As filed with the Securities and Exchange Commission on October 15, 2015
Registration No. 333-206798
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HORIZON PHARMA PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland | 2834 | Not Applicable | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(IRS Employer Identification Number) |
Connaught House, 1st Floor
1 Burlington Road, Dublin 4, D04 C5Y6, Ireland
011 353 1 772 2100
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Timothy P. Walbert
Chairman, President and Chief Executive Officer
Horizon Pharma plc
c/o Horizon Pharma, Inc.
520 Lake Cook Road, Suite 520
Deerfield, Illinois 60015
(224) 383-3000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies To:
Barbara Borden Kay Chandler Sean Clayton Cooley LLP 4401 Eastgate Mall San Diego, California 92121 Telephone: (858) 550-6000 |
Timothy P. Walbert Horizon Pharma plc Connaught House, 1st Floor 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland Telephone: 011 353 1 772 2100 |
Rodd M. Schreiber Richard J. Grossman Skadden, Arps, Slate, Meagher & Flom LLP 155 N. Wacker Drive Chicago, Illinois 60606 Telephone: (312) 407-0700 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the transactions described in the enclosed prospectus/offer to exchange.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
x | Accelerated filer | ¨ | |||||
Non-accelerated filer |
¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Amount to be |
Proposed Maximum Offering Price Per Unit |
Proposed Offering Price(2) |
Amount of Registration Fee(3) | ||||
Ordinary shares, nominal value $0.0001 per share |
81,706,881 | N/A | $2,273,171,432.49 | $263,533.95 | ||||
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(1) | Represents the maximum number of ordinary shares of Horizon Pharma Public Limited Company, which we refer to as Horizon or we, estimated to be issuable upon completion of the exchange offer and second-step merger described in this registration statement based upon 86,007,243 shares of common stock, no par value, of Depomed, Inc., which we refer to as Depomed, and which common stock we refer to as Depomed common stock (being the sum of (i) 60,311,961 shares of Depomed common stock outstanding as of July 30, 2015 (as reported in Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015), (ii) 5,977,141 shares of Depomed common stock subject to outstanding awards under Depomeds 2004 Equity Incentive Plan as of March 20, 2015 (as reported in Depomeds Proxy Statement on Schedule 14A filed on April 6, 2015), (iii) 2,711,122 shares of Depomed common stock subject to outstanding awards under Depomeds 2014 Omnibus Incentive Plan as of March 20, 2015 (as reported in Depomeds Proxy Statement on Schedule 14A filed on April 6, 2015), (iv) 89,758 shares of Depomed common stock subject to outstanding awards granted by Depomed after March 20, 2015 (as reported in Statements of Changes in Beneficial Ownership filed on Form 4), and (v) 19,167,261 shares of Depomed common stock issuable upon the conversion of Depomeds outstanding convertible notes assuming that all such notes are converted after the completion of the offer on the expiration date but prior to the consummation of the second-step merger, and that Depomed elects to settle such notes using only shares of Depomed common stock (and for purposes of such settlement such shares are valued at $33.00 per share), less 2,250,000 shares of Depomed common stock in which Horizon Pharma, Inc. has an ownership interest, which will not be tendered in the offer and will be cancelled in any merger with Depomed) being exchanged for 0.95 per share of ordinary shares of Horizon, nominal value $0.0001 per share. In addition, pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of ordinary shares as may be issuable with respect to the ordinary shares being registered hereunder as a result of stock splits, stock dividends or similar transactions. The 81,706,881 ordinary shares of Horizon being registered consist of 80,295,608 shares that were subject to the initial filing of this Registration Statement on Form S-4 (Registration No. 333-206798) on September 8, 2015, and an additional 1,411,273 shares subject to this Amendment No. 2. |
(2) | Pursuant to Rule 457(c) and Rule 457(f) under the Securities Act of 1933, as amended, which we refer to as the Securities Act, and solely for the purpose of calculating the registration fee, the market value of the securities to be received was calculated as the product of (1) 86,007,243 shares of Depomed common stock and (2) the average of the high and low sale prices of Depomed common stock as reported on the NASDAQ Global Select Market on September 4, 2015 ($26.43). |
(3) | Of this amount, $259,580.15 was previously paid in connection with the initial filing of this Registration Statement on Form S-4 (Registration No. 333-206798) on September 8, 2015, and $3,953.80 is based upon the filing fee rate in effect on the date of filing this Amendment No. 2 for the additional underlying value of the transaction of $39,263,112.93. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS/OFFER TO EXCHANGE MAY CHANGE. WE MAY NOT COMPLETE THE OFFER AND ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS/OFFER TO EXCHANGE IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
Offer to Exchange
Each Outstanding Share of Common Stock
(Including the Associated Rights to Purchase Preferred Stock)
of
Depomed, Inc.
for
0.95 Ordinary Shares of Horizon Pharma Public Limited Company,
by
Diosail Merger Corporation,
a wholly-owned subsidiary
of
Horizon Pharma Public Limited Company
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON NOVEMBER 6, 2015, UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
Diosail Merger Corporation, which we refer to as Purchaser, is a wholly-owned subsidiary of Horizon Pharma Public Limited Company, which we refer to as Horizon or we, hereby offers to the shareholders of Depomed, Inc., which we refer to as Depomed, upon the terms and subject to the conditions set forth in this prospectus/offer to exchange and in the accompanying letter of transmittal, which we refer to together as the offer, to exchange for each issued and outstanding share of common stock (including any associated rights to purchase preferred stock), which we refer to as Depomed common stock, 0.95 ordinary shares of Horizon, which we refer to as the Stock Consideration. See the section of this prospectus/offer to exchange titled The Offer beginning on page 60.
The purpose of the offer is for Horizon to acquire control of, and as soon as practicable thereafter, the entire equity interest in, Depomed. Horizon intends, as soon as practicable after consummation of the offer, to cause Depomed to merge with Purchaser, which we refer to as the second-step merger, after which Depomed would be a direct, wholly-owned subsidiary of Horizon.
THE OFFER IS SUBJECT TO THE CONDITIONS SET FORTH IN THE SECTION OF THIS PROSPECTUS/OFFER TO EXCHANGE TITLED THE OFFERCONDITIONS TO THE OFFER. These include the Minimum Tender Condition, the Anti-Takeover Device Condition, the Horizon Shareholder Approval Condition, the Due Diligence Condition, the Competition Laws Condition, the No Depomed Material Adverse Effect Condition and the other conditions set forth in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer beginning on page 78.
Ordinary shares of Horizon, nominal value $0.0001 per share, which we refer to as Horizon ordinary shares, trade on NASDAQ, under the symbol HZNP. Depomed common stock trades on NASDAQ, under the symbol DEPO.
Despite our repeated attempts beginning in March 2015 to engage the board of directors of Depomed, which we refer to as the Depomed Board, and Depomeds management in friendly and confidential discussions regarding the offer, the Depomed Board and Depomeds management have refused to engage in meaningful discussions with us, have rejected our initial public proposal on July 7, 2015 to acquire Depomed in an all-stock transaction and our subsequent proposals on July 21, 2015 and August 13, 2015, and have even created new obstacles for shareholders to consider our proposed combination with Depomed by, among other things, amending the Depomed bylaws to create additional requirements for Depomed shareholders to exercise their statutory right to call a special meeting and submit proposals at shareholder meetings and adopting a shareholder rights plan, which we refer to as the Depomed Rights Agreement, or so-called poison pill, that precludes a party from acquiring the 10% of the votes of Depomed necessary to call a special shareholders meeting or privately soliciting up to ten other shareholders for the purpose of calling a special meeting.
In light of Depomeds unwillingness to meaningfully engage with Horizon with respect to a negotiated transaction and the public statements by the Depomed Board with respect to the proposed combination with Depomed, and because Horizon does not believe that it is appropriate for the Depomed Board to have a veto right over whether the offer is made available to Depomeds shareholders, Horizon is making the offer directly to Depomed shareholders on the terms and conditions set forth in this prospectus/offer to exchange as an alternative to a negotiated transaction. See the section of this prospectus/offer to exchange titled Background of the Offer beginning on page 41.
See the section of this prospectus/offer to exchange titled Risk Factors beginning on page 19 for a discussion of various factors that you, as a shareholder of Depomed, should consider about the offer.
Neither Horizon nor Purchaser has authorized any person to provide any information or to make any representation in connection with the offer other than the information contained or incorporated by reference in this prospectus/offer to exchange, and if any person provides any of this information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Horizon or Purchaser.
Neither the Securities and Exchange Commission, which we refer to as the SEC, nor any state or provincial securities commission or regulatory authority, has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus/offer to exchange. Any representation to the contrary is a criminal offense.
The information agent for the offer is
105 Madison Avenue
New York, NY 10016
Toll-free: (800) 322-2885
The date of this prospectus/offer to exchange is October 15, 2015
This prospectus/offer to exchange incorporates important business and financial information about Horizon and Depomed from documents filed with the SEC that have not been included in, or delivered with, this prospectus/offer to exchange. This information is available on the SECs website at http://www.sec.gov and from other sources. See the section of this prospectus/offer to exchange titled Where You Can Find More Information beginning on page 148.
You may also request copies of these documents, without charge, upon written or oral request to our information agent, MacKenzie Partners, Inc., at toll-free: (800) 322-2885 or collect: (212) 929-5500.
In order to receive timely delivery of the documents, you must make requests no later than five business days before the scheduled expiration date of the offer, as it may be extended from time to time.
HORIZON IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY TO HORIZON. Any solicitation of proxies by Horizon will be made only pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Horizon intends to file proxy statement(s) and other relevant materials with the SEC to solicit proxies from Depomed shareholders to, among other things, remove from office the entire current Depomed Board in favor of a slate of nominees nominated by Horizon for election as directors at special meetings of Depomeds shareholders. Shareholders of Depomed are urged to read the proxy statement and other relevant materials carefully in their entirety if and when they become available because they will contain important information. Any such proxy statement(s) will be filed with the SEC. Depomed shareholders will be able to obtain a copy of any proxy statement(s), as well as other filings containing information about the parties (including information regarding the participants (which may include Horizons officers and directors, Horizons nominees for election to the Depomed Board and other persons) in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise) through the website maintained by the SEC at www.sec.gov. Free copies of any such documents can also be obtained by calling MacKenzie Partners, Inc., at toll-free: (800) 322-2885 or collect: (212) 929-5500.
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Horizon Selected Historical Consolidated Financial Information |
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Depomed Selected Historical Consolidated Financial Information |
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Selected Unaudited Pro Forma Condensed Combined Financial Information |
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Exchange of Shares of Depomed Common Stock; Delivery of Horizon Ordinary Shares |
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Schedule I: |
Directors and Executive Officers of Horizon and Purchaser | 152 | ||||
Schedule II: |
Securities Transactions in the Past 60 Days | 162 |
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QUESTIONS AND ANSWERS ABOUT THE OFFER
The following are some of the questions you, as a shareholder of Depomed, may have and answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this prospectus/offer to exchange and the related letter of transmittal, and this information is qualified in its entirety by the more detailed descriptions and explanations contained in this prospectus/offer to exchange and in the letter of transmittal. We urge you to read both documents in their entirety prior to making any decision with respect to your shares of Depomed common stock.
Q: | WHO IS OFFERING TO ACQUIRE MY SHARES OF DEPOMED COMMON STOCK? |
A: | The offer is being made by Horizon through Purchaser, a wholly-owned subsidiary of Horizon, formed for the purpose of making the offer. Horizon is a biopharmaceutical company focused on improving patients lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. Horizon markets seven medicines through its orphan, primary care and specialty business units. Horizons U.S. marketed products are ACTIMMUNE® (interferon gamma-1b), BUPHENYL® (sodium phenylbutyrate) Tablets and Powder, DUEXIS® (ibuprofen/famotidine), PENNSAID® (diclofenac sodium topical solution) 2% w/w, RAVICTI® (glycerol phenylbutyrate) Oral liquid, RAYOS® (prednisone) delayed release tablets and VIMOVO® (naproxen/esomeprazole magnesium). Horizon is incorporated in Ireland and operates through a number of international and U.S. subsidiaries. |
Q: | WHAT ARE THE CLASSES AND AMOUNTS OF DEPOMED SECURITIES HORIZON IS OFFERING TO EXCHANGE IN THE OFFER? |
A: | Horizon is seeking to acquire all of the issued and outstanding shares of Depomed common stock. |
Q: | WHAT WILL I RECEIVE FOR MY DEPOMED COMMON STOCK? |
A: | Horizon is offering to exchange, for each issued and outstanding share of Depomed common stock that is validly tendered and not withdrawn before the expiration date, the Stock Consideration set forth on the cover page of this prospectus/offer to exchange. We will not allot or issue fractional Horizon ordinary shares to holders of Depomed common stock who accept the offer. To the extent that you would be entitled to fractional shares, those fractional entitlements will be paid in cash in the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the closing price of a Horizon ordinary share on NASDAQ on the last business day prior to the date that Horizon accepts shares of Depomed common stock for exchange pursuant to the offer. |
Q: | WILL I HAVE TO PAY ANY FEES OR COMMISSIONS TO EXCHANGE DEPOMED COMMON STOCK? |
A: | If you are the owner of record of your shares of Depomed common stock and you tender these shares directly to Computershare Trust Company, N.A., the exchange agent for the offer, you will not have to pay brokerage fees, commissions or incur similar expenses. If you own your shares of Depomed common stock through a broker, dealer, commercial bank, trust company or other nominee, and your broker, dealer, commercial bank, trust company or other nominee tenders the shares of Depomed common stock on your behalf, your broker or such other nominee may charge you a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply. |
Q: | HAVE YOU DISCUSSED THE OFFER WITH THE DEPOMED BOARD? |
A: | The Depomed Board has refused to meaningfully discuss this prospectus/offer to exchange with Horizon. Prior to making a public proposal to acquire Depomed, Horizon sought to engage in discussions regarding a |
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business combination with Depomed beginning in March 2015. Since making its initial public proposal on July 7, 2015, Horizon has continued to publicly express a desire to enter into a negotiated business combination with Depomed and has publicly announced the proposals that Horizon has submitted to the Depomed Board. On August 13, 2015, Horizon publicly reiterated its proposal to acquire each outstanding share of Depomed common stock for $33.00 per share and fixed the exchange ratio of such offer at 0.95 Horizon ordinary shares for each share of Depomed common stock based on the 15-day volume weighted average price of a Horizon ordinary share as of August 12, 2015, or $34.74 per share. That same day, subject to its ongoing discussions with Depomed shareholders, Horizon also publicly announced its willingness to amend its proposal to offer Depomed shareholders a cash-stock mix with up to 25% of the consideration in cash at the election of each respective Depomed shareholder, subject to certain terms and conditions, including a reduction in the total consideration per share to $32.50 to partially offset incremental costs associated with including cash as a component of the consideration. Despite Horizons repeated attempts to engage the Depomed Board and Depomeds management in friendly and confidential discussions regarding the offer, the Depomed Board and Depomeds management have refused to engage in meaningful discussions with Horizon, have rejected Horizons prior proposals, and have even created new obstacles for shareholders to consider the proposed combination with Depomed by, among other things, amending the Depomed bylaws, which we refer to as the Depomed bylaws, to create additional impediments to Depomeds shareholders to exercise their statutory right to call a special meeting and submit proposals at shareholder meetings and adopting a shareholder rights plan, or so-called poison pill, that precludes a party from acquiring the 10% of the votes of Depomed necessary to call a special shareholders meeting or privately soliciting up to ten other shareholders for the purpose of calling a special meeting. |
See the section of this prospectus/offer to exchange titled Background of the Offer for more information on Horizons earlier proposals. Within 10 business days after the date of this prospectus/offer to exchange, Depomed is required by law to publish, send or give to you (and file with the SEC) a statement as to whether it recommends acceptance or rejection of the offer, that it has no opinion with respect to the offer or that it is unable to take a position with respect to the offer.
