Asia will drive up backhaul rates.”
  6. There will be a “surge in demand for containers” but getting containers back takes time. See Domino number 4.
  7. Need to order new containers
  8. Value of all containers will drop as a result of Domino 7.
  9. Headhaul rates will increase. Headhaul is “leg of the route that has the highest volume.” The route back is “back haul.”
  10. Refrigerated containers will continue to stack up in Chinese ports.
  11. That will trigger “congestion surcharges”
  12. Refrigerated containers will be diverted to other Asian ports “creating congestion challenges – and new tranches of dominoes – all their own.
  13. This is will cause temporary equipment shortages.
  14. Refrigerated transport rates will increase.

Now imagine the cost of all that stuff that’s either still stuck inside those containers or will be stuck inside those containers or hasn’t yet received a container in which to be shipped. The cost of whatever those widgets are will go up.

What kind of stuff is transported inside these containers?

  1. Food
  2. Forest Products
  3. Grains
  4. Metal
  5. Construction materials
  6. Iron and steel products
  7. Cars and trucks and parts
  8. Chemicals
  9. Ore
  10. Textiles

Jensen says, “In the best case, the coronavirus outbreak is contained quickly. If so, the dominoes outlined above will continue to fall, but the duration of each one will be relatively short.”

If anything, President Trump has done more to highlight the need for more manufacturing in the United States than offshore. He’s the one who made an issue out of U.S.-made steel, for example, as a national security issue. He’s dismissed as a jingoistic know-nothing for it, but he’s been proven right over and over, as the coronavirus has shown.