Full Press Release Details
LETTER TO SHAREHOLDERS OF ESSA PHARMA INC.
Suite 720, 999 West Broadway
Vancouver, BC V5Z 1K5
previously announced, on July 13, 2025, ESSA Pharma Inc. (the "Company"), entered into a Business Combination
Agreement (the "Agreement") with XenoTherapeutics, Inc., Xeno Acquisition Corp., a wholly-owned subsidiary of
Xeno ("Purchaser") and XOMA Royalty Corporation, under which Purchaser will acquire all of the issued and outstanding
common shares (the "Common Shares," and the holders of such Common Shares, the "Shareholders") of
the Company (the "Transaction"). Pursuant to the terms of the Agreement, the Company, once it has obtained an order
from the Supreme Court of British Columbia (the "Court") authorizing it to do so, intends to reduce the capital of
its Common Shares and make a concurrent distribution to Shareholders of an amount equal to the reduction in capital as part of the discontinuance
and winding-up of the business of the Company (the "Distribution") prior to the closing of the Transaction.1
Capitalized terms that are used but not defined in this letter have the meaning given to such term in the Agreement.
Company is sending this letter to provide you with information regarding the potential U.S. and Canadian federal income tax consequences
of the Distribution in advance of an upcoming Shareholder vote regarding the Transaction (together with the Distribution and subsequent
dissolution and liquidation of the Company, the "Discontinuance Transactions"). As the Distribution is subject to Court
approval, no assurance can be given that the Company will make the Distribution or as to the amount or timing of the Distribution, if
it is made. This letter is intended to assist you in understanding the potential tax treatment of the proposed Distribution and to highlight
certain considerations that may be relevant to your individual circumstances. Additional information regarding the U.S. and Canadian federal
income tax considerations of the Transaction will be described in the proxy statement and management information circular for the
Shareholders filed with the United States Securities and Exchange Commission.
As announced by press release dated July 23, 2025, ESSA intends to make an application to the Court for an order authorizing the holding
of a special meeting and matters related thereto (the "Interim Order") and an order approving the Distribution (the
"Distribution Order"). The hearing for the Orders will take place at the courthouse of the Court at 800 Smithe Street,
Vancouver, British Columbia at 9:45 a.m. (Pacific time) on August 5, 2025, or as soon thereafter as counsel may be heard, or at any other
date and time and by any other method as the Court may direct. Any person that may be affected by any of the Orders sought may appear
or be represented and present evidence or arguments at the hearing of the application for the Orders. The Supreme Court Civil Rules
set out the prescribed forms for a Response to Petition (Form 67) and Affidavit (Form 109) to be filed with the Court. Response materials
should also be sent to ESSA's counsel by mail or courier c/o Blake, Cassels & Graydon LLP, 1133 Melville Street, Suite 3500,
The Stack, Vancouver, BC V6E 4E5 attention: Alexandra Luchenko, or by email to alexandra.luchenko@blakes.com.
Certain U.S. Federal Income Tax Considerations
The following is a summary
of the anticipated U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of Common Shares as
a result of the Distribution.
The following summary does
not purport to address all U.S. federal income tax consequences that may apply to a U.S. Holder (as defined below) as a result of the
Distribution, nor does it take into account the specific circumstances of any particular holder, some of which may be subject to special
tax rules (including, but not limited to, brokers, dealers in securities or currencies, traders in securities that elect to use a
mark-to-market method of accounting for securities holdings, tax-exempt organizations, insurance companies, banks, thrifts and other financial
institutions, persons liable for alternative minimum tax, persons that hold an interest in an entity that holds the Common Shares, persons
that will own, or will have owned, directly, indirectly or constructively 10% or more (by vote or value) of our stock, persons that hold
the Common Shares as part of a hedging, integration, conversion or constructive sale transaction or a straddle, Shareholders who acquired
their Common Shares through the exercise of an employee stock option or otherwise as compensation, former citizens or permanent residents
of the United States, or persons whose functional currency is not the U.S. dollar).
This summary is based on the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury regulations, administrative pronouncements
and rulings of the United States Internal Revenue Service (the "IRS"), judicial decisions and the Canada-United States
Income Tax Convention (1980), as amended, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive
effect) and to differing interpretations. Except as specifically set forth below, this summary does not discuss applicable income tax
reporting requirements. This summary does not describe any state, local or non-U.S. tax law considerations, or any aspect of U.S. federal
tax law other than income taxation (e.g., estate or gift tax or the Medicare contribution tax). U.S. Holders (as defined below) should
consult their tax advisers regarding such matters.