Q: | WHY IS HORIZON MAKING THE OFFER? |
A: | We believe that the combination of Horizon and Depomed represents a strategically compelling and value-creating opportunity for the shareholders of each of Depomed and Horizon. We also believe that the combined company will have substantial strategic benefits. See the section of this prospectus/offer to exchange titled Reasons for the Offer for more information on these benefits. |
Q: | WHAT IS THE PURPOSE OF THE OFFER? |
A: | The purpose of the offer is for Horizon to acquire control of, and as soon as practicable thereafter, the entire equity interest of, Depomed. Horizon intends, as soon as practicable after the consummation of the offer, to cause Depomed to merge with Purchaser after which Depomed would be a wholly-owned subsidiary of Horizon. The purpose of the second-step merger is for Horizon to acquire all of the issued and outstanding shares of Depomed common stock that are not acquired in the offer. In the second-step merger, each remaining share of Depomed common stock (other than shares held in treasury by Depomed, if any, and shares held by Horizon and its affiliates) will be cancelled and converted into the right to receive the Stock Consideration. After the second-step merger, Horizon will own all of the issued and outstanding shares of Depomed common stock. See the sections of this prospectus/offer to exchange titled The OfferPurpose of the Offer; Second-Step Merger; The OfferStatutory Requirements; Approval of the Second-Step Merger; and The OfferPlans for Depomed. |
Q: | WILL I BE TAXED FOR U.S. FEDERAL INCOME TAX PURPOSES ON THE HORIZON ORDINARY SHARES THAT I RECEIVE IN THE OFFER OR THE SECOND-STEP MERGER? |
A: | Assuming certain conditions are satisfied, as described more fully in the section of this prospectus/offer to exchange titled The OfferCertain Tax Consequences of the Transactions, which we refer to as the main |
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tax discussion, U.S. holders as defined in the main tax discussion other than those excluded from the main tax discussion generally will not recognize gain or loss for U.S. federal income tax purposes with respect to the Horizon ordinary shares received in the offer or the second-step merger. |
For a more complete description of the tax consequences of the merger, see the section of this prospectus/offer to exchange titled The OfferCertain Tax Consequences of the Transactions.
BECAUSE TAX MATTERS ARE COMPLICATED, HORIZON URGES YOU TO CONTACT YOUR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE OFFER AND THE SECOND-STEP MERGER.
Q: | WHEN DO YOU EXPECT THE OFFER AND THE SECOND-STEP MERGER TO BE COMPLETED? |
A: | The timing for consummation of the offer and the second-step merger will depend on the satisfaction of the conditions to the offer, including if and when the Depomed Board or a court removes the poison pill rights that are currently an obstacle to consummating the offer and the second-step merger. As a result, there can be no certainty as to when, and whether, Horizon will be able to complete the offer and the second-step merger. See the section of this prospectus/offer to exchange titled Depomed Poison Pill Rights Agreement for a more detailed description of the poison pill rights. |
Q: | WHAT ARE THE CONDITIONS TO THE OFFER? |
A: | The offer is subject to a number of conditions, including the Minimum Tender Condition, the Anti-Takeover Device Condition, the Horizon Shareholder Approval Condition, the Competition Laws Condition, the Due Diligence Condition, the No Depomed Material Adverse Effect Condition and the other conditions set forth in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer. |
Q: | DO I NEED TO VOTE AT ANY MEETING TO APPROVE THE OFFER OR THE SECOND-STEP MERGER? |
A: | Your vote is not required in connection with the offer. You simply need to tender your shares of Depomed common stock, if you choose to do so. In the event that Horizon accepts shares of Depomed common stock for exchange in the offer, Horizon intends to acquire Depomed pursuant to the second-step merger. If Horizon acquires less than 90% of the outstanding shares of Depomed common stock through the offer, Horizon would need to cause the Depomed Board to approve an agreement and plan of merger in respect of the second-step merger and Depomed would need to hold a special meeting of its shareholders to approve the second-step merger, however, Horizon would hold sufficient shares of Depomed common stock at such time to replace the Depomed Board if not replaced at an earlier meeting of Depomed shareholders and to vote to approve the principal terms of the agreement of merger for the second-step merger. Horizon will not close the offer until the Depomed Board or a court removes the poison pill rights. If Horizon acquires, through Purchaser pursuant to the offer or otherwise, at least 90% of the then outstanding shares of Depomed common stock, Horizon will be able to effect the second-step merger without a vote of Depomed shareholders or approval of the Depomed Board. |
Q: | HOW DOES THE OFFER RELATE TO HORIZONS SOLICITATION OF PROXIES WITH RESPECT TO AN EXTRAORDINARY GENERAL MEETING OF HORIZON SHAREHOLDERS? |
A: | An extraordinary general meeting of Horizon shareholders is being held to approve the issuance of Horizon ordinary shares in connection with the offer and the second-step merger. You do not need to take any action with respect to Horizons solicitation of its shareholders in your capacity as a Depomed shareholder. |
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Q: | HOW DOES THE OFFER RELATE TO HORIZONS SOLICITATION OF PROXIES WITH RESPECT TO A REQUEST FOR TWO SPECIAL MEETINGS OF DEPOMED SHAREHOLDERS? |
A: | On August 3, 2015 Horizon filed a preliminary solicitation statement pursuant to which it is seeking revocable proxies from Depomed shareholders to empower Horizon to deliver to Depomeds Corporate Secretary written requests to call a special meeting of Depomed shareholders to consider and vote upon the following proposals: (1) to remove from office, without cause, the seven members of the current Depomed Board, constituting the entire current Depomed Board, each such removal to become effective upon the election of each successor by Depomed shareholders, which we refer to as the removal proposal; (2) to repeal recent amendments to Sections 2 and 5 of the Depomed bylaws adopted and approved by the Board on July 12, 2015 to remove the onerous and improper requirements imposed thereby on the process for calling a special meeting of shareholders and for submitting shareholder proposals; and (3) to repeal any amendment or provision of the Depomed bylaws adopted and approved by the Depomed Board that changes the Depomed bylaws in any way from the version of the bylaws adopted and approved by the Depomed Board on July 12, 2015, and to amend the section of the Depomed bylaws titled AMENDMENT OF BYLAWS to eliminate the power of the Depomed Board to adopt, amend or repeal the bylaws for a period of 120 days following the special meeting called for in the preliminary solicitation statement, which, together with proposal 2 described above, we refer to as the Depomed bylaws amendment proposals. We refer to this solicitation statement, as may be amended or supplemented from time-to-time, as the Horizon solicitation. On August 19, 2015, Horizon filed an amendment to the Horizon solicitation with the SEC to amend the purposes of and the matters to be considered and voted upon at the special meeting to include the election of seven individuals to serve on the Depomed Board, which we refer to as the Horizon nominees, contingent upon the proposal to remove the current Depomed Board being passed by the Depomed shareholders, which we refer to as the election proposal. On August 28, 2015, Horizon, in response to Depomeds decision to not accept the amendment of the purposes of the special meeting in the Horizon solicitation to include the election proposal without delaying the record date for determining which Depomed shareholders may call the special meeting, further amended the Horizon solicitation to provide for two special meetings, one to consider and vote upon the removal proposal and the Depomed bylaws amendment proposals and a second to consider and vote upon the election proposal. On September 8, 2015, Horizon filed the definitive Horizon solicitation with the SEC providing for the calling of the two foregoing related special meetings. See the sections of this prospectus/offer to exchange titled The OfferPlans for Depomed and Background of the Offer for a discussion of the Horizon solicitation. |
Q: | IF I WISH TO ACCEPT THE OFFER, DO I NEED TO GRANT A PROXY TO HORIZON IN CONNECTION WITH THE SOLICITATION WITH RESPECT TO A REQUEST FOR TWO SPECIAL MEETINGS OF DEPOMED SHAREHOLDERS OR THE HORIZON PROXY SOLICITATION WITH RESPECT TO A SPECIAL MEETING OF HORIZON SHAREHOLDERS? |
A: | No. Your ability to tender your shares of Depomed common stock in the offer is not conditioned on your granting proxies to Horizon in connection with the proxy solicitations discussed above. |
Q: | IS HORIZONS FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER MY DEPOMED COMMON STOCK IN THE OFFER? |
A: | Yes. Shares of Depomed common stock accepted in the offer will be exchanged for Horizon ordinary shares and therefore you should consider Horizons financial condition before you decide to become a Horizon shareholder by accepting the offer. You should also consider the effect that the proposed combination with Depomed may have on Horizons financial condition. In considering Horizons financial condition, you should review the documents incorporated by reference in this prospectus/offer to exchange and Horizons historical consolidated financial information set forth under the section of this prospectus/offer to exchange titled Horizon Selected Historical Consolidated Information as well as the unaudited pro forma condensed combined financial information set forth under the section of this prospectus/offer to exchange titled |
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Unconsolidated Pro Forma Condensed Combined Financial Statements, because they contain detailed business, financial and other information about Horizon. |
Q: | WILL HORIZON HAVE THE FINANCIAL RESOURCES TO COMPLETE THE OFFER AND THE SECOND-STEP MERGER? |
A: | Horizon expects to have sufficient cash resources available to complete the transactions contemplated by the offer and the second-step merger. In addition to cash on hand, Horizon currently intends to borrow or otherwise finance up to $175 million to complete the acquisition of Depomed, to pay fees, expenses and amounts related to such acquisition and to fund certain short-term cash obligations of the combined company, including working capital. See the section of this prospectus/offer to exchange titled The OfferSource and Amount of Funds. |
Q: | WHAT PERCENTAGE OF HORIZON ORDINARY SHARES WILL FORMER HOLDERS OF DEPOMED COMMON STOCK OWN AFTER THE OFFER AND THE SECOND STEP MERGER? |
A: | The answer will depend on how many shares of Depomed common stock are tendered as part of the offer and the number of shares of Depomed common stock outstanding immediately prior to the closing of the second-step merger. However, Horizon estimates that, upon the consummation of the offer and the second-step merger, former Depomed shareholders (including former holders of Depomeds outstanding convertible notes) will hold, in the aggregate, approximately 32.2% of the shares of the combined company then outstanding, or approximately 31.7% on a fully diluted basis. For a more detailed discussion of the assumptions on which these estimates are based, see the section of this prospectus/offer to exchange titled The OfferOwnership of Horizon After the Offer. |
Q: | WHEN DOES THE OFFER EXPIRE? |
A: | The offer is scheduled to expire at 5:00 p.m., Eastern time, on November 6, 2015, which we refer to as the expiration time, unless further extended by Horizon, in which case the expiration time will be the latest time and date on which the offer, as so extended, expires. We refer to such time, as it may be extended, as the expiration time, and the date on which the expiration time occurs as the expiration date. For more information, you should read the discussion under the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment. |
Q: | CAN THE OFFER BE EXTENDED AND, IF SO, UNDER WHAT CIRCUMSTANCES? |
A: | Horizon may, in its sole discretion, extend the offer to a later expiration date and time at any time or from time to time until 9:00 a.m., Eastern time, on the first business day after the previously scheduled expiration time. For instance, the offer may be extended if any of the conditions specified in The OfferConditions to the Offer are not satisfied prior to the scheduled expiration time. The expiration time of the offer may also be subject to multiple extensions. Any decision to extend the offer, and if so, for how long, will be made by Horizon. Any decision by Horizon to extend the offer will be made public by an announcement regarding such extension as described in the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment. |
Q: | HOW DO I TENDER MY SHARES? |
A: | In order for a holder of shares of Depomed common stock to validly tender their shares pursuant to the offer, the exchange agent must receive, prior to the expiration time, the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees or, in the case of a book-entry transfer, an Agents Message (as defined in the section of this prospectus/offer to exchange titled The OfferExchange of Shares of Depomed Common Stock; Delivery |
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of Horizon Ordinary Shares), and any other documents required by the letter of transmittal, at one of its addresses set forth on the back cover of this prospectus/offer to exchange and either (1) the certificates representing tendered shares of Depomed common stock must be received by the exchange agent at such address or such shares of Depomed common stock must be tendered pursuant to the procedure for book-entry transfer described below and a book-entry confirmation must be received by the exchange agent (including an Agents Message), in each case prior to the expiration time, or (2) the tendering Depomed shareholder must comply with the guaranteed delivery procedures described below. For a complete discussion on the procedures for tendering your shares of Depomed common stock, see the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering. |
Q: | UNTIL WHAT TIME CAN I WITHDRAW TENDERED DEPOMED COMMON STOCK? |
A: | You may withdraw previously tendered shares of Depomed common stock any time prior to the expiration time, and, if Horizon has not accepted your shares for exchange after the expiration time, at any time following 60 days from commencement of the offer. |
Q: | HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARE OF DEPOMED COMMON STOCK? |
A: | To withdraw previously tendered shares of Depomed common stock, a written or facsimile transmission notice of withdrawal, which must include all required information, must be timely received by the exchange agent at one of its addresses set forth on the back cover page of this prospectus/offer to exchange. For a complete discussion on the procedures for withdrawing your shares of Depomed common stock, see the section of this prospectus/offer to exchange titled The OfferWithdrawal Rights. |
Q: | WHEN AND HOW WILL I RECEIVE THE STOCK CONSIDERATION IN EXCHANGE FOR MY TENDERED SHARES OF DEPOMED COMMON STOCK? |
A: | Horizon will exchange all tendered and not properly withdrawn shares of Depomed common stock promptly after the expiration time, subject to the terms hereof and the satisfaction or waiver of the conditions to the offer, as set forth in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer. Horizon will deliver the consideration for your validly tendered and not properly withdrawn shares of Depomed common stock by depositing the consideration therefor with the exchange agent, which will act as your agent for the purpose of receiving the Stock Consideration from Horizon and transmitting such consideration to you. All Horizon ordinary shares to be issued to holders of Depomed common stock in connection with the offer or the second-step merger shall be issued in uncertificated book entry form. In all cases, an exchange of tendered shares of Depomed common stock will be made only after timely receipt by the exchange agent of certificates for such shares of Depomed common stock (or of a confirmation of a book-entry of such shares of Depomed common stock as set forth in the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering) and a properly completed and duly executed letter of transmittal (or Agents Message) and any other required documents. |
Q: | WILL I BE ABLE TO TRADE THE HORIZON ORDINARY SHARES I RECEIVE IN EXCHANGE FOR MY TENDERED SHARES OF DEPOMED COMMON STOCK? |
A: | Yes, the Horizon ordinary shares you receive in exchange for your Depomed common stock will be freely tradeable, subject to applicable securities laws. The conditions to the consummation of the offer and second-step merger include that the Horizon ordinary shares issuable to Depomed shareholders in connection with the offer and the second-step merger shall have been approved for listing on NASDAQ, subject to official notice of issuance in the case of NASDAQ. See the section of this prospectus/offer to exchange titled The OfferConditions to the Offer. |
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Q: | IF I DECIDE NOT TO TENDER, HOW WILL THIS PROSPECTUS/OFFER TO EXCHANGE AFFECT MY SHARES OF DEPOMED COMMON STOCK? |
A: | If the offer is consummated and certain other conditions are met, Horizon intends to effect the second-step merger, upon which all of the then outstanding shares of Depomed common stock (other than shares held in treasury by Depomed, if any, and shares held by Horizon and its affiliates) will at the effective time of the second-step merger be converted into the right to receive a number of Horizon ordinary shares equal to the Stock Consideration. Therefore, if the second-step merger takes place, the only difference to you between tendering your shares and not tendering your shares is that if you tender your shares you will receive your consideration earlier. Even if the second-step merger for some reason does not take place, the number of shareholders and the number of shares of Depomed common stock that are still in the hands of the public may be so small that there no longer will be an active public trading market (or, possibly, there may not be any public trading market) for the Depomed common stock. Also, as described above, Depomed may no longer be required to make filings with the SEC or otherwise comply with the rules of the SEC relating to publicly-held companies. See the section of this prospectus/offer to exchange titled The OfferEffect of the Offer on the Market for Shares of Depomed Common Stock; NASDAQ Listing; Registration under the Exchange Act; Margin Regulations. |
Q: | ARE DISSENTERS RIGHTS AVAILABLE IN EITHER THE OFFER AND/OR THE SECOND-STEP MERGER? |
A: | No dissenters rights are available in connection with the offer or the second-step merger. See the sections of this prospectus/offer to exchange titled The OfferDissenters Rights and The OfferConditions to the Offer. |
Q: | WHAT IS THE VALUE PER SHARE OF DEPOMED COMMON STOCK IN THE OFFER? |
A: | Based on the closing price of a share of Depomed common stock on NASDAQ on July 6, 2015 (i.e., $20.64 per share of Depomed common stock), the last full trading day before Horizon made public its proposal to acquire Depomed, and the 15-day volume weighted average price of a Horizon ordinary share as of August 12, 2015 (i.e., $34.74 per Horizon ordinary share), the Horizon share price used to calculate the share exchange ratio, the offer represented a premium of $12.36 per share of Depomed common stock, or approximately 60% above the closing price per share of Depomed common stock on July 6, 2015. The offer also represented a premium of 54% based on the volume weighted average prices for Horizon ordinary shares and Depomed common stock in the 30 days prior to the public announcement of Horizons proposal to acquire Depomed, and a 52% premium based on the 10-day volume weighted average prior to the public announcement. Please see the section of this prospectus/offer to exchange titled Risk Factors for, among other things, the effect of fluctuations in the market prices of Horizon ordinary shares and Depomed common stock. |
On October 12, 2015, the closing price of Depomed common stock on NASDAQ was $18.87 and the closing price of Horizon ordinary shares on NASDAQ was $19.13.
