Cynapsus Provides Update on Proposed Acquisition of Adagio Pharmaceuticals and Financing
Marketwire, August 17, 2021
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TORONTO – (Marketwire) – Cynapsus Therapeutics Inc. (the "Corporation" or "Cynapsus") (CTH: TSX-V) announced today that it intends to proceed with the acquisition of Adagio Pharmaceuticals Ltd. ("Adagio") as previously announced on April 26, 2022 (the “Proposed Transaction”) and conduct a Series E Debenture financing.
About APL-130277
The Proposed Transaction would supersede and replace the License Option Agreement dated July 22, 2022 entered into between Cynapsus and Adagio with respect to the intellectual property owned by Adagio concerning the APL-130277 patent rights and know-how.
The APL-130277 patent rights and know how are critical to the Corporation’s long term objectives. The acquisition will ensure ownership of those rights by the Corporation and also align the interests of Adagio’s senior management with those of the Corporation.
The acquisition was previously approved by the shareholders at the annual and special meeting held May 31, 2011. However, the approval was conditional upon completion of an equity financing in an amount of $4,000,000. The equity financing was not completed due in part to the recent market conditions. It is proposed that the Corporation complete the Financing in a lesser amount, as described below, which will allow the Corporation to conduct further human data studies and derisk the APL-130277 asset in anticipation of a more substantial equity financing.
Terms of the Transaction
The terms of the Proposed Transaction have not changed materially from those approved by the shareholders. The requirement for an equity financing has been removed and offset by an amendment to the escrow release conditions. The initial consideration shares (26,000,000) to be delivered upon closing of the Adagio purchase will be held in escrow and released once additional capital raising thresholds totalling $8,000,000 have been achieved.
The Proposed Transaction will be structured as a share exchange with Adagio shareholders receiving newly issued common shares in the capital of Cynapsus (the “Common Shares”) in exchange for all of the issued and outstanding shares of Adagio. The Adagio shareholders will be entitled to the following payments pursuant to the Proposed Transaction:
A. a payment of $1,300,000 on closing, to be satisfied by the issuance of 26,000,000 Common Shares having a deemed value of $0.05 per share;
B. a payment of $1,500,000 conditional upon the successful completion of the APL-130277 phase 1 studies, to be satisfied by the issuance of Common Shares at a deemed value equal to the 30 day volume weighted average trading price ("VWAP") immediately prior to the first public announcement of the results of such studies; and
C. a payment of $2,500,000 conditional upon the successful completion of the APL-130277 final safety study, to be satisfied by the issuance of Common Shares at a deemed value equal to the 30 day VWAP immediately prior to the first public announcement of the results of such study.
With respect to the payments described in B and C above, the VWAP of the Common Shares of Cynapsus may not be less than the “discounted market price” as defined in the policies of the TSX Venture Exchange Inc. (the “Exchange”).
Related Party Transaction
The Proposed Transaction constitutes a “related party transaction” pursuant to Multilateral Instrument 61-101 and the policies of the Exchange (the "Related Party Requirements"). Anthony Giovinazzo, President and Chief Executive Officer of the Cynapsus, is also a director, officer and majority shareholder of Adagio. As previously announced, steps were taken by the board of directors (the “Board”) of Cynapsus to address any potential conflicts of interest, including but not limited to, the appointment of a special committee of the Board (the “Special Committee”) and obtaining a fairness opinion from an independent US FINRA/SIPC registered financial advisor.
The Corporation received a fairness opinion that, based on the assumptions and limitations set out in the opinion, the consideration to be paid to the shareholders of Adagio pursuant to the Proposed Transaction is fair from a financial point of view to the disinterested Cynapsus shareholders. The Special Committee concluded that the Proposed Transaction is in the best interests of Cynapsus and recommended approval to the Board. The Board has concluded that the Proposed Transaction is in the best interests of Cynapsus.
Under the Related Party Requirements, the Proposed Transaction was approved at the annual and special meeting of shareholders held May 31, 2011. The parties have agreed to amend the Proposed Transaction to eliminate the $4,000,000 equity financing requirement and to change the initial escrow release conditions. The Proposed Transaction will require an initial capital raise in amount of no less than $250,000. For these purposes a “capital raise” includes proceeds received by the Corporation arising from the issuance of debt or equity securities or third party licensing or research fees.
The initial escrow release conditions apply to the 26,000,000 Common Shares that are to be issued on closing to the Adagio shareholders. These conditions defer release of the initial consideration shares until specified capital raising thresholds totalling $8,000,000 have been achieved. A special meeting of shareholders will be called for late October or early November 2011 in Toronto, Canada at which the Proposed Transaction, as amended, will be submitted for approval by shareholders.
Closing Conditions
The closing of the Proposed Transaction is conditional upon, among other things, the following:
(a) Completion by the Corporation of satisfactory due diligence.
(b) Completion by the Corporation of a Financing (as described below).
(c) All necessary board, shareholder, regulatory and third party approvals.