No legal opinion from U.S.
legal counsel or ruling from the IRS has been requested, or will be obtained, regarding the U.S. federal income tax consequences to U.S.
Holders (as defined below) of the Distribution. This summary is not binding on the IRS, and the IRS is not precluded from taking a position
that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary
is based are subject to different interpretations, the IRS and U.S. courts could disagree with one or more of the positions taken in this
As used in this summary, a
"U.S. Holder" is a beneficial owner of the Common Shares who, for U.S. federal income tax purposes, is (i) a citizen
or individual resident of the United States, (ii) a corporation (or other entity that is classified as a corporation for U.S. federal
income tax purposes) that is created or organized in or under the laws of the United States, any State thereof or the District of Columbia,
(iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (A) a U.S.
court can exercise primary supervision over the trust's administration and one or more U.S. persons are authorized to control all
substantial decisions of the trust, or (B) the trust has a valid election in effect to be treated as a U.S. person for U.S. federal
income tax purposes.
If an entity or arrangement
that is classified as a partnership for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax treatment of
a partner will depend on the status of the partner and the activities of the partnership. Partnerships holding Common Shares and partners
in such partnerships should consult their tax advisers as to the particular U.S. federal income tax considerations relating to the Distribution.
For purposes of this summary,
a "non-U.S. holder" is a beneficial owner of Common Shares, other than a partnership or other entity taxable as a partnership
for U.S. federal income tax purposes, that is not a U.S. Holder. This discussion does not address the U.S. federal income tax consequences
of the Distribution applicable to non-U.S. holders of Common Shares. Accordingly, a non-U.S. holder should consult its tax advisor regarding
all U.S. federal, state, local and non-U.S. tax considerations relating to the Distribution.
Tax Considerations Relevant to U.S. Holders
For U.S. federal income tax
purposes, we and Purchaser intend to treat the Distribution as one in a series of distributions in complete liquidation of the Company.
In general, for U.S. federal income tax purposes and subject to the discussion below under "Passive Foreign Investment Company Considerations,"
a U.S. Holder who receives the Distribution will recognize capital gain or loss in an amount equal to the difference, if any, between
(1) the amount of cash received (expressed in U.S. dollars) and (2) the U.S. Holder's adjusted tax basis (expressed in
U.S. dollars) in such shares.
such gain or loss will generally be long-term capital gain or loss if the U.S. Holder's holding period in the Common Shares is greater
than one year as of the date of the Distribution. Subject to the discussion below under
"- Passive Foreign Investment Company Considerations," long-term capital gains of certain non-corporate holders, including
individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to
limitations. If a U.S. Holder acquired different blocks of Common Shares at different times or different prices, such U.S. Holder must
determine its adjusted tax basis and holding period separately with respect to each block of Common Shares. In general, each U.S. Holder
must allocate liquidating distributions proportionally to each block of shares of the Common Shares and compare the allocated portion
of each liquidating distribution with the U.S. Holder's adjusted tax basis in each block of shares of the Common Shares at the time
of such distribution. Any capital gain or loss will generally be treated as U.S.-source gain or loss for U.S. foreign tax credit purposes,
which will generally limit the availability of foreign tax credits.
There is no assurance that
the IRS will agree with our conclusion, however, that the Distribution be treated as one in a series of liquidating distributions in complete
liquidation of the Company. If, contrary to our expectations, the Distribution is treated as an ordinary distribution from the Company
to Shareholders, U.S. Holders may be subject to significant adverse tax consequences to the extent that the Company is classified as a
PFIC for the taxable year that includes the Distribution or a prior year in which the U.S. Holder held Common Shares in the Company. Such
adverse tax consequences could include a U.S. Holder recognizing income with respect to the full amount of the Distribution received (without
reference to the U.S. Holder's adjusted basis in its Common Shares or the current and accumulated earnings and profits of the Company),
and any such income being taxed as ordinary income, and an additional interest charge applying with respect to a portion of the tax due
thereon (as further described in the Company's 2024 Form 10-K under the heading Passive Foreign Investment Company
Passive Foreign Investment Company Considerations