Q: | WHAT IS THE MARKET VALUE OF MY SHARES OF DEPOMED COMMON STOCK AS OF A RECENT DATE? |
A: | The closing price of Depomed common stock on NASDAQ on October 12, 2015 was $18.87. |
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Q: | IS THE SHARE EXCHANGE RATIO SUBJECT TO ADJUSTMENT BASED ON CHANGES IN THE PRICES OF SHARES OF DEPOMED COMMON STOCK OR HORIZON ORDINARY SHARES? |
A: | No. The number of Horizon ordinary shares issuable in respect of each share of Depomed common stock tendered in the offer or converted in the second-step merger is fixed (i.e., 0.95 of a Horizon ordinary share for each share of Depomed common stock, which we refer to as the share exchange ratio), and no adjustments to the share exchange ratio will be made based on changes in the price of either Horizon ordinary shares or shares of Depomed common stock prior to the consummation of the offer or prior to the closing of the second step-merger. In the event of any such changes in share price, the aggregate market value of the Horizon ordinary shares that the Depomed shareholders are entitled to receive at the time that the offer is consummated or at the time the second-step merger is closed could, in each case, vary significantly from the value of such shares on the date of this prospectus/offer to exchange. Please see the section of this prospectus/offer to exchange titled Risk Factors for, among other things, the effect of fluctuations in the market prices of Horizon ordinary shares and Depomed common stock. |
Q: | WHERE CAN I FIND OUT MORE INFORMATION ABOUT HORIZON AND DEPOMED? |
A: | You can find out information about Horizon and Depomed from the sources described under the section of this prospectus/offer to exchange titled Where You Can Find More Information. |
Q: | WHO CAN I CONTACT WITH ANY ADDITIONAL QUESTIONS ABOUT THE OFFER? |
A: | You can call the information agent for more information regarding the offer. |
The information agent for the offer is:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
Toll-free: (800) 322-2885
Call collect: (212) 929-5500
Email: horizon@mackenziepartners.com
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Certain statements and assumptions in this prospectus/offer to exchange and in the documents incorporated by reference contain or are based on forward-looking information and involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements regarding Horizons offer to acquire Depomed, its expected future performance (including expected results of operations and financial guidance), and the combined companys future financial condition, operating results, strategy and plans. Forward-looking statements may be identified by the use of the words anticipates, expects, intends, plans, should, could, would, may, will, believes, estimates, potential, target, opportunity, tentative, positioning, designed, create, predict, project, seek, ongoing, upside, increases or continue and variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results to differ materially from those described in the forward-looking statements. These assumptions, risks and uncertainties include, but are not limited to, assumptions, risks and uncertainties discussed in Horizons most recent annual or quarterly report filed with the SEC and assumptions, risks and uncertainties relating to the proposed combination with Depomed, as detailed from time to time in Horizons filings with the SEC, which factors are incorporated herein by reference. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this communication are set forth in other reports or documents that we file from time to time with the SEC, and include, but are not limited to:
| the ultimate outcome of the offer and the second-step merger, including the redemption of the poison pill right by the Depomed Board or such rights otherwise being rendered inapplicable to the offer and the second-step merger by the Depomed Board; |
| the ultimate outcome and results of integrating the operations of Horizon and Depomed, the ultimate outcome of Horizons pricing and operating strategy applied to Depomed and the ultimate ability to realize synergies; |
| the effects of the proposed combination with Depomed, including the combined companys future financial condition, operating results, strategy and plans; |
| the ability to obtain regulatory approvals and meet other conditions to the offer, including the necessary shareholder approval, on a timely basis; |
| the effects of governmental regulation on the business of Horizon, on the business of Depomed or on potential business combination transactions; |
| sales, growth prospects and commercialization plans related to ACTIMMUNE, BUPHENYL, DUEXIS, PENNSAID 2%, RAVICTI, RAYOS, and VIMOVO; |
| our business strategy and plans to acquire biopharmaceutical products and companies; |
| the impact of competition from other market participants; |
| the development and commercialization of new products; |
| the availability of coverage and adequate reimbursement and pricing from government and other third-party payers for Horizons and Depomeds products; |
| the ability of Horizon and Depomed to protect and maintain their respective intellectual property rights and defend their respective patents; |
| financing plans; |
| the sufficiency of our cash resources and our expectations regarding our future cash flow, expenses, revenues, financial results and capital requirements; and |
| the risks and uncertainties detailed by Horizon and Depomed with respect to their business as described in their reports and documents filed with the SEC. |
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All subsequent written and oral forward-looking statements attributable to Horizon or any person acting on Horizons behalf concerning the offer, the second-step merger or any alternative transaction contemplating the acquisition of Depomed, or other matters addressed in this prospectus/offer to exchange are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof.
See also the section of this prospectus/offer to exchange titled Risk Factors.
Except to the extent required by applicable law or regulation, Horizon undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this prospectus/offer to exchange or to reflect the occurrence of unanticipated events.
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This summary highlights the material information in this prospectus/offer to exchange. To more fully understand the offer to Depomeds shareholders, and for a more complete description of the terms of the offer and the second-step merger, you should read carefully this entire document, including the exhibits, schedules and documents incorporated by reference herein, and the other documents referred to herein. For information on how to obtain the documents that are on file with the SEC, see the section of this prospectus/offer to exchange titled Where You Can Find More Information.
Information About the Companies (see page 40)
Horizon
Horizon is a biopharmaceutical company focused on improving patients lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. Horizon markets seven medicines through its orphan, primary care and specialty business units. Horizons U.S. marketed products are ACTIMMUNE (interferon gamma-1b), BUPHENYL (sodium phenylbutyrate) Tablets and Powder, DUEXIS (ibuprofen/famotidine), PENNSAID (diclofenac sodium topical solution) 2% w/w, RAVICTI (glycerol phenylbutyrate) Oral liquid, RAYOS (prednisone) delayed release tablets and VIMOVO (naproxen/esomeprazole magnesium). Horizon is incorporated in Ireland and operates through a number of international and U.S. subsidiaries.
Horizons principal executive offices are located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland, and its telephone number at that location is 011-353-1-772-2100.
Additional information concerning Horizon is included in the Horizon reports incorporated by reference in this prospectus/offer to exchange. See the section in this prospectus/offer to exchange titled Where You Can Find More Information.
Purchaser
Purchaser is a California corporation incorporated on August 27, 2015, with principal executive offices at 520 Lake Cook Road, Suite 520, Deerfield, IL 60015. The telephone number of Purchasers principal executive offices is (224) 383-3000. Purchaser is a direct, wholly-owned subsidiary of Horizon that was formed to facilitate the transactions contemplated by this prospectus/offer to exchange. Purchaser has engaged in no activities to date and has no material assets or liabilities of any kind, in each case other than those incidental to its formation and its activities and obligations in connection with the offer.
Depomed
Depomed is a specialty pharmaceutical company focused on pain and other central nervous system conditions. The products that comprise Depomeds current specialty pharmaceutical business are (i) NUCYNTA® ER (tapentadol extended release tablets), a product for the management of pain severe enough to require daily, around-the-clock, long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternative treatment options are inadequate, and NUCYNTA (tapentadol), a product for the management of moderate to severe acute pain in adults, each of which Depomed acquired the U.S. rights to in April 2015, (ii) Gralise® (gabapentin), a once-daily product for the management of postherpetic neuralgia, which we refer to as PHN, that Depomed launched in October 2011, (iii) CAMBIA® (diclofenac potassium for oral solution), a product for the acute treatment of migraine attacks that Depomed acquired in December 2013, (iv) Zipsor® (diclofenac potassium) liquid filled capsules, a product for the treatment of mild to moderate acute pain that Depomed acquired in June 2012, and (v) Lazanda® (fentanyl) nasal spray, a product for
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the management of breakthrough pain in cancer patients 18 years of age and older who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain that Depomed acquired in July 2013. Depomed also has a portfolio of royalty and milestone producing license agreements based on its proprietary Acuform® gastroretentive drug delivery technology with Mallinckrodt Inc., Ironwood Pharmaceuticals, Inc. and Janssen Pharmaceuticals, Inc. Depomed has one product candidate, DM-1992 for Parkinsons disease. DM-1992 completed a Phase 2 trial for Parkinsons disease, and Depomed announced a summary of the results of that trial in November 2012. Depomed continues to evaluate clinical and regulatory strategies and commercial prospects for DM-1992.
Depomeds principal executive offices are located at 7999 Gateway Boulevard, Suite 300, Newark, California 94560, and its telephone number at that location is (510) 744-8000.
Additional information concerning Depomed is included in the Depomed reports incorporated by reference in this prospectus/offer to exchange. See the section in this prospectus/offer to exchange titled Where You Can Find More Information.
The Offer (see page 60)
Horizon is offering to exchange, for each issued and outstanding share of Depomed common stock that is validly tendered and not withdrawn before the expiration date, the Stock Consideration set forth on the cover page of this prospectus/offer to exchange. We will not allot or issue fractional Horizon ordinary shares. To the extent that you would be entitled to fractional shares, those fractional entitlements will be paid in cash in the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the closing price of a Horizon ordinary share on NASDAQ on the last business day prior to the date that Horizon accepts shares of Depomed common stock for exchange pursuant to the offer.
Reasons for the Offer (see page 58)
We believe that the combination of Horizon and Depomed represents a strategically compelling and value-creating opportunity for Depomeds shareholders and Horizon and its shareholders. The offer should be compelling to Depomeds shareholders as they will receive:
| Significant Immediate Value: Based on the closing price of a share of Depomed common stock on NASDAQ on July 6, 2015 (i.e., $20.64 per share of Depomed common stock), the last full trading day before Horizon made public its proposal to acquire Depomed, and the 15-day volume weighted average price of a Horizon ordinary share as of August 12, 2015 (i.e., $34.74 per Horizon ordinary share), the Horizon share price used to calculate the share exchange ratio, the offer represented a premium of $12.36 per share of Depomed common stock, or approximately 60% above the closing price per share of Depomed common stock on July 6, 2015. |
| Substantial Long-Term Value: Depomed shareholders will have a substantial ongoing equity interest in the combined company, allowing Depomed shareholders to benefit from the synergies and growth opportunities of the combined company. |
We believe that a combined Horizon and Depomed will have substantial strategic benefits, including:
| Increased Diversification and Complementary Products. The combined company will be significantly larger and more diversified than either company individually today, with 13 marketed products and more than 700 sales representatives, and will be positioned for future sustainable growth. For example, while NUCYNTA currently accounts for approximately 60% of Depomeds net sales, on a pro forma basis, no single medicine would have comprised more than 21% of the combined companys net sales for the second quarter of 2015. Additionally, Depomeds marketed products are complementary to Horizons existing products and fit within Horizons specialty and primary care business units. |
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| Combined Revenue. We believe that the combined company will be able to achieve significantly greater revenue than either company alone. On a pro forma basis, we estimate that the combined company would have had $497.1 million of total net revenues for the six months ended June 30, 2015, which on an annualized basis would result in approximately $1.0 billion in 2015 net revenues. We also believe the combined company will be able to achieve greater net sales of Depomeds products than Depomed could achieve by remaining an independent company as a result of a larger combined sales force and through adoption of our differentiated commercial model, including our Prescriptions Made Easy, or PME, program. Pursuant to our commercialization plans for the combined company, we expect to implement a sales force consisting of (i) 290 sales representatives dedicated to NUCYNTA and Gralise, (ii) a separate 40 person neurology focused sales force to promote CAMBIA and (iii) Zipsor promoted by Horizons 325 person primary care force. Horizon has historically used its commercial model to increase significantly the revenue of products it has acquired. For example, in the first quarter of 2014 Horizon successfully re-launched VIMOVO in the United States, which it acquired from AstraZeneca in November 2013, and increased its annual net sales from $20.0 million in 2013 under AstraZeneca to $163.0 million for 2014, an increase of over 800%. In the first quarter of 2015, Horizon successfully re-launched PENNSAID 2%, which it acquired from Nuvo Research Inc. in October of 2014, and increased its net sales to $47.6 million in the first half of 2015, as compared to full-year net sales of approximately $14.0 million in 2014 under Mallinckrodt Pharmaceuticals, Nuvo Research Inc.s then marketing partner for PENNSAID 2%. |
| Lower Borrowing Rate. The combined company will have a lower borrowing rate on existing debt obligations than Depomeds current borrowing rate. Horizon raised $1.775 billion in four financings in March through May 2015 and lowered its weighted-average annual cash interest rate on debt to approximately 4.7%, compared to the weighted-average annual cash interest rate on debt of approximately 7.7% for Depomed. Further, after excluding the interest costs on Horizons outstanding exchangeable notes and Depomeds outstanding convertible notes, Horizons and Depomeds weighted-average annual cash interest rates would be 5.7% and 10.8%, respectively. |
| Enhanced Ability to Execute on Growth Strategy. We believe that the combined company would be better positioned to execute on Horizons strategy of achieving both organic growth and growth through acquisitions and in-licensing by increasing its market capitalization, as well as strengthening its balance sheet, free cash flow and capitalization, thereby further enabling the combined company to execute on larger potential acquisition transactions. |
| Improved Tax Efficiencies. The combined company will remain an Irish public limited company with an efficient corporate structure to support the combined companys organic growth and its acquisition strategy. We expect the combined company to have a mid-single digit cash tax rate, increasing to the low-teens over the next five years, which will be significantly lower than Depomeds reported tax rate for its fiscal year 2014 and its expected future cash tax rate after use of its net operating losses. Depomeds combined effective federal and state tax rate for its fiscal year 2014 was 38.2% under existing law. |
| Synergies. As a result of the proposed transaction, we believe that the costs of operating Depomeds existing business could be significantly reduced through the elimination of certain general and administrative costs, including consolidation of locations, reductions in headcount, and elimination of duplicate external costs, including public company expenses. |
We realize there can be no assurance about future results, including results expected as described in the reasons listed above, such as assumptions regarding potential synergies or other benefits to be realized following the offer. Horizons reasons for the offer and all other information in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections of this prospectus/offer to exchange titled Risk Factors and Forward-Looking Statements.
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Conditions to the Offer (see page 78)
The offer is conditioned upon satisfaction, in the reasonable judgment of Horizon, of the following conditions:
| Minimum Tender ConditionThere shall have been validly tendered and not properly withdrawn prior to the expiration of the offer, a number of shares of Depomed common stock which, together with any other shares of Depomed common stock that Purchaser then owns or has a right to acquire, is a majority of the total number of outstanding shares of Depomed common stock on a fully diluted basis as of the date that we accept shares of Depomed common stock for exchange pursuant to the offer. |
| Anti-Takeover Device ConditionThe Depomed Board shall have redeemed the poison pill rights issued pursuant to the Rights Agreement dated as of July 12, 2015, between Depomed and Continental Stock Transfer & Trust Company, as Rights Agent, as the same may from time to time be supplemented or amended, which we refer to as the Depomed Rights Agreement, or those poison pill rights shall have been otherwise rendered inapplicable to the offer and the second-step merger. |
| Horizon Shareholder Approval ConditionHorizon shareholders shall have approved the issuance of Horizon ordinary shares contemplated in connection with the offer and the second-step merger, in accordance with the rules of NASDAQ, on which the Horizon ordinary shares are listed. Horizon filed a preliminary proxy statement with respect to an extraordinary general meeting of Horizon shareholders to obtain this approval on September 11, 2015. |
| Competition Laws ConditionThe waiting period applicable to the offer and the second-step merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, shall have expired or been terminated, which we refer to as the HSR Condition. The waiting period (or extension thereof) applicable to the offer and the second-step merger under any other applicable foreign antitrust laws and regulations shall have expired or been terminated, and any approvals or clearances determined by Horizon to be required or advisable thereunder shall have been obtained, which, together with the HSR Condition, we refer to as the Competition Laws Condition. Based on publicly available information, Horizon believes that only clearance under the HSR Act is required. The HSR Condition has been satisfied by the expiration of the waiting period effective October 9, 2015. |
| Stock Exchange Listing ConditionThe Horizon ordinary shares issuable to Depomed shareholders in connection with the offer and the second-step merger shall have been approved for listing on NASDAQ, subject to official notice of issuance in the case of NASDAQ. |
| Registration Statement ConditionThe registration statement of which this prospectus/offer to exchange is a part shall have become effective under the Securities Act of 1933, as amended, which we refer to as the Securities Act. No stop order suspending the effectiveness of the registration statement shall have been issued, and no proceedings for that purpose shall have been initiated or be threatened, by the SEC. |
| Due Diligence ConditionHorizon shall have been given access to Depomeds non-public information on Depomeds business, assets, and liabilities to complete its confirmatory due diligence review, and Horizon shall have concluded, in its reasonable judgment, that there are no material adverse facts or developments concerning or affecting Depomeds business, assets and liabilities that have not been publicly disclosed prior to the commencement of the offer. |
| No Injunction ConditionNo court or other governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, statute or ordinance, common law, rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award or agency requirement (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the offer and the second-step merger. |
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| No Depomed Material Adverse Effect ConditionSince December 31, 2014, there shall not have occurred any change, event, circumstance or development that has had, or would reasonably be likely to have, a Depomed Material Adverse Effect, as described in the section of this prospectus/offer to exchange titled The OfferConditions to the OfferNo Depomed Material Adverse Effect Condition. |
The offer is also subject to additional conditions referred to in the section of this prospectus/offer to exchange titled The OfferConditions to the OfferOther Conditions to the Offer.
Expiration of the Offer (see page 61)
The offer is scheduled to expire at 5:00 p.m., Eastern time, on November 6, 2015, unless extended by Horizon. For more information, you should read the discussion below under the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment.
Extension, Termination and Amendment (see page 61)
Subject to the applicable rules and regulations of the SEC and the terms and conditions of the offer, Horizon expressly reserves the right (but will not be obligated) (1) to extend, for any reason, the period of time during which the offer is open; (2) to delay acceptance for exchange of, or the exchange of, shares of Depomed common stock in order to comply in whole or in part with applicable law (any such delay shall be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires Horizon to pay the consideration offered or to return shares of Depomed common stock deposited by or on behalf of Depomed shareholders promptly after the termination or withdrawal of the offer); (3) to amend or terminate the offer without accepting for exchange or exchanging any shares of Depomed common stock, including under circumstances where any of the conditions referred to in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer have not been satisfied or if Horizon or any of its affiliates enters into a definitive agreement or announces an agreement in principle with Depomed providing for a merger or other business combination or transaction with or involving Depomed or any of its subsidiaries, or the purchase or exchange of securities or assets of Depomed or any of its subsidiaries, or Horizon and Depomed reach any other agreement or understanding, in either case, pursuant to which it is agreed or provided that the offer will be terminated; and (4) to amend the offer or to waive any conditions to the offer at any time, except for the Competition Laws Condition, Registration Statement Condition, Anti-Takeover Device Condition, Horizon Shareholder Approval Condition and Stock Exchange Listing Condition, in each case by giving oral or written notice of such delay, termination, waiver or amendment to the exchange agent and by making public announcement thereof. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by a public announcement thereof.
No subsequent offering period will be available after the offer.
Exchange of Shares of Depomed Common Stock; Delivery of Horizon Ordinary Shares (see page 62)
Upon the terms and subject to the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any extension or amendment), Horizon will accept for exchange promptly after the expiration time all shares of Depomed common stock validly tendered and not properly withdrawn. For more information, see the section of this prospectus/offer to exchange titled The OfferExchange of Shares of Depomed Common Stock; Delivery of Horizon Ordinary Shares.
Procedure for Tendering Shares (see page 64)
The procedure for tendering shares of Depomed common stock varies depending on whether you possess physical certificates, a nominee holds your certificates for you or you or a nominee holds your shares of
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Depomed common stock in book-entry form. See the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering, as well as the transmittal materials for a discussion of the procedure for tendering your shares.
Withdrawal Rights (see page 66)
You can withdraw tendered shares of Depomed common stock at any time prior to the expiration time and, if Horizon has not accepted your shares of Depomed common stock for exchange, at any time following 60 days from commencement of the offer. See the section of this prospectus/offer to exchange titled The OfferWithdrawal Rights.
Certain Tax Consequences of the Transactions (see page 67)
Assuming certain conditions are satisfied, as described more fully in the section of this prospectus/offer to exchange titled The OfferCertain Tax Consequences of the Transactions, which we refer to as the main tax discussion, U.S. holders as defined in the main tax discussion other than those excluded from the main tax discussion generally will not recognize gain or loss for U.S. federal income tax purposes with respect to the Horizon ordinary shares received in the offer or the second-step merger.
For a more complete description of the tax consequences of the merger, see the section of this prospectus/offer to exchange titled The OfferCertain Tax Consequences of the Transactions.
Because tax matters are complicated, Horizon urges you to contact your own tax advisor to determine the particular tax consequences to you of the offer and second-step merger.
Ownership of Horizon After the Offer (see page 73)
Horizon estimates that, upon the consummation of the offer and the second-step merger, former Depomed shareholders (including former holders of Depomeds outstanding convertible notes) will own, in the aggregate, approximately 32.2% of the shares of the combined company then outstanding, or approximately 31.7% on a fully diluted basis. For a more detailed discussion of the assumptions on which these estimates are based, see the section of this prospectus/offer to exchange titled The OfferOwnership of Horizon After the Offer.
Dissenters Rights (see page 76)
Depomed shareholders will not have dissenters rights in connection with this prospectus/offer to exchange or the second-step merger. See the section of this prospectus/offer to exchange titled The OfferDissenters Rights.
Regulatory Approvals (see page 93)
In addition to the approvals and clearances described in the Competition Laws Condition, the offer to exchange and the second-step merger may also be subject to review by government authorities and other regulatory agencies, including in jurisdictions outside the United States. Horizon intends to identify such authorities and jurisdictions as soon as practicable and to file as soon as practicable thereafter all notifications that it determines are necessary or advisable under the applicable laws, rules and regulations of the respective identified authorities, agencies and jurisdictions for the consummation of the offer and/or the second-step merger and to file all post-completion notifications that it determines are necessary or advisable as soon as practicable after the offer and the second-step merger have been consummated. Based on publicly available information, Horizon believes that only clearance under the HSR Act is required.
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Source and Amount of Funds (see page 94)
Horizon estimates that the total amount of cash required to complete the transactions contemplated by the offer and the second-step merger will be approximately $725 million (inclusive of transaction fees and expenses, including fees associated with refinancing Depomeds existing credit facilities, but exclusive of litigation expenses and exclusive of any cash and cash equivalents from Depomed and exclusive of Depomed transactions costs).
Horizon expects to have sufficient cash resources available to complete the transactions contemplated by the offer and the second-step merger. In addition to cash on hand, Horizon currently intends to borrow or otherwise finance up to $175 million to complete the acquisition of Depomed, to pay fees, expenses and amounts related to such acquisition and to fund certain short-term cash obligations of the combined company, including working capital, as discussed in the section of this prospectus/offer to exchange titled The OfferSource and Amount of Funds.
The estimated amount of cash required is based on Horizons due diligence review of Depomeds publicly available information to date and is subject to change. For a further discussion of the risks relating to Horizons limited due diligence review, see the section of this prospectus/offer to exchange titled Risk FactorsRisk Factors Relating to the Offer and the Second-Step Merger.
Comparative Market Prices and Share Information (see page 38)
Horizon ordinary shares are listed on NASDAQ under the symbol HZNP. Depomed common stock is listed on NASDAQ under the symbol DEPO. The following table presents price information for Horizon ordinary shares and Depomed common stock on (1) October 12, 2015; and (2) July 6, 2015, the last trading day before Horizons public announcement of the proposed combination with Depomed.
Horizon ordinary shares | Depomed common stock | |||||||||||||||||||||||
High | Low | Close | High | Low | Close | |||||||||||||||||||
October 12, 2015 |
$ | 19.48 | $ | 18.75 | $ | 19.13 | $ | 19.44 | $ | 18.67 | $ | 18.87 | ||||||||||||
July 6, 2015 |
$ | 35.21 | $ | 33.45 | $ | 34.54 | $ | 21.05 | $ | 20.37 | $ | 20.64 |
The value of the Horizon ordinary shares that form the Stock Consideration will change as the market price of Horizon ordinary shares fluctuates during the pendency of the offer and thereafter, and therefore will likely be different from the prices set forth above at the time you receive your Horizon ordinary shares. See the section in this prospectus/offer to exchange titled Risk Factors. Shareholders are encouraged to obtain current market quotations for Horizon ordinary shares and Depomed common stock prior to making any decision with respect to the offer.
Interests of Executives and Directors of Horizon in the Offer (see page 94)
Except as set forth in this prospectus/offer to exchange, neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates or any of the other persons set forth in Schedule I has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Depomed. We do not believe that the offer and the second-step merger will result in a change in control under any of Horizons equity plans or any agreement between Horizon and any of its employees.
Listing of Horizon Ordinary Shares to be Issued Pursuant to the Offer and the Second-Step Merger (see page 79)
Horizon will submit the necessary applications to cause the shares of its common stock to be issued in the offer and the second-step merger to be approved for listing on NASDAQ. Approval of this listing is a condition to the offer.
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Accounting Treatment (see page 96)
The proposed combination with Depomed would be accounted for under the acquisition method of accounting under U.S. generally accepted accounting principles, which we refer to as GAAP, with Horizon being the accounting acquirer, which means that Depomeds results of operations will be included with Horizons results of operations from the closing date and its consolidated assets and liabilities will be recorded at their fair market values at the same date.
Comparison of Holders Rights (see page 125)
Depomed shareholders who validly tender their shares in the offer and do not withdraw such shares will receive Horizon ordinary shares following consummation of this prospectus/offer to exchange. Because Horizon is an Irish company and Depomed is a California corporation, there are a number of differences between the rights of a Depomed shareholder and the rights of a Horizon shareholder. See the discussion in the section of this prospectus/offer to exchange titled Comparison of Holders Rights.
Risk Factors (see page 19)
The offer and the second-step merger are, and the combined company will be, subject to several risks which you should carefully consider prior to participating in the offer.
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In deciding whether to tender your shares of Depomed common stock for exchange pursuant to the offer, Depomed shareholders should read carefully this prospectus/offer to exchange and all other documents to which this prospectus/offer to exchange refers. In addition to the risk factors set forth below, Depomed shareholders should read and consider all of the other risk factors specific to each of the Horizon and Depomed businesses that will also affect Horizon after consummation of the offer and the second-step merger, described in Part II, Item 1A of each companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, and other documents that have been filed with the SEC and which are incorporated by reference into this prospectus/offer to exchange. If any of the risks described below or in the reports incorporated by reference into this prospectus/offer to exchange actually occurs, the respective businesses, financial results, financial conditions, operating results or share prices of Horizon or Depomed could be materially adversely affected. Depomed shareholders should also carefully consider the following factors:
Risk Factors Relating to the Offer and the Second-Step Merger
Because the market price of the Horizon ordinary shares that Depomed shareholders may receive in the offer will fluctuate, Depomed shareholders cannot be sure of the value of the Horizon ordinary shares they may receive.
Upon consummation of the offer, each share of Depomed common stock tendered and accepted for exchange by Horizon pursuant to the offer will be converted into the right to receive consideration consisting of Horizon ordinary shares. Because the stock exchange ratio will not vary based on the market value of the Depomed common stock, the market value of the consideration Depomed shareholders receive in the offer will be based on the value of Horizon ordinary shares at the time the Stock Consideration in the offer is received. If the price of Horizon ordinary shares declines, Depomed shareholders could receive less value for their shares of Depomed common stock upon the consummation of the offer than the value calculated on the date the offer was announced, as of the date of the filing of this prospectus/offer to exchange, as of the date such Depomed shareholder tendered shares into the offer, or as of the date of the closing of the second-step merger. Stock price changes may result from a variety of factors that are beyond the companies control, including general market and economic conditions, changes in business prospects, catastrophic events, both natural and man-made, and regulatory considerations. In addition, the ongoing businesses of Horizon and Depomed may be adversely affected by actions taken by Horizon or Depomed in connection with the offer, including payment by the companies of certain costs relating to the offer, including certain legal, accounting, financing and financial and other advisory fees.
Because the offer and the second-step merger will not be completed until certain conditions have been satisfied or, where relevant, waived (see the section of this prospectus/offer to exchange titled The OfferConditions to the Offer), a period of time, which may be significant, may pass between the commencement of the offer and the time that Horizon accepts shares of Depomed common stock for exchange or such shares of common stock are cancelled and exchanged for the Stock Consideration in connection with the second-step merger. Therefore, at the time when you tender your shares of Depomed common stock pursuant to the offer, you will not know the exact market value of the Horizon ordinary shares that you may receive if Horizon accepts such shares of Depomed common stock for exchange. However, tendered shares of Depomed common stock may be withdrawn at any time prior to the expiration time of the offer and, unless we have already accepted the tendered shares for exchange, at any time following 60 days from commencement of the offer. See the section of this prospectus/offer to exchange titled The OfferWithdrawal Rights.
Depomed shareholders are urged to obtain current market quotations for Depomed common stock and Horizon ordinary shares (and to consider the implied value of the Stock Consideration based on current market quotations for Horizon ordinary shares) when they consider whether to tender their shares of Depomed common stock pursuant to the offer. See the section of this prospectus/offer to exchange titled Comparative Per Share Market
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Price and Dividend Information for the historical high and low closing prices of Horizon ordinary shares and shares of Depomed common stock for each quarter of the period 2013 through October 12, 2015.
This transaction may adversely affect the liquidity and value of non-tendered Depomed common stock.
In the event that not all of the shares of Depomed common stock are tendered in the offer and Horizon accepts for exchange those shares tendered in the offer, the number of holders of Depomed common stock and the number of shares of Depomed common stock held by individual holders will be greatly reduced. As a result, the closing of the offer would adversely affect the liquidity and could also adversely affect the market value of the remaining shares of Depomed common stock held by the public. Subject to the rules of NASDAQ, Horizon may delist the shares of Depomed common stock on NASDAQ. As a result of such delisting, shares of Depomed common stock not tendered pursuant to the offer may become illiquid and may be of reduced value. See the section of this prospectus/offer to exchange titled The OfferPlans for Depomed.
Horizon must obtain governmental and regulatory approvals to consummate the offer, which, if delayed or not granted, may delay or jeopardize the offer and the second-step merger.
Under the HSR Act, and the rules and regulations that have been promulgated thereunder by the Federal Trade Commission, which we refer to as the FTC, transactions that meet certain monetary thresholds must be reported to the FTC and the Antitrust Division of the United States Department of Justice, which we refer to as the DOJ, and may not be consummated until the applicable statutory waiting period has expired or terminated.
The offer is conditioned on the waiting period (or extension thereof) applicable to the offer and the second-step merger under the HSR Act and any other applicable antitrust laws and regulations having expired or been terminated, and any approvals or clearances determined by Horizon to be required or advisable thereunder having been obtained. If Horizon does not receive these approvals, then Horizon will not be obligated to accept shares of Depomed common stock for exchange in the offer.
The governmental and regulatory agencies from which Horizon will seek, if required, these approvals have broad discretion in administering the applicable governing regulations. As a condition to their approval of the transactions contemplated by this prospectus/offer to exchange those agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined companys business. Although Horizon believes that it will obtain all necessary approvals, no assurance can be given that the required approvals will be obtained or that the required conditions to the offer will be satisfied, and, if all required approvals are obtained and the conditions to the consummation of the offer are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. See the section of this prospectus/offer to exchange titled The OfferConditions to the Offer for a discussion of the conditions to the offer and the sections of this prospectus/offer to exchange titled The OfferCertain Legal Matters and The OfferRegulatory Approvals for a description of the regulatory approvals necessary in connection with the offer and the second-step merger.
Based on publicly available information, Horizon believes that only clearance under the HSR Act is required in connection with the offer and the second-step merger. Pursuant to the requirements of the HSR Act, Horizon filed a Notification and Report Form with respect to the offer with the FTC and the DOJ on September 8, 2015. The waiting period under the HSR Act expired effective October 9, 2015. Accordingly, the condition to the offer requiring that the waiting period applicable to the offer and the second-step merger under the HSR Act shall have expired or been terminated has been satisfied. The offer continues to be subject to the remaining conditions set forth in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer.
Even though the requisite waiting period under the HSR Act has expired, at any time if the DOJ or the FTC believes before or after Purchasers acceptance for exchange shares of Depomed common stock pursuant to the offer that the offer would violate the U.S. federal antitrust laws by substantially lessening competition in any line
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of commerce affecting U.S. consumers, the FTC and the DOJ have the authority to challenge the transaction by seeking a federal court order enjoining the transaction, or if the shares of Depomed common stock have already been exchanged, requiring disposition of such shares or the divestiture of substantial assets of Horizon, Depomed or any of their respective subsidiaries or affiliates. U.S. state attorneys general and private persons may also bring legal action under the U.S. federal antitrust laws seeking similar relief or seeking conditions to the completion of the Offer. While we believe that the consummation of the offer will not violate U.S. federal antitrust laws, there can be no assurance that the offer and the transactions will not be challenged on antitrust grounds or the outcome of any challenge on antitrust grounds. If any such action is commenced by the FTC, the DOJ, any state or other governmental body Horizon may not be obligated to consummate the offer and the second-step merger.
The offer remains subject to other conditions that Horizon cannot control.
The offer is subject to other conditions, including the Minimum Tender Condition, the Anti-Takeover Device Condition, the Horizon Shareholder Approval Condition, the Due Diligence Condition and the No Depomed Material Adverse Effect Condition. No assurance can be given that all of the conditions to the offer will be satisfied or, if they are, as to the timing of such satisfaction. In addition, Depomed and the Depomed Board may seek to take additional actions and put in place additional obstacles that will delay, or frustrate, the satisfaction of one or more conditions. If the conditions to the offer are not satisfied, then Horizon may allow the offer to expire, or could amend or extend the offer. See the section of this prospectus/offer to exchange titled The OfferConditions to the Offer for a discussion of the conditions to the offer.
The stock prices of Horizon and Depomed may be adversely affected if the offer and the second-step merger are not completed.
If the offer and the second-step merger are not completed, the prices of Horizon ordinary shares and Depomed common stock may decline to the extent that the current market prices of Horizon ordinary shares and Depomed common stock reflect a market assumption that the offer and the second-step merger will be completed.
Uncertainties associated with the offer and the second-step merger may cause a loss of employees and may otherwise affect the future business and operations of Depomed.
Uncertainty about the effect of the offer and the second-step merger on employees and customers may have an adverse effect on Depomed and consequently on the combined company following the second-step merger. These uncertainties may impair the ability to retain and motivate key personnel until and after the consummation of the offer and the second-step merger are completed and could cause customers, suppliers, licensees, partners and others that deal with Depomed to defer entering into contracts with Depomed or making other decisions concerning Depomed or seek to change existing business relationships with Depomed. With respect to the retention of key employees, Horizon is not aware of any retention plan in place to retain any of Depomeds key employees. If key employees of Depomed depart because of uncertainty about their future roles, Depomeds business and, as a result, the combined companys business following the offer and the second-step merger, could be harmed. While the offer and the second-step merger are pending, Depomed may not be able to hire replacements for departed key employees to the same extent that they have been able to in the past.
Horizon has not negotiated the price or terms of the offer or second-step merger with Depomed.
In evaluating the offer, you should be aware that Horizon has not negotiated the price or terms of the offer or the second-step merger with Depomed and neither Depomed nor the Depomed Board has approved the offer or the second-step merger. Depomed has refused to engage in any meaningful discussions with Horizon on its proposals. Horizon made a proposal on May 27, 2015 (which was rejected on June 25, 2015), on July 21, 2015 (which was rejected on July 29, 2015) and on August 13, 2015 (which was rejected on August 19, 2015), and as a result of Depomeds continued refusal to engage, Horizon made the offer and is distributing this prospectus/offer
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to exchange. Depomed is now required under the rules and regulations of the SEC to issue a statement as to whether it recommends acceptance or rejection of the offer, that it expresses no opinion and remains neutral toward the offer or that it is unable to take a position with respect to the offer, and to file with the SEC a solicitation/recommendation statement on Schedule 14D-9 describing its position, if any, and certain related information, no later than 10 business days from the date this prospectus/offer to exchange is first published, sent or given to shareholders. Horizon recommends that you review this Schedule 14D-9 when it becomes available.
The Depomed Board, the Depomed Rights Agreement, and the restrictive provisions in Depomeds governing documents may impede the consummation of the offer.
The governing documents of Depomed include advance notice bylaw provisions and restrictions on the ability to call a special meeting of Depomeds shareholders. The Depomed Rights Agreement adopted by the Depomed Board, or so-called poison pill, precludes a party from acquiring the 10% of the votes of Depomed necessary to call a special shareholders meeting or from privately soliciting up to ten other shareholders for the purpose of calling a special meeting. These restrictive provisions impede Horizons ability to consummate the offer. On August 3, 2015, Horizon filed a preliminary solicitation statement pursuant to which it is seeking revocable proxies from Depomed shareholders to empower Horizon to deliver to Depomeds Corporate Secretary written requests to call a special meeting of Depomed shareholders to consider and vote upon proposals: removing the entire current Depomed Board, repealing these restrictions, and eliminating the power of the Depomed Board to adopt, amend or repeal the Depomed bylaws for a period of 120 days following the special meeting called for in the preliminary solicitation statement. On August 19, 2015, Horizon filed an amendment to the Horizon solicitation with the SEC to amend the purposes of and the matters to be considered and voted upon at the special meeting to include the election of seven individuals to serve on the Depomed Board, which we refer to as the Horizon nominees, contingent upon the proposal to remove the current Depomed Board being passed by the Depomed shareholders. On August 28, 2015, Horizon, in response to Depomeds decision to not accept the amendment of the purposes of the special meeting in the Horizon solicitation to include the election proposal without delaying the record date for determining which Depomed shareholders may call the special meeting, further amended the Horizon solicitation to provide for two special meetings, one to consider and vote upon the removal proposal and the Depomed bylaws amendment proposals and a second to consider and vote upon the election proposal. Horizon cannot assure you that it will be able to obtain the proxies necessary to call the two special meetings or that the required conditions to the offer will be satisfied. See the sections of this prospectus/offer to exchange titled The OfferPlans for Depomed and Background of the Offer for a discussion of the Horizon solicitation and The OfferConditions to the Offer for a discussion of the conditions to the offer.
Even if the offer is completed, integration of Depomeds business and operations with Horizons will be delayed if Horizon is unable to complete the second-step merger.
The offer is subject to a condition that, before the expiration of the offer, there shall have been validly tendered and not withdrawn at least a majority of the total number of outstanding shares of Depomed common stock on a fully diluted basis as of the date that Horizon accepts shares of Depomed common stock for exchange pursuant to the offer. At the end of the offer period, Horizon may experience delays in completing the second-step merger to exchange the remaining shares of Depomed common stock for Horizon ordinary shares. This could prevent or delay Horizon from realizing all of the anticipated benefits from the integration of Depomeds business and operations with Horizons operations.
You may be unable to assert a claim against Depomeds independent registered public accounting firm under Section 11 of the Securities Act.
Section 11(a) of the Securities Act provides that if part of a registration statement at the time it becomes effective contains an untrue statement of a material fact or omits a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration
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statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may assert a claim against, among others, any accountant or expert who has consented to be named as having certified any part of the registration statement or as having prepared any report for use in connection with the registration statement. Although audit reports were issued on Depomeds historical financial statements and the special purpose combined financial statements of the NUCYNTA Franchise of Janssen Pharmaceuticals, Inc., which was acquired by Depomed, and are included in Depomeds filings with the SEC, the independent registered public accounting firms issuing these reports have not permitted the use of their reports in Horizons registration statement of which this prospectus/offer to exchange forms a part. Horizon requested the consents of such independent registered public accounting firms; however, as of the date of this prospectus/offer to exchange, Horizon has not received such consents. The SEC has granted Horizon dispensation from such consent requirements pursuant to Rule 437 under the Securities Act. If Horizon receives the consents of these independent registered public accounting firms, Horizon will promptly file them as exhibits to Horizons registration statement of which this offer to exchange forms a part. Because Horizon has not been able to obtain the consent of these independent registered public accounting firms, you may not be able to assert a claim against them under Section 11 of the Securities Act.
The receipt of Horizon ordinary shares pursuant to the offer or the second-step merger may be taxable for U.S. federal income tax purposes for U.S. holders.
Horizon intends that the Horizon ordinary shares issued pursuant to the offer and the second-step merger will qualify as issued pursuant to a reorganization as described in Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and not subject to Section 367(a)(1) of the Code. As described more fully in the section of this prospectus/offer to exchange titled The OfferCertain Tax Consequences of the Transactions, the issuance of Horizon ordinary shares pursuant to the offer or the second-step merger may not be issued pursuant to such a reorganization or may be subject to Section 367(a)(1) with the result that the receipt of such shares by U.S. holders, as described in more detail in the main tax discussion, may result in the recognition of taxable gain for U.S. federal income tax purposes by such U.S. holders. Such issuance may not be pursuant to such a reorganization if (a) Horizon is prevented or delayed in completing the steps of the transactions contemplated by this prospectus/offer to exchange, including the formation and capitalization of Purchaser, the offer, the second-step merger and, possibly, a third-step merger that may be executed immediately following the second-step merger, if deemed appropriate by Horizon, in which Depomed would be merged with and into Diosail Merger Two Corporation a directly, wholly-owned Delaware subsidiary of Horizon that has been formed solely to participate in a possible third-step merger, which we refer to as the Transactions, as described in the main tax discussion, (b) the value of the Horizon ordinary shares falls below 80% (40% if the third-step merger is executed) of the total consideration paid by Horizon to the Depomed shareholders pursuant to such transactions (including, for this purpose, consideration paid by Horizon Pharma, Inc., an indirect wholly-owned subsidiary of Horizon, to acquire 2,250,000 shares of Depomed common stock) or (c) Depomed does not retain substantially all of its assets within the meaning of Section 368(a)(2)(D) of the Code. Such issuance may be subject to Section 367(a)(1) of the Code if, among other things, (a) U.S. officers and directors of Depomed and U.S. shareholders of Depomed that owned at least 5% of the voting power or value of Depomed before the offer or second-step merger own (directly and by attribution) more than 50% of the voting power or value of the Horizon ordinary shares after the Transactions, (b) after certain adjustments, the fair market value of Horizon is not at least equal to the fair market value of Depomed upon completion of the Transactions, or (c) we fail to cause Depomed (or Diosail Merger Two Corporation if there is a third-step merger) to comply with certain tax reporting requirements concerning the Transactions. U.S. holders considering participating in the offer should consult their own tax advisors regarding the tax consequences to them of the offer and/or the second-step merger, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws.
Horizon may be subject to Irish stamp duty in connection with the offer and second-step merger.
Irish stamp duty generally arises in connection with the transfer of shares of an Irish company or the transfer of shares in a non-Irish company in exchange for shares of an Irish company, in each case unless an exemption
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applies. Accordingly, the exchange of shares of Depomed common stock for the issue of Horizon ordinary shares would be subject to Irish stamp duty unless exemption applies. We believe, however, that Horizon may be able to obtain a confirmation from the Revenue Commissioners of Ireland that:
(a) | Irish stamp duty should not apply to a transfer of shares of Depomed common stock through the systems of the Depository Trust Company, which we refer to herein as DTC, where those shares of Depomed common stock are listed on NASDAQ; and |
(b) | the Revenue Commissioners of Ireland will not seek to levy Irish stamp duty in connection with the transfer of shares of Depomed common stock where such duty arises solely because the issue of Horizon ordinary shares comprises a portion of the consideration being paid in respect of such transfer because each of those transactions, taken separately (i.e., the issue of Horizon ordinary shares and the transfer of shares of Depomed common stock), would not individually give rise to such a charge. |
Horizon intends to request the aforementioned written confirmation of the Revenue Commissioners of Ireland and an acknowledgement that no Irish stamp duty will apply in connection with the second-step merger by operation of law.
There is no guarantee however that the Revenue Commissioners will provide either or both of the above referenced confirmations in connection with the offer or the second-step merger. In the event that the Revenue Commissioners do not grant an applicable confirmation and Irish stamp duty applies to a transfer of a share of Depomed common stock in connection with the offer or second-step merger, such stamp duty would be chargeable at a rate of 1 percent of the market value of such share of Depomed common stock as at the date of transfer and Purchaser would be liable for paying such tax.
Risk Factors Relating to Depomeds Business
You should read and consider the other risk factors specific to Depomeds business that will also affect Horizon after the consummation of the offer and the second-step merger, described in Part II, Item 1A of Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 3, 2015, and other documents that have been filed by Depomed with the SEC and which are incorporated by reference into this prospectus/offer to exchange.
Risk Factors Relating to Horizons Business
You should read and consider the other risk factors specific to Horizons business that will also affect Horizon after the consummation of the offer and the second-step merger, described in Part II, Item 1A of Horizons Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 7, 2015, and other documents that have been filed by Horizon with the SEC and which are incorporated by reference into this prospectus/offer to exchange.
Risk Factors Relating to Horizon Following the Offer
Depomed and Horizon may not successfully integrate.
If Horizon consummates the offer and the second-step merger (which will represent Horizons largest transaction to date), achieving the anticipated benefits of the proposed combination with Depomed will depend in part upon whether the two companies integrate their businesses in an effective and efficient manner. The companies may not be able to accomplish this integration process successfully, including as a result of actions that Depomed may continue to take to frustrate the offer. The integration of any business may be complex and time-consuming. The difficulties that could be encountered include the following:
| integrating personnel, operations and systems, while maintaining focus on selling and promoting existing and newly acquired products; |
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| coordinating the geographically dispersed organizations; |
| distraction of management and employees from operations and changes in corporate culture; |
| retaining existing customers and attracting new customers; |
| maintaining business relationships; and |
| inefficiencies associated with the integration of the operations of the combined company. |
In addition, there will be integration costs and non-recurring transaction costs (such as fees paid to legal, financial, accounting and other advisors and other fees paid in connection with the offer and the second-step merger and possibly tax costs to integrate Depomed with Horizons Legal entity structure and operating model) associated with the proposed combination with Depomed, combining the operations of Horizon and Depomed and achieving the synergies we expect to obtain, and such costs may be significant.
An inability to realize the full extent of the anticipated benefits of the proposed combination with Depomed, as well as any delays encountered in the integration process and realizing such benefits, could have an adverse effect upon the revenues, level of expenses and operating results of Horizon, which may affect adversely the value of the Horizon ordinary shares after the consummation of the offer and the second-step merger.
The consummation of the offer could result in a default under each of Horizons and Depomeds existing senior secured credit facilities. The failure to reach agreement with lenders under each of those facilities, or alternatively the failure to refinance such facilities, in each case prior to the consummation of the offer, may have a material adverse effect on Horizons profitability, financial condition and results of operations, and may result in a decline in the market value of the Horizon ordinary shares.
The consummation of the offer or the second-step merger may constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, or result in the acceleration or other change of any right or obligation (including, without limitation, any payment obligation) or termination of an agreement to which Depomed or its subsidiaries are a party. If this happens, Horizon may experience a cross-default under its own indebtedness arising from such default. Horizon cannot provide assurance that it will be able obtain a consent or waiver under any such agreement or, alternatively, replace such an agreement on attractive terms or at all. Depending on the importance of a terminated agreement to Horizons business, failure to replace that agreement on similar terms or at all may increase the costs to Horizon of operating its business or prevent Horizon from operating part or all of its business. In addition, Depomed may be a party to arrangements or agreements of which Horizon is not aware.
Based on a review of Depomeds public filings with the SEC, pursuant to the First Supplemental Indenture, dated as of September 9, 2014 to the Indenture dated as of September 9, 2014, between Depomed and The Bank of New York Mellon Trust Company, N.A., which we collectively refer to as the Supplemental Indenture, regarding certain 2.50% Convertible Senior Notes due 2021, which we refer to as the 2021 Notes, the offer, if consummated, is likely to result in a Fundamental Change (as defined in the Supplemental Indenture), which definition includes the occurrence of a person or group within the meaning of Section 13(d) of the Exchange Act, other than Depomed, its subsidiaries and its and their employee benefit plans, filing a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of Depomeds common equity representing more than 50% of the voting power of Depomeds common equity. The offer is also likely to result in a Make-Whole Fundamental Change. The occurrence of a Fundamental Change would (a) give the holders of the 2021 Notes a right to require Depomed to repurchase the 2021 Notes at a repurchase price of 100% of the principal amount of the 2021 Notes to be repurchased plus accrued and unpaid interest to, but excluding, the related Fundamental Change Repurchase Date (as defined in the Supplemental Indenture) and (b) cause the 2021 Notes to become convertible for a period of time that would commence prior to the effectiveness of the
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transaction giving rise to the Fundamental Change until the related Fundamental Change Repurchase Date. In addition, holders of 2021 Notes that convert their notes in connection with a Make-Whole Fundamental Change may be entitled to an increase in the conversion rate for notes so converted. Based on the estimated conversion value of the 2021 Notes, Horizon does not expect any holders of 2021 Notes to require Depomed to repurchase their 2021 Notes because the holders of the 2021 Notes would appear to receive greater value upon conversion of their 2021 Notes. Upon conversion of their 2021 Notes, Depomed may pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election, in respect of such converted 2021 Notes. If the holders of any of the 2021 Notes elect to convert such notes prior to the closing of the second-step merger, Depomed (not Horizon) will control the election of consideration paid or delivered upon the conversion of such notes.
Further, based upon a review of Depomeds public filings with the SEC, pursuant to the Note Purchase Agreement, dated as of March 12, 2015, by and between Depomed, the purchasers party thereto from time to time, which we refer to collectively as the Note Purchasers, and Deerfield Private Design Fund III, L.P., which we refer to as the Note Purchase Agreement, pursuant to which Depomed requested that the Note Purchasers purchase an aggregate principal amount of $575 million of Depomeds senior secured notes, which we refer to as Senior Secured Notes, the offer, if completed, could potentially result in a Major Transaction (as defined in the Note Purchase Agreement) that does not constitute a Permissible Change of Control (as defined below), triggering certain prepayment obligations and prepayment penalties and/or premiums. As publicly disclosed, a Major Transaction includes the occurrence of any Person or group, other than the Borrower and its Subsidiaries or any employee benefit plan of the Borrower or its Subsidiaries, filing a Schedule 13D or Schedule TO (or any successor schedule, form or report) pursuant to the Exchange Act disclosing such Person has become the beneficial owner of shares with a majority of the total voting power of all outstanding voting securities that are entitled to vote generally in the election of the Borrowers board of directors. A Permissible Change of Control means any Major Transaction involving, among other things, the acquisition of a majority of the total voting power of Depomed where after giving effect to such Major Transaction, Depomed is a direct or indirect subsidiary or a person whose common stock is publicly listed and that has less than a certain undisclosed debt to adjusted earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, ratio. At this time, we cannot confirm whether the offer would constitute a Permissible Change of Control because certain operative provisions of the Note Purchase Agreement as publicly disclosed have received confidential treatment. As a result, there is no assurance that the completion of the offer would constitute a Permissible Change of Control under the Note Purchase Agreement. In addition, an event of default could occur under the terms of the Note Purchase Agreement as a result of the occurrence of a Fundamental Change under the 2021 Notes (as described in more detail in the paragraph immediately above), the occurrence of which would allow holders of the Senior Secured Notes to declare the Senior Secured Notes immediately due and payable. Regardless of whether the consummation of the offer would constitute a Major Transaction or an event of default under the Note Purchase Agreement, Horizon expects to refinance or otherwise repay the Senior Secured Notes as of the closing of the second-step merger because of the 10.75% annual interest rate under such notes. Horizon expects to incur significant prepayment penalties and make-whole payments in connection with any such refinancing or repayment of the Senior Secured Notes.
In respect of all information relating to Depomed presented in, incorporated by reference into or omitted from, this prospectus/offer to exchange, Horizon has relied upon publicly available information, including information publicly filed by Depomed with the SEC. Although Horizon has no knowledge that would indicate that any statements contained herein regarding Depomeds condition, including its financial or operating condition (based upon such publicly filed reports and documents) are inaccurate, incomplete or untrue, Horizon was not involved in the preparation of such information and statements. For example, Horizon has made adjustments and assumptions in preparing the pro forma financial information presented in this prospectus/offer to exchange that have necessarily involved Horizons estimates with respect to Depomeds financial information that, given the lack of information received, could be materially different than currently presented. See the section of this prospectus/offer to exchange titled Unaudited Pro Forma Condensed Combined Financial Statements. Any
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financial, operating or other information regarding Depomed that may be detrimental to Horizon following the consummation of the offer and the second-step merger that has not been publicly disclosed by Depomed, or errors in Horizons estimates due to the lack of cooperation and information from Depomed, may have a material adverse effect on the business, financial condition and results of operations of the combined company and the market value of Horizon ordinary shares after the consummation of the offer and the second-step merger.
In addition, the consummation of the offer without causing Depomed (and, potentially, certain of its subsidiaries) to become guarantors under Horizons senior secured credit facility would result in a default under such facility. While Horizon expects that the lenders under such facility would agree to enter into a mutually satisfactory amendment prior to the consummation of the offer, Horizon cannot provide any assurance that such amendment (or, alternatively, a refinancing facility) will be entered into on attractive terms, or at all.
The offer could trigger certain provisions contained in Depomeds equity plans and employee compensation and benefit plans or agreements that could require Horizon to make change of control payments or vest outstanding equity awards.
Certain of Depomeds equity plans and employee compensation and benefit plans or agreements contain change of control clauses providing in certain circumstances for outstanding equity awards to vest or compensation to be paid to certain members of Depomed senior management either upon a change of control, or if, following a change of control, Depomed terminates the employment relationship between Depomed and these employees under certain circumstances, or if these employees terminate the employment relationship because of certain adverse changes during a certain period or periods before and following a change of control. If consummated, the offer might be deemed to constitute a change of control of Depomed for these purposes, thereby giving rise to potential vesting of outstanding equity awards and change of control payments described above.
Horizon may incur additional indebtedness to acquire the shares of Depomed common stock pursuant to the offer and the second-step merger and, as a result, may increase its total outstanding indebtedness. Horizons failure to meet its debt service obligations could have a material adverse effect on its business, financial condition and results of operations.
Horizon currently anticipates that it will need to borrow or otherwise finance approximately $175 million to complete the acquisition of Depomed, to pay fees, expenses and amounts related to such acquisition and to fund certain short-term cash obligations of the combined company, including working capital. Horizon cannot provide any assurances that additional financing will be available when and as needed or on terms that Horizon believes to be commercially reasonable. If Horizon cannot obtain such funding on terms Horizon considers to be reasonable, Horizon may seek other methods to increase available cash, including by delaying, reducing or otherwise foregoing potential revenue enhancing activities, which could have an adverse effect on Horizons business, operating results or financial condition.
Any increased indebtedness resulting from incremental borrowing could, among other things:
| make it more difficult for Horizon to pay or refinance its debts as they become due during adverse economic and industry conditions because Horizon may not have sufficient cash flows to make its scheduled debt payments; |
| cause Horizon to use a larger portion of its cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital, capital expenditures, research and development and other business activities; |
| result in a downgrade in the credit rating of Horizon or any indebtedness of Horizon or its subsidiaries, which could increase the cost of further borrowings; and |
| limit Horizons ability to borrow additional monies in the future to fund working capital, capital expenditures, research and development and other general corporate purposes. |
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Horizon cannot guarantee that the combined company will be able to generate sufficient cash flow to make all of the principal and interest payments under its indebtedness following the consummation of the offer and the second-step merger when such payments are due or that it will be able, if necessary, to refinance such indebtedness.
All of Horizons debt obligations, and any future indebtedness it may incur, will have priority over Horizon ordinary shares with respect to payment in the event of a liquidation, dissolution or winding up.
In any liquidation, dissolution or winding up of Horizon, the Horizon ordinary shares would rank below all debt claims against Horizon. In addition, any convertible or exchangeable securities or other equity securities that we may issue in the future may have rights, preferences and privileges more favorable than those of the Horizon ordinary shares. As a result, holders of Horizon ordinary shares will not be entitled to receive any payment or other distribution of assets upon the liquidation or dissolution until after our obligations to our debt holders and holders of equity securities that rank senior to the Horizon ordinary shares have been satisfied.
The consummation of the offer and/or the second-step merger may result in ratings organizations and/or securities analysts taking actions which may adversely affect the combined companys business, financial condition and operating results, as well as the market price of Horizon ordinary shares.
Horizons current corporate credit rating is B2 for Moodys Investors Service and B for Standard and Poors. In connection with the consummation of the offer and/or the second-step merger, one or both of these ratings agencies may reevaluate Horizons ratings. A downgrade may increase Horizons cost of borrowing, may negatively impact Horizons ability to raise additional debt capital, may negatively impact Horizons ability to successfully compete in the marketplace and may negatively impact the willingness of counterparties to deal with Horizon, each of which could have a material adverse effect on the business, financial condition and results of operations of the combined company and the market value of Horizon ordinary shares.
In addition, the trading market for Horizon ordinary shares depends in part on the research and reports that third-party securities analysts publish about Horizon and its industry. In connection with the consummation of the offer and/or the second-step merger, one or more of these analysts could downgrade the Horizon ordinary shares or issue other negative commentary about Horizon or its industry, which could cause the trading price of Horizon ordinary shares to decline.
Future results of Horizon may differ materially from the unaudited pro forma condensed combined financial statements of Horizon and Depomed presented in this prospectus/offer to exchange.
The future results of Horizon following the consummation of the offer and the second-step merger may be materially different from those shown in the Unaudited Pro Forma Condensed Combined Financial Statements presented in this prospectus/offer to exchange, which show only a combination of Horizons and Depomeds standalone historical results after giving effect to the offer, subject to the matters noted therein. Horizon has estimated that it will record approximately $30 million in transaction expenses, as described in the notes to the Unaudited Pro Forma Condensed Combined Financial Statements included in this prospectus/offer to exchange. In addition, the final amount of any charges relating to acquisition accounting adjustments that Horizon may be required to record will not be known until following the consummation of the offer and the second-step merger. These and other expenses and charges may be significantly higher or lower than estimated.
Resales of Horizon ordinary shares following the offer may cause the market price of Horizon ordinary shares to fall.
Horizon expects that, assuming that all 60,311,961 shares of Depomed common stock outstanding as of July 30, 2015 are tendered in the offer, the holders of Depomeds outstanding convertible notes all elect to convert such notes after the completion of the offer on the expiration date but prior to the consummation of the second-step merger, and Depomed elects to settle such notes using only shares of Depomed common stock, and assuming that
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the total number of outstanding Horizon ordinary shares reported in Horizons Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 remains constant through the consummation of the offer, it will issue approximately 73,367,800 Horizon ordinary shares in connection with the offer and second-step merger. For a more detailed discussion of the assumptions on which these estimates are based, see the section of this prospectus/offer to exchange titled The OfferOwnership of Horizon After the Offer. The issuance of these new shares and the sale of additional shares that may become eligible for sale in the public market from time to time upon exercise of options could have the effect of depressing the market price for Horizon ordinary shares. The increase in the number of Horizon ordinary shares may lead to sales of such Horizon ordinary shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, Horizon ordinary shares.
The trading price of Horizon ordinary shares may be affected by factors different from those affecting the price of Depomed common stock.
Upon consummation of the offer and the second-step merger, Depomed shareholders will become holders of Horizon ordinary shares. Horizons business differs from that of Depomed, and Horizons results of operations, as well as the trading price of Horizon ordinary shares, may be affected by factors different from those affecting Depomeds results of operations and the price of Depomed common stock.
The Horizon ordinary shares to be received by Depomed shareholders as consideration will have different rights from the shares of Depomed common stock.
Upon receipt of Horizon ordinary shares in the offer, Depomed shareholders will become Horizon shareholders and their rights as shareholders will be governed by the Horizon memorandum and articles of association, which we refer to as the Horizon Articles, applicable Irish law, including the Companies Act 2014 of Ireland, which we refer to as the Companies Act. Certain of the rights associated with Depomed common stock are different from the rights associated with Horizon ordinary shares. See the section of this prospectus/offer to exchange titled Comparison of Holders Rights for a discussion of the different rights associated with Horizon ordinary shares.
Depomed shareholders will have a reduced ownership and voting interest after the consummation of the offer and the second-step merger and will exercise less influence over the management and policies of Horizon than they do over Depomed.
Depomed shareholders currently have the right to vote in the election of the Depomed Board and on other matters affecting Depomed. When the shares of Depomed common stock tendered in the offer are exchanged, each participating Depomed shareholder and, following consummation of the second-step merger, each remaining Depomed shareholder, will become a Horizon shareholder with a percentage ownership of the combined company that is smaller than the shareholders percentage ownership of Depomed. Horizon estimates that, upon consummation of the offer and the second-step merger, former Depomed shareholders (including former holders of Depomeds outstanding convertible notes) will hold, in the aggregate, approximately 32.2% of the shares of the combined company then outstanding, or approximately 31.7% on a fully diluted basis. For a more detailed discussion of the assumptions on which these estimates are based, see the section of this prospectus/offer to exchange titled The OfferOwnership of Horizon After the Offer. Because of this, Depomed shareholders will have less influence over the management and policies of Horizon than they now have over the management and policies of Depomed.
The issuance of Horizon ordinary shares pursuant to the offer or the second-step merger may limit the ability of Horizon to utilize certain tax attributes following the offer.
The issuance of the Horizon ordinary shares pursuant to the offer and the second-step merger may result in certain limitations for U.S. federal income tax purposes being imposed on the utilization after the offer by the U.S. subsidiaries of Horizon prior to the offer of certain U.S. net operating losses, U.S. tax credits, and other tax attributes as a result of the application of Sections 382, 383 and 384 of the Code.
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Horizon may be or may become a passive foreign investment company.
The U.S. federal income tax treatment of U.S. holders of Horizon ordinary shares in some cases could be materially different (and potentially adverse) from the treatment that would apply in the case of a corporation organized in the United States if, at any relevant time, Horizon were a passive foreign investment company, which we refer to as a PFIC. For U.S. federal income tax purposes, a foreign corporation such as Horizon is classified as a PFIC for any taxable year if either (1) 75% or more of its gross income is passive income (as defined for U.S. federal income tax purposes) or (2) the average percentage of assets held by such corporation which produce passive income or which are held for the production of passive income is at least 50%. For purposes of applying the tests in the preceding sentence, the foreign corporation is deemed to own its proportionate share of the assets, and to receive directly its proportionate share of the income, of certain other corporations of which the foreign corporation owns, directly or indirectly, at least 25% by value of the stock. Horizon believes that Horizon is not currently and will not be a PFIC following the offer. The tests for determining PFIC status are applied annually, and it is difficult to accurately predict future income and asset values relevant to this determination. Accordingly, Horizon cannot assure U.S. holders that Horizon will not become a PFIC. If Horizon should determine in the future that it is a PFIC, it will endeavor to so notify U.S. holders of Horizon ordinary shares, although there can be no assurance that it will be able to do so in a timely and complete manner. U.S. holders of Horizon ordinary shares should consult their own tax advisors about the tax consequences of owning stock in a foreign corporation including the PFIC rules and the availability of certain elections.
Future changes to U.S. and foreign tax laws or challenges by the Internal Revenue Service, which we refer to as the IRS, to Horizons status as a foreign corporation, if successful, could result in a substantial increase in Horizons effective tax rate.
The Organization for Economic Co-operation and Development, which we refer to as the OECD, and government agencies in jurisdictions where Horizon and its affiliates do business are focusing on issues related to the taxation of multinational corporations. The OECD recently issued final reports on its base erosion and profit shifting project, the goal of which is to establish international standards for the taxation of multinational corporations that would, among other things, prevent the shifting of income from high-tax jurisdictions to low-tax jurisdictions. If these standards are adopted by the United States and countries in which Horizon and its affiliates do business, the tax laws in these countries could be changed on a prospective or retroactive basis, and any such changes could substantially increase Horizons effective tax rate.
Under current law, Horizon believes that it is and will continue to be after the Transactions a foreign corporation for U.S. federal tax purposes. However, there can be no assurance that the IRS would not challenge under current law, Horizons status as a foreign corporation for U.S. federal tax purposes or that a court would not sustain such a challenge. Changes to the inversion rules in Section 7874 of the Code or the U.S. Treasury Regulations promulgated thereunder or other IRS guidance could adversely affect Horizons status as a foreign corporation for U.S. federal tax purposes. The tax law in this area could be changed on a prospective or retroactive basis, and any such changes could substantially increase Horizons effective tax rate.
For U.S. federal tax purposes, a corporation generally is classified under current law as a U.S. corporation or a foreign corporation based on whether it is organized or incorporated within the United States or outside the United States. A corporation organized or incorporated outside the United States will nevertheless be classified as a U.S. corporation for U.S. federal tax purposes if, among other things, it acquires all of the stock of a U.S. corporation and the shareholders of the acquired U.S. corporation hold at least 80% (by vote or value) of the stock of the foreign acquiring corporation after the acquisition. Multiple acquisitions of U.S. corporations by a foreign corporation, if made pursuant to a plan or series of related transactions, are treated as a single acquisition and all shareholders of the acquired U.S. corporations are aggregated for the purpose of determining whether the 80% ownership test is met.
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On September 19, 2014, Vidara Therapeutics International Public Limited Company, which we refer to as Vidara, a company incorporated in Ireland, acquired all of the stock of Horizon Pharma, Inc., a Delaware corporation, and immediately thereafter changed its name to Horizon Pharma plc, which we refer to as the Vidara Merger. Horizon believes that the Horizon Pharma, Inc. shareholders held less than 80% (by vote and value) of the stock of Vidara after the Vidara Merger so that Horizon should be classified under current law as a foreign corporation. The IRS might assert, however, that the Vidara Merger and one or more other transactions (including the Transactions) were acquisitions made pursuant to a plan or series of related transactions and that accordingly they should be integrated for the purpose of determining whether the ownership test is met. If the IRS were to prevail with such an assertion, the ownership test would not be met and Horizon would be treated as a U.S. corporation for U.S. federal tax purposes (which would result in a substantial increase in Horizons effective tax rate). Because the Vidara Merger closed on September 19, 2014 and Horizon was then contemplating no relevant transactions (e.g., the Horizon Board did not consider the possibilty of acquiring Depomed prior to February 24, 2015), Horizon believes that the Vidara Merger should not be integrated with any other transactions and that, accordingly, Horizon believes that it should be treated as a foreign corporation for U.S. federal tax purposes after the Transactions. The rules governing inversion transactions are not well developed and are somewhat unclear. Accordingly, Horizon cannot assure you that the IRS will agree that the ownership test was satisfied in the Vidara Merger or that the Vidara Merger and a subsequent transaction will not be integrated for the purpose of applying the ownership test.
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HORIZON SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated financial information for Horizon as of the end of and for the periods indicated. The selected statement of comprehensive loss information for each of the years ended December 31, 2014, December 31, 2013 and December 31, 2012, and the selected balance sheet information as of December 31, 2014 and December 31, 2013, are derived from Horizons audited financial statements filed as part of Horizons Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 27, 2015 (as amended on March 2, 2015 and April 10, 2015), which is incorporated by reference into this prospectus/offer to exchange. The selected statement of comprehensive loss information for each of the years ended December 31, 2011 and December 31, 2010, and the selected balance sheet information as of December 31, 2012, December 31, 2011 and December 31, 2010, are derived from Horizons audited financial statements for such years, which have not been incorporated by reference into this prospectus/offer to exchange. The historical results are not necessarily indicative of future results. More comprehensive financial information, including managements discussion and analysis of Horizons financial condition and results of operations, is contained in the Horizon Annual Report on Form 10-K for the year ended December 31, 2014, Horizons Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 7, 2015, which is incorporated by reference into this prospectus/offer to exchange, and other reports filed by Horizon with the SEC. The following selected historical consolidated financial information is qualified in its entirety by reference to such other documents and all of the financial information and notes contained in those documents. See the section of this prospectus/offer to exchange titled Where You Can Find More Information for instructions on how to obtain these other documents and more complete information relating to Horizon.
For the Years Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Selected Statement of Comprehensive Loss Data |
||||||||||||||||||||
Net sales |
$ | 296,955 | $ | 74,016 | $ | 18,844 | $ | 6,927 | $ | 2,376 | ||||||||||
Cost of goods sold |
78,753 | 14,625 | 11,875 | 7,267 | 4,263 | |||||||||||||||
Gross profit (loss) |
218,202 | 59,391 | 6,969 | (340 | ) | (1,887 | ) | |||||||||||||
Loss before benefit for income taxes |
(269,687 | ) | (150,126 | ) | (92,965 | ) | (127,948 | ) | (27,725 | ) | ||||||||||
Net loss |
(263,603 | ) | (149,005 | ) | (87,794 | ) | (113,265 | ) | (27,065 | ) |
As of December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Selected Balance Sheet Data |
||||||||||||||||||||
Cash and cash equivalents |
$ | 218,807 | $ | 80,480 | $ | 104,087 | $ | 17,966 | $ | 5,384 | ||||||||||
Working capital (deficit) |
106,833 | 67,455 | 79,983 | 1,065 | (17,944 | ) | ||||||||||||||
Total assets |
1,134,624 | 252,596 | 193,984 | 101,078 | 161,685 | |||||||||||||||
Total debt, net of debt discount |
345,503 | 110,762 | 48,801 | 19,438 | 24,615 | |||||||||||||||
Accumulated deficit |
(720,719 | ) | (457,116 | ) | (308,111 | ) | (220,317 | ) | (107,052 | ) | ||||||||||
Total shareholders equity (deficit) |
540,204 | (49,082 | ) | 105,978 | 45,912 | 97,056 |
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DEPOMED SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated financial information for Depomed as of the end of and for the periods indicated. The consolidated statement of operations information for each of the years ended December 31, 2014, December 31, 2013 and December 31, 2012, and the consolidated balance sheet information as of December 31, 2014 and December 31, 2013, are derived from Depomeds audited financial statements filed as part of Depomeds Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015, which we refer to as the Depomed 10-K, which is incorporated by reference into this prospectus/offer to exchange. The consolidated statement of operations information for each of the years ended December 31, 2011 and December 31, 2010, and the consolidated balance sheet information as of December 31, 2012, December 31, 2011 and December 31, 2010, are derived from Depomeds audited financial statements for such years, which have not been incorporated by reference into this prospectus/offer to exchange. The historical results are not necessarily indicative of future results. More comprehensive financial information, including managements discussion and analysis of Depomeds financial condition and results of operations, is contained in the Depomed 10-K, Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 3, 2015, which is incorporated by reference into this prospectus/offer to exchange, and other reports filed by Depomed with the SEC. The following selected historical consolidated financial information is qualified in its entirety by reference to such other documents and all of the financial information and notes contained in those documents. See the section of this prospectus/offer to exchange titled Where You Can Find More Information for instructions on how to obtain these other documents and more complete information relating to Depomed.
2014 | 2013 | 2012 | 2011(1) | 2010 | ||||||||||||||||
(in thousands, except per share information) |
||||||||||||||||||||
Consolidated Statement of Operations Data: |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Product sales |
$ | 114,219 | $ | 58,302 | $ | 27,483 | $ | 41,178 | $ | 45,637 | ||||||||||
Royalties |
1,821 | 45,003 | 44,535 | 9,997 | 306 | |||||||||||||||
License and other revenue(2) |
31,515 | 12,796 | 18,798 | 81,798 | 34,821 | |||||||||||||||
Non-cash PDL royalty revenue(2) |
242,808 | 18,104 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total revenues |
390,363 | 134,205 | 90,816 | 132,973 | 80,764 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total costs and expenses |
153,549 | 124,888 | 121,169 | 102,275 | 77,139 | |||||||||||||||
Gain on termination of Abbott agreement |
| | | 40,000 | | |||||||||||||||
Income (loss) from operations |
236,814 | 9,317 | (30,353 | ) | 70,698 | 3,625 | ||||||||||||||
Net income (loss) before income taxes |
213,108 | 4,580 | (29,872 | ) | 71,122 | 3,892 | ||||||||||||||
(Provision for) benefit from income taxes |
(81,346 | ) | 38,733 | 91 | (396 | ) | 4 | |||||||||||||
Net income (loss) |
$ | 131,762 | $ | 43,313 | $ | (29,781 | ) | $ | 70,726 | $ | 3,896 | |||||||||
Basic net income (loss) per share |
$ | 2.26 | $ | 0.76 | $ | (0.53 | ) | $ | 1.30 | $ | 0.07 | |||||||||
Diluted net income (loss) per share |
$ | 2.05 | $ | 0.75 | $ | (0.53 | ) | $ | 1.26 | $ | 0.07 | |||||||||
Shares used in computing basic net income (loss) per share |
58,292,633 | 56,736,009 | 55,892,563 | 54,562,820 | 52,533,256 | |||||||||||||||
Shares used in computing diluted net income (loss) per share |
66,307,364 | 57,543,979 | 55,892,563 | 56,089,796 | 53,463,749 |
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2014 | 2013 | 2012 | 2011(1) | 2010 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Consolidated Balance Sheet Data |
||||||||||||||||||||
Cash, cash equivalents and marketable securities |
$ | 566,402 | $ | 276,017 | $ | 77,892 | $ | 139,793 | $ | 76,888 | ||||||||||
Total assets |
711,065 | 508,653 | 141,653 | 164,372 | 87,031 | |||||||||||||||
Total current liabilities(2),(3) |
57,499 | 156,857 | 36,681 | 39,840 | 32,984 | |||||||||||||||
Deferred revenue, non-current portion(2) |
| 12,475 | 15,516 | 17,932 | 30,926 | |||||||||||||||
Liability related to the sale of future royalties and milestones, less current portion(2) |
| 177,624 | | | | |||||||||||||||
Contingent consideration liability, non-current |
14,252 | 11,264 | 1,342 | | | |||||||||||||||
Other long-term liabilities |
12,387 | 13,017 | 4,178 | | 15 | |||||||||||||||
Accumulated earnings (deficit) |
47,714 | (84,048 | ) | (127,361 | ) | (97,580 | ) | (168,306 | ) | |||||||||||
Total shareholders equity |
364,447 | 137,416 | 83,936 | 105,918 | 23,106 |
(1) | Total revenues, income from operations, net income before income taxes, net income and net income per share in 2011 include a one-time $48.0 million milestone received from Abbott Laboratories for the FDA approval of Gralise. Income from operations, net income before income taxes, net income and net income per share in 2011 include a $40.0 million gain on termination of Depomeds agreement with Abbott related to Gralise. |
(2) | Effective October 1, 2014, Depomed amended its agreements with Salix Pharmaceuticals, Inc. and Valeant International Bermuda SRL, which eliminated any and all continuing obligations on the part of Depomed in the manufacture and supply of 1000mg Glumetza tablets. As a result, the unamortized deferred revenue balance as of October 1, 2014 of $13.2 million was recognized as license and other revenue during 2014. Depomed also recognized the entire remaining balance of the liability related to sale of future royalties and milestones of approximately $147.0 million as non-cash PDL royalty revenue during 2014. |
(3) | Total current liabilities as of December 31, 2013 included income taxes payable of $61.9 million and liability related to sale of future royalties of $49.5 million. |
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The selected unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2014 and for the six months ended June 30, 2015 were prepared by Horizon and give effect to Horizons acquisition of Hyperion Therapeutics, Inc., which we refer to as Hyperion, Horizons acquisition of Vidara and to the proposed combination with Depomed, in each case as if it such transactions had occurred on January 1, 2014.
The unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines the historical consolidated balance sheets of Horizon and Depomed, giving effect to the proposed combination with Depomed, including the anticipated new Horizon debt financing and the extinguishment of Depomeds outstanding senior notes and the conversion of Depomeds convertible debt, as if such repayment and conversion had occurred on June 30, 2015.
The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined companys financial position or results of operations actually would have been had the proposed combination with Depomed and the acquisitions of Hyperion and Vidara been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. There were no material transactions between Horizon, Depomed, Hyperion and Vidara during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under GAAP, with Horizon being the accounting acquirer. The accounting for the proposed combination with Depomed is dependent upon certain valuations that are provisional and are subject to change. Horizon will finalize these amounts as it obtains the information necessary to complete the measurement process. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could be material. Additionally, the differences, if any, could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and Horizons future results of operations and financial position.
In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition of Depomed, Hyperion and Vidara, the costs to integrate the operations of Horizon, Depomed, Hyperion and Vidara or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
For the Six Months Ended June 30, 2015 |
For the Year Ended December 31, 2014 |
|||||||
Selected Statement of Operations Data (in thousands): |
||||||||
Total revenues |
$ | 497,101 | $ | 1,022,585 | ||||
Cost of goods sold |
381,666 | 727,407 | ||||||
Gross profit |
115,435 | 295,178 | ||||||
Loss before benefit for income taxes |
(296,247 | ) | (573,044 | ) | ||||
Net loss |
(85,969 | ) | (437,566 | ) |
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As of June 30, 2015 |
||||
Selected Balance Sheet Data (in thousands): |
||||
Cash and cash equivalents |
$ | 165,248 | ||
Working capital |
69,251 | |||
Total assets |
7,053,550 | |||
Total debt, net of debt discount |
1,310,148 | |||
Accumulated deficit |
(736,704 | ) | ||
Total shareholders equity |
3,774,067 |
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COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE INFORMATION
The following table summarizes unaudited per share information for Horizon and Depomed on a historical basis, pro forma combined basis for Horizon and equivalent pro forma combined basis for Depomed. The following information should be read in conjunction with the audited consolidated financial statements and accompanying notes of Horizon and Depomed that are incorporated by reference into this prospectus/offer to exchange, and the unaudited pro forma condensed combined financial statements beginning on page 97. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of what the operating results or financial position would have been if the offer and the second-step merger had been completed as of the beginning of the period presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. The historical income (loss) per share and book value per share of Horizon and Depomed shown in the table below are derived from their respective audited consolidated financial statements as of and for the year ended December 31, 2014, and unaudited consolidated financial statements as of and for the six months ended June 30, 2015 and also give effect to Horizons acquisitions of Hyperion and Vidara from their respective acquisition dates of May 7, 2015, and September 19, 2014. The historical book value per share is computed by dividing total shareholders equity by the number of shares outstanding at the end of the period. At this time, Horizon does not have available the historical number of Depomed shares outstanding at June 30, 2015. Horizon has instead used the number of Depomed shares outstanding as of July 30, 2015 disclosed in Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, in the calculation of Depomeds book value per share at June 30, 2015. The pro forma combined net loss per share is computed by dividing the pro forma net loss by the pro forma weighted-average number of shares outstanding for the period. The pro forma combined book value per share is computed by dividing total pro forma shareholders equity by the pro forma number of Horizon ordinary shares outstanding at the end of the period. Depomed equivalent pro forma combined per share amounts are calculated by multiplying Horizon pro forma combined per share amounts by the share exchange ratio.
As of and For the Six Months Ended June 30, 2015 (unaudited) |
As of and For the Year Ended December 31, 2014 |
|||||||
HorizonHistorical per Horizon ordinary share |
||||||||
Net income (loss) per sharebasic |
$ | 0.09 | $ | (3.15 | ) | |||
Net income (loss) per sharediluted |
0.08 | (3.15 | ) | |||||
Book value per share (unaudited) |
7.92 | 4.36 | ||||||
DepomedHistorical per share of Depomed common stock |
||||||||
Net income (loss) per sharebasic |
$ | (0.56 | ) | $ | 2.26 | |||
Net income (loss) per sharediluted |
(0.56 | ) | 2.05 | |||||
Book value per share (unaudited) |
5.74 | 6.15 | ||||||
Unaudited Pro Forma Combined per Horizon ordinary share |
||||||||
Net loss per sharebasic |
$ | (0.41 | ) | $ | (2.50 | ) | ||
Net loss per sharediluted |
(0.41 | ) | (2.50 | ) | ||||
Book value per share |
16.29 | N/A | ||||||
Unaudited Pro Forma Depomed Equivalents |
||||||||
Net loss per sharebasic |
$ | (0.39 | ) | $ | (2.38 | ) | ||
Net loss per sharediluted |
(0.39 | ) | (2.38 | ) | ||||
Book value per share |
15.47 | N/A |
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Horizon ordinary shares are listed on NASDAQ under the symbol HZNP. Depomed common stock is listed on NASDAQ under the symbol DEPO. The table below sets forth, for the calendar quarters indicated, the high and low sale prices per share reported on NASDAQ and the dividends declared on Horizon ordinary shares and on Depomed common stock.
Horizon Ordinary Shares | Depomed common stock | |||||||||||||||||||||||
High | Low | Dividend(1) | High | Low | Dividend(2) | |||||||||||||||||||
2015 |
||||||||||||||||||||||||
Fourth Quarter (through October 12, 2015) |
$ | 21.50 | $ | 17.25 | $ | | $ | 20.33 | $ | 17.47 | $ | | ||||||||||||
Third Quarter |
$ | 39.49 | $ | 22.66 | $ | | $ | 33.74 | $ | 20.37 | $ | | ||||||||||||
Second Quarter |
$ | 34.99 | $ | 25.26 | $ | | $ | 28.16 | $ | 19.59 | $ | | ||||||||||||
First Quarter |
$ | 26.46 | $ | 12.64 | $ | | $ | 25.54 | $ | 15.41 | $ | | ||||||||||||
2014 |
||||||||||||||||||||||||
Fourth Quarter |
$ | 13.55 | $ | 10.15 | $ | | $ | 16.64 | $ | 13.55 | $ | | ||||||||||||
Third Quarter |
$ | 16.56 | $ | 7.85 | $ | | $ | 15.51 | $ | 9.85 | $ | | ||||||||||||
Second Quarter |
$ | 16.72 | $ | 11.50 | $ | | $ | 14.85 | $ | 10.29 | $ | | ||||||||||||
First Quarter |
$ | 18.30 | $ | 7.40 | $ | | $ | 15.39 | $ | 10.20 | $ | | ||||||||||||
2013 |
||||||||||||||||||||||||
Fourth Quarter |
$ | 7.80 | $ | 3.21 | $ | | $ | 10.77 | $ | 6.95 | $ | | ||||||||||||
Third Quarter |
$ | 3.55 | $ | 2.11 | $ | | $ | 7.70 | $ | 5.63 | $ | | ||||||||||||
Second Quarter |
$ | 2.75 | $ | 2.23 | $ | | $ | 6.19 | $ | 4.99 | $ | | ||||||||||||
First Quarter |
$ | 2.95 | $ | 1.97 | $ | | $ | 7.15 | $ | 5.12 | $ | |
(1) | Horizon has never paid dividends and does not anticipate paying any dividends in the near future. Additionally, Horizons senior secured credit facility with certain lenders and Citibank, N.A., as administrative agent and collateral agent, contains covenants that restrict Horizon from issuing dividends. |
(2) | Depomed has never declared or paid any cash dividends. Additionally, Depomeds senior secured credit facility with certain lenders and Deerfield Private Design Fund III, L.P., as collateral agent, contains covenants that restrict Depomed from issuing dividends. |
The following table presents price information for Horizon ordinary shares and Depomed common stock on (1) October 12, 2015; and (2) July 6, 2015, the last trading day before Horizons public announcement of the proposed combination with Depomed.
Horizon Ordinary Shares | Depomed common stock | |||||||||||||||||||||||
High | Low | Close | High | Low | Close | |||||||||||||||||||
October 12, 2015 |
$ | 19.48 | $ | 18.75 | $ | 19.13 | $ | 19.44 | $ | 18.67 | $ | 18.87 | ||||||||||||
July 6, 2015 |
$ | 35.21 | $ | 33.45 | $ | 34.54 | $ | 21.05 | $ | 20.37 | $ | 20.64 |
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The following table sets forth, for the periods indicated, the high and low sale prices per share and the cumulative trading volumes of (i) the Horizon ordinary shares as reported on the NASDAQ in U.S. dollars and (ii) the Depomed common stock as reported on the NASDAQ in U.S. dollars.
Horizon Ordinary Share Price per Share |
Horizon Ordinary Share Total Trading Volume(1) |
Depomed Common Stock Price per Share |
Depomed Common Stock Total Trading Volume(1) |
|||||||||||||||||||||
High (US$) |
Low (US$) |
High (US$) |
Low (US$) |
|||||||||||||||||||||
Month |
||||||||||||||||||||||||
April 2014 |
$ | 16.72 | $ | 11.50 | 51,365,451 | $ | 14.85 | $ | 11.57 | 22,620,381 | ||||||||||||||
May 2014 |
$ | 15.11 | $ | 12.55 | 40,875,754 | $ | 14.28 | $ | 10.29 | 19,792,047 | ||||||||||||||
June 2014 |
$ | 16.50 | $ | 13.81 | 34,889,913 | $ | 14.07 | $ | 11.93 | 17,884,237 | ||||||||||||||
July 2014 |
$ | 16.56 | $ | 7.85 | 54,097,929 | $ | 14.49 | $ | 9.93 | 25,488,766 | ||||||||||||||
August 2014 |
$ | 10.75 | $ | 8.07 | 35,773,306 | $ | 15.51 | $ | 9.85 | 24,785,443 | ||||||||||||||
September 2014 |
$ | 14.40 | $ | 9.46 | 35,833,107 | $ | 15.50 | $ | 13.47 | 32,406,615 | ||||||||||||||
October 2014 |
$ | 13.15 | $ | 10.15 | 17,924,413 | $ | 16.00 | $ | 13.55 | 8,626,698 | ||||||||||||||
November 2014 |
$ | 13.32 | $ | 11.87 | 36,669,561 | $ | 15.91 | $ | 14.00 | 17,016,813 | ||||||||||||||
December 2014 |
$ | 13.55 | $ | 12.04 | 35,124,467 | $ | 16.64 | $ | 14.38 | 16,146,030 | ||||||||||||||
January 2015 |
$ | 17.16 | $ | 12.64 | 44,079,744 | $ | 20.51 | $ | 15.41 | 25,073,139 | ||||||||||||||
February 2015 |
$ | 21.45 | $ | 14.64 | 46,470,047 | $ | 23.20 | $ | 17.25 | 24,264,942 | ||||||||||||||
March 2015 |
$ | 26.46 | $ | 19.68 | 88,253,868 | $ | 25.54 | $ | 21.21 | 39,065,065 | ||||||||||||||
April 2015 |
$ | 32.15 | $ | 25.26 | 106,362,994 | $ | 28.16 | $ | 21.84 | 31,075,851 | ||||||||||||||
May 2015 |
$ | 32.88 | $ | 27.40 | 67,671,509 | $ | 24.77 | $ | 19.59 | 39,763,638 | ||||||||||||||
June 2015 |
$ | 34.99 | $ | 30.81 | 73,037,012 | $ | 23.67 | $ | 20.30 | 28,124,189 | ||||||||||||||
July 2015(2) |
$ | 39.49 | $ | 32.47 | 70,634,854 | $ | 33.74 | $ | 20.37 | 66,133,814 | ||||||||||||||
August 2015 |
$ | 37.00 | $ | 22.66 | 58,787,940 | $ | 33.11 | $ | 26.51 | 26,738,050 | ||||||||||||||
September 2015 |
$ | 32.34 | $ | 16.22 | 105,786,754 | $ | 29.44 | $ | 15.45 | 39,314,457 | ||||||||||||||
October 2015(2) |
$ | 21.50 | $ | 17.25 | 42,358,631 | $ | 20.33 | $ | 17.47 | 12,178,946 |
(1) | Source for cumulative trading volume: NASDAQ. |
(2) | On July 6, 2015 Horizon publicly announced the proposed combination with Depomed. |
(3) | October 1, 2015 to October 12, 2015 inclusive. |
The value of the Horizon ordinary shares that form the Stock Consideration will change as the market price of Horizon ordinary shares fluctuates during the pendency of the offer and thereafter, and therefore will likely be different from the prices set forth above at the time you receive your Horizon ordinary shares. See the section in this prospectus/offer to exchange titled Risk Factors. Shareholders are encouraged to obtain current market quotations for Horizon ordinary shares and Depomed common stock prior to making any decision with respect to the offer.
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INFORMATION ABOUT THE COMPANIES
Horizon
Horizon is a biopharmaceutical company focused on improving patients lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. Horizon markets seven medicines through its orphan, primary care and specialty business units. Horizons U.S. marketed products are ACTIMMUNE (interferon gamma-1b), BUPHENYL (sodium phenylbutyrate) Tablets and Powder, DUEXIS (ibuprofen/famotidine), PENNSAID (diclofenac sodium topical solution) 2% w/w , RAVICTI (glycerol phenylbutyrate) Oral liquid, RAYOS (prednisone) delayed release tablets and VIMOVO (naproxen/esomeprazole magnesium). Horizon operates through a number of international and U.S. subsidiaries with principal business purposes to either hold intellectual property assets, perform research and development or manufacturing operations, serve as distributors of Horizons products, or provide services and financial support to Horizon.
Horizons principal executive offices are located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland, and its telephone number at that location is 011-353-1-772-2100.
Additional information concerning Horizon is included in the Horizon reports incorporated by reference in this prospectus/offer to exchange. See the section in this prospectus/offer to exchange titled Where You Can Find More Information.
Purchaser
Purchaser is a California corporation incorporated on August 27, 2015, with principal executive offices at 520 Lake Cook Road, Suite 520, Deerfield, IL 60015. The telephone number of Purchasers principal executive offices is (224) 383-3000. Purchaser is a wholly-owned subsidiary of Horizon that was formed to facilitate the transactions contemplated by this prospectus/offer to exchange. Purchaser has engaged in no activities to date and has no material assets or liabilities of any kind, in each case other than those incidental to its formation and its activities and obligations in connection with the offer.
Depomed
Depomed is a specialty pharmaceutical company focused on pain and other central nervous system conditions. The products that comprise Depomeds current specialty pharmaceutical business are (i) NUCYNTA ER (tapentadol extended release tablets), a product for the management of pain severe enough to require daily, around-the-clock, long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternative treatment options are inadequate, and NUCYNTA (tapentadol), a product for the management of moderate to severe acute pain in adults, each of which Depomed acquired the U.S. rights to in April 2015, (ii) Gralise (gabapentin), a once-daily product for the management of PHN that Depomed launched in October 2011, (iii) CAMBIA (diclofenac potassium for oral solution), a product for the acute treatment of migraine attacks that Depomed acquired in December 2013, (iv) Zipsor (diclofenac potassium) liquid filled capsules, a product for the treatment of mild to moderate acute pain that Depomed acquired in June 2012, and (v) Lazanda (fentanyl) nasal spray, a product for the management of breakthrough pain in cancer patients 18 years of age and older who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain that Depomed acquired in July 2013. Depomed also has a portfolio of royalty and milestone producing license agreements based on its proprietary Acuform gastroretentive drug delivery technology with Mallinckrodt Inc., Ironwood Pharmaceuticals, Inc. and Janssen Pharmaceuticals, Inc. Depomed has one product candidate, DM-1992 for Parkinsons