Zevra Therapeutics to acquire Acer Therapeutics in potential $91M transaction

Zevra Therapeutics (ZVRA) and Acer Therapeutics (ACER) announced the companies have entered into a definitive agreement pursuant to which Zevra would acquire Acer in a merger transaction having a total potential value for Acer stockholders of up to $91 million, consisting of approximately 2.96 million shares of Zevra common stock valued at $15 million, or 0.121 shares of Zevra’s common stock per share of Acer common stock based on the volume weighted average trading price of shares of Zevra’s common stock during the 20 consecutive trading days ending on the trading date prior to today, and up to an additional $76 million in a series of potential cash payments pursuant to non-transferable Contingent Value Rights upon achievement of certain commercial and regulatory milestones for Acer’s OLPRUVA and Acer’s EDSIVOl within specified time periods. Certain additional cash payments are also possible pursuant to the CVRs with respect to milestones involving Acer’s early-stage program ACER-2820, as described further below. Zevra has also purchased Acer’s secured debt at a discount from Nantahala Capital through a series of transactions in capital efficient structure. In addition, Zevra has agreed to provide Acer with a bridge loan facility for up to $16.5 million, subject to certain terms and conditions. Both companies are deeply committed to developing and commercializing treatments for rare diseases with a strong focus on patients and remain dedicated to supporting communities with little or no existing therapeutic options. The merger is expected to expand Zevra’s rare disease portfolio, as well as increase and diversify its revenues with the addition of a U.S. commercial asset, OLPRUVA, indicated for the treatment of UCDs. The transaction is subject to certain customary closing conditions, including, but not limited to, approval by Acer’s stockholders. The transactions, which have been approved by the Boards of Directors of both companies, are currently anticipated to close in the fourth quarter of 2023, subject to Acer stockholder approval, as well as other customary closing conditions. The merger is expected to accelerate Zevra’s pathway to becoming a commercial-stage company by adding OLPRUVA, an FDA-approved asset, which is expected to add to Zevra’s revenue. There are potential synergies to be realized by combining Acer’s operations with Zevra’s capabilities in preparation for the potential launch of arimoclomol. In addition, Zevra expects to acquire significant net operating loss tax assets as part of this merger, providing potential tax savings against future earnings. Under the terms of the definitive agreement, at closing, Zevra would issue 0.121 of a share of Zevra’s common stock in respect of each share of Acer’s common stock. In addition, Acer stockholders of record as of immediately prior to the effective time of the merger would receive non-transferable CVRs entitling the holders to receive up to $34 million in cash upon the achievement of certain commercial milestones for OLPRUVA, and up to an additional $42 million in cash upon the achievement of certain regulatory milestones for OLPRUVA and EDSIVO. Approximately 2.96 million shares of Zevra common stock to be issued in the merger is calculated by dividing $15.0 million by the VWAP of Zevra’s shares of common stock during the 20 consecutive trading days through yesterday, which was $5.0667. The 20-day trailing VWAP value represents a discount of approximately 2% to yesterday’s closing share price for Acer. The non-transferable CVRs will entitle the Acer stockholders of record to receive up to $34 million in cash upon the achievement of certain commercial milestones for OLPRUVA, and an additional $42 million in cash upon the achievement of certain regulatory milestones for other development programs. The proposed transactions also include non-transferable CVRs for ACER-2820, Acer’s early phase emetine program. Based on the number of Zevra shares issued and outstanding as of June 30, 2023, together with the equity issued to Nantahala as part of the debt acquisition as described below, the aggregate number of shares issuable to Acer stockholders in the merger is expected to represent approximately 7.6% of the issued and outstanding common stock of Zevra following the merger. To provide for a smooth transition and uninterrupted operations, and subject to certain conditions, Zevra has extended a bridge loan facility to Acer of up to $16.5 million to provide additional working capital to, among other things, support the commercial launch of OLPRUVA until the expected closing of the merger transaction, and to provide the $10 million payment to Acer’s termination of the 2021 collaboration and license agreement by and between Acer and Relief Therapeutics, and Acer’s related entry into an exclusive license agreement with Relief for the development and commercialization rights for OLPRUVA in geographical Europe. Additionally, Zevra has purchased Acer’s secured debt from Nantahala representing an aggregate of principal, accrued interest other fees and premiums of approximately $35.3 million, for a total of $28.5 million to be paid using a combination of $12 million in cash financed from Zevra’s existing margin line of credit facility, $5 million in a new promissory note held by Nantahala, with a three-year maturity and bearing interest initially at 9% per annum, and $11.5 million in Zevra’s common stock based on the 20-day trailing VWAP calculation described above, or approximately 2.27 million shares, or approximately 5.8% of the issued and outstanding common stock of Zevra following the merger.