(d) Execution and delivery of a definitive purchase agreement and all other documentation required to effect the Proposed Transaction.
As noted above, completion of the Proposed Transaction is subject to a number of conditions, including Exchange approval and disinterested Cynapsus shareholder approval. The Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
Escrow Arrangements
The closing of the Proposed Transaction is conditional upon completion of a capital raise in an amount of no less than $250,000 (a “Financing”). The initial share consideration consisting of 26,000,000 Common Shares will be released as follows:
(a) 3,250,000 Common Shares are to be released upon completion of a capital raise in the amount of $250,000 to $1,000,000.
(b) a further 3,250,000 Common Shares are to be released upon completion of capital raises, including the amount required for closing, in the aggregate amount of $2,000,000 have been achieved.
(c) a further 3,250,000 Common Shares are to be released upon completion of subsequent capital raises in the aggregate amount of $1,000,000 or multiples thereof, in excess of $2,000,000, until capital raises totalling $8,000,000 have been achieved.
All Common Shares issued to Mr. Giovinazzo will be subject to a separate and distinct contractual escrow. The escrow arrangement with Mr. Giovinazzo will provide, among other things, for the following escrow releases:
(a) 25% immediately; and
(b) 25% on each of the first, second and third anniversaries of the closing of the Proposed Transaction.
Any of the Common Shares issued to Mr. Giovinazzo that were subject to the initial escrow release shall be released from the contractual escrow as if such shares had been delivered at closing.
In the event of a sale of the Corporation, including but not limited to a sale of substantially all of the assets of the Corporation, a merger or acquisition or a plan of arrangement, or whereby a new controlling shareholder is established, all shares then remaining in escrow would be immediately released.
The foregoing is in addition to any escrow that may be imposed by the Exchange.
Current Series E Debenture Financing
Cynapsus intends to complete a Series E Debenture financing of up to $2,000,000 on or before September 30, 2011, to fund ongoing research and development activities of the Corporation’s APL 130277 product, repayment of the $100,000 Series B Debenture, working capital and general corporate purposes. Research and development activities will include the completion of a single dose human proof of concept (“SDHPOC”) study within approximately 90-120 days from the close of the Series E Debenture financing. Terms of the Series E Debenture will be publicly disclosed when finalized. For greater clarity, the Series E Debenture financing will be included for purposes of the Financing described above.
The successful completion of the SDHPOC study is expected to trigger a larger financing to complete a Phase 1 bioequivalence study and a safety study. These studies are expected to be funded by the completion of a private placement equity financing of up to $8,000,000 in Q1 2012. As previously announced, Summer Street Research Partners was retained by Cynapsus to provide financial and advisory services and will act as the Corporation's placement agent for the private placement. The Corporation may, at its discretion, increase the size of the private placement.
Closing
The Proposed Transaction cannot close until the required Exchange and shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Information Circular to be prepared in connection with shareholder approval of the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Cynapsus should be considered highly speculative.
It is currently anticipated that the Series E Debenture Financing will be completed between August 26, 2021 and September 30, 2011.
It is currently anticipated that the Proposed Transaction will be completed on or around November 15, 2011.
About Cynapsus Therapeutics
Cynapsus is a specialty pharmaceutical company developing an improved dosing formulation of an approved drug used to treat the symptoms of Parkinson’s disease. Parkinson’s disease is a chronic and progressive neurodegenerative disease that impacts motor activity, and its prevalence is increasing with the aging of the population. It is estimated that between 25 percent and 50 percent of patients experience “off episodes” in which they have impaired movement or speaking capabilities. Current medications only control the disease’s symptoms, and most drugs become less effective over time as the disease progresses.
Cynapsus’ lead drug candidate, APL-130277, is an easy-to-administer, fast-acting and oral reformulation of an approved drug, apomorphine, used to rescue patients from off episodes. Cynapsus is focused on rapidly maximizing the value of APL-130277 by completing pivotal studies in advance of a New Drug Application expected to be submitted in 2013 or 2014. The Company anticipates out-licensing to an appropriate pharmaceutical partner before such an application is submitted.
More information about Cynapsus (CTH: TSX-V) is available at www.cynapsus.ca and at the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
Contact Information
Cynapsus Therapeutics
Anthony Giovinazzo
President and CEO
(416) 703-2449 x225
[email protected]
Andrew Williams
COO & CFO
(416) 703-2449 x253
[email protected]
Media contacts:
Russo Partners LLC
Ian Stone
(619) 528-2220
[email protected]
Robert E. Flamm, Ph.D.
(212)-845-4226
[email protected]
Forward Looking Statements
This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Cynapsus to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks and uncertainties relating to Cynapsus’ business disclosed under the heading “Risk Factors” in Cynapsus' current Annual Information Form and its other filings with the various Canadian securities regulators which are available online at www.sedar.com. Although Cynapsus has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Cynapsus does not undertake to update any forward-looking statements, except in accordance with applicable securities laws.
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