Full Press Release Details
THOMSON REUTERS STREETEVENTS
TRGT Targacept Inc and Catalyst Biosciences Enter
Definitive Merger Agreement
EVENT DATE/TIME: MARCH 06, 2015 / 01:30PM GMT
CORPORATE PARTICIPANTS
Stephen Hill Targacept, Inc. President and CEO
Nassim Usman Catalyst Biosciences CEO
CONFERENCE CALL PARTICIPANTS
Harwood Capital Analyst
Larry Litton Second Line Capital Analyst
Good day, ladies and gentlemen, and welcome to the Targacept, Inc. and Catalyst Biosciences merger conference call. My name is Emma, and I will be your
(OPERATOR INSTRUCTIONS)
As a reminder, this call is being recorded for replay purposes. I d now like to turn the call over to Dr. Stephen Hill, President and CEO, Targacept,
Inc. Please proceed, sir.
Stephen Hill Targacept, Inc. President and CEO
Thank you for joining us today to discuss the proposed merger of Targacept and Catalyst Biosciences. Joining me today on the call is Dr. Nassim Usman,
Chief Executive Officer of Catalyst.
Before we begin, I would like to make a statement regarding forward-looking remarks that you may hear today during
the call. Any statement that we make today other than historical facts are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
During the call, Targacept and Catalyst may make projections or other forward-looking statements regarding, amongst other things, the structure, timing, and
completion of the announced merger with Catalyst; the financial projections and estimates and their underlying assumptions, including, without limitation, projections relating to the Company s cash balance at the anticipated close of the
merger; anticipated amount of proposed special dividend of cash and redeemable convertible notes to be issued to Targacept s existing shareholders prior to the closing of the merger; expectations regarding Catalyst s planned clinical and
pre-clinical product development following the merger; and the potential advantages of the merger to Targacept s existing shareholders; and other estimates of future performance.
These forward-looking statements are based on Targacept s and Catalyst s current expectations, but actual results may differ materially due to the
various risks and uncertainties, including, but not limited to, Targacept s or Catalyst s inability to satisfy the conditions of the merger or that the merger is otherwise delayed or ultimately not consummated, the continued service of the
combined Company s key employees following the consummation of the merger, and the timing and success of the combined Company s development and commercialization is anticipated product candidates. Additionally, we urge you to review the
factors discussed under the caption Risk Factors in Targacept s filings from time to time with the Securities and Exchange Commission.
of these risks and uncertainties, there can be no assurance that the forward-looking statements made during this presentation will in fact be realized. Except as otherwise required by applicable securities laws, we disclaim any intention or
obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
I also note that in connection with the merger, Targacept and Catalyst intend to file relevant materials with the SEC, including a registration statement on
Form S-4 that will contain a prospectus and a proxy statement and information statement. Investors and security holders of Targacept and Catalyst are urged to read these materials when they become available because they will contain important
information about Targacept, Catalyst, and the merger.
The proxy statement, information statement, prospectus, and other relevant materials, when they
become available, and any other documents filed by Targacept with the SEC may be obtained free of charge at the SEC website. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Targacept by
directing a written request to our Chief Financial Officer. Investors and security holders are urged to read the proxy statement, information statement, prospectus, and other relevant materials when they become available before making any voting or
investment decision with respect to the merger.
Any comments made on this call shall not constitute an offer to sell or the solicitation of an offer to
sell, or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws
of any jurisdiction. No offering of securities to be made except by means of a prospectus meeting the requirements of section 10 of the Securities Act of 1993, as amended.
Targacept and its Directors and Executive Officers, and Catalyst and its Directors and Executive Officers, may be deemed to be participants in the
solicitation of proxies from the shareholders of Targacept in connection with the proposed transaction. Information regarding the special interest of these Directors and Executive Officers in the merger will be included in the proxy statement,
information statement, and prospectus that I referred to a moment ago.
Additional information regarding the Directors and Executive Officers of Targacept
is also included in Targacept s definitive proxy statement in connection with its 2014 annual meeting of shareholders filed with the SEC on April 18, 2014, and incorporated by reference in Targacept s annual report on form 10K for the
year ended December 31, 2013, which was filed with the SEC on March 14, 2014. These documents are available free of charge at the SEC website and from our Chief Financial Officer at Targacept.
Now that we ve described the legal administrative proceedings, let s talk about the merger and why we re extremely pleased with this
transformative event. Yesterday, we announced our entry into a definitive agreement, under which Catalyst will merge with a wholly-owned subsidiary of Targacept in an all-stock transaction.
We are pleased that the respective Boards of Directors of both Targacept and Catalyst have unanimously approved the merger, which will create a
publicly-traded Company focused on the development of novel, therapeutic candidates, focused on the field of hemostasis and complement regulation. Catalyst is a leader in protease engineering technologies and is working independently with leading
industry partners to develop both novel and improved best-in-class versions of protease-based drugs. Nassim Usman, Catalyst s CEO, will provide more detail about Catalyst s strengths, pipeline, and key value drivers later in our call.
Yesterday s announcement was the culmination of a thoughtful and comprehensive process whereby the Board and Management Team of Targacept, in
consultation with our shareholders, assessed a broad range of strategic alternatives. The decision to recommend the combination with Catalyst reflects our excitement about the merged Company s future prospects for patients and for our
shareholders. It is the result of a highly-competitive process and presents a range of potential benefits.
First, Targacept will initially provide $35
million in cash to the merged Company to add to approximately $5 million in cash anticipated at closing from Catalyst, for a total of approximately $40 million initial cash and cash equivalents. This creates a well-funded Company to pursue four
clinical and pre-clinical development programs.
Second, Targacept will issue a special dividend to its stockholders in the form of $20 million in cash
and $37 million in aggregate principal amount of redeemable convertible notes. These notes are convertible into new shares of the combined Company at a 30% premium to the negotiated per-share value of Targacept s assets following the
anticipated distribution of the dividend for a period of two years following the closing, all at the discretion of Targacept shareholders. This creates an additional potential financial benefit to current Targacept shareholders.
Third, Targacept will be placing its neuronal nicotinic receptor compounds and related assets in a liquidating
trust, if not sold or otherwise disposed of prior to closing, and Targacept stockholders who are entitled to the pre-closing dividend will also be entitled to any net proceeds received as a result of any disposition of Targacept s NNR assets
that occurs within a period not to exceed two years after the closing of the proposed merger.
Through our investigation and extensive due diligence in
this process, we believe that Catalyst s strong pipeline, which includes an engineered factor VIIa drug candidate that successfully completed a Phase 1 clinical trial and is being developed by Pfizer Inc. to successfully address the needs of
patients with hemophilia, and other promising drug candidates to hemophilia B, procoagulation and complement disorders, represent an impressive investment opportunity with the potential to dramatically improve the lives of patients. Additionally,
their focused research on engineered human proteases provides further opportunity beyond nearer-term milestones.
Finally, let me provide some insight
into the operational and financial structure of the new Company. The post-merger Company will be named Catalyst Biosciences, Inc., and will be under the leadership of Catalyst s current CEO, Dr. Nassim Usman. We expect the merger to close
in the second quarter of 2015, subject to approval by a majority of Targacept s outstanding stockholders and certain of Catalyst s stockholders, clearance by the Securities and Exchange Commission, and customary closing conditions.
Any personal disappointment I may have in giving up the reins of Targacept is more than compensated by my excitement for this new Company and the opportunity
to serve on its Board of Directors. Following completion of the merger, current Targacept stockholders will own approximately 35% of the Company, and current Catalyst stockholders will own approximately 65% of the Company. In connection with the
merger, Targacept plans to effect a reverse stock split to meet requirements needed for continued listing with NASDAQ.
If, in the future, the redeemable
convertible notes are converted into Company stock, up to $37 million held in escrow would be made available to the combined Company within two years following closing. If those notes are fully converted, Targacept stockholders would own
approximately 49% of the outstanding capital stock of the combined Company based on each Company s current capitalization.
I would like to express
my deep gratitude to everyone on the Targacept Team for their efforts and commitment over the years and throughout this process. Going forward, I will be leaving Targacept as CEO, but will continue my affiliation with the merged Company as a member
of the Board of Directors. Dr. Barry Selick, the current Chairman of Catalyst, will become Chairman of the Board of the merged Company. The Board of Directors will comprise three current directors from Targacept and four from Catalyst.
The corporate headquarters will be in South San Francisco, California, and following a short transition period, we do not anticipate any ongoing activities in
Winston-Salem. This transaction is the culmination of a process conducted in partnership with our financial advisors, Stifel Nicolaus & Company Incorporated, and I would like to thank them for their efforts in assisting us and finding an
exciting path forward for both Companies.
Before I turn the call over to Dr. Usman, let me emphasize that the Targacept Management Team and the
Board of Directors believe this transaction is in the best interest of Targacept stockholders. We see the tremendous potential of Catalyst and the key value drivers that are expected to occur as that pipeline is developed. We look forward to
supporting the success of the combined Organization.
With that, I m now delighted to turn over the call to Dr. Nassim Usman, the Chief
Executive Officer of Catalyst, for comments on the merger and on Catalyst s operating strategy.
Nassim Usman Catalyst
Thank you Steve, and good morning to everyone on the call. We are very excited about the merger with Targacept. We
look for to getting to know the Targacept shareholders and ensuring that you understand our R&D programs, and importantly, the passion and commitment we have for these programs.
For those investors that may not be familiar with our Company, Catalyst is a clinical-stage Company focused on
the development of novel catalytic biopharmaceutical products based on engineered human proteases. Our portfolio of clinical and pre-clinical development-stage products addresses areas of high unmet need and multi-billion-dollar market opportunities
in the orphan disease area of hemophilia and in complement-driven diseases, such as dry AMD, as well as kidney and myocardial ischemia reperfusion injury in the surgical settings of transplant, coronary artery bypass grafting, myocardial infarction,
Our Team at Catalyst has been actively pursuing strategies to access the resources necessary to advance our product candidates into the
clinic, and the proposed combination of Targacept and Catalyst enables us to combine with a public company while providing what we believe will be the financial resources necessary to support the further clinical development of a valuable and deep
Targacept reviewed multiple companies interested in a potential merger. Throughout this process, we have been particularly impressed with the
diligence, rigor, attention to detail, scientific and financial knowledge, and skill that Steve and his Team have used in assessing and developing an understanding the Catalyst s technology, strategies, and long-term goals.
We agree with Steve that this transaction represents an excellent opportunity for Targacept stockholders as well as for Catalyst investors. The new Company
will be led by an Executive Team that has a great deal of experience in developing and getting drugs to market.
Catalyst s Chief Scientific Officer
is Dr. Ed Madison, who, before joining Catalyst, was VP of Research at Dendreon, and also a Professor of Vascular Biology at the Torrey Pines Institute for Molecular Studies, and Adjunct Professor of Vascular Biology at the Scripps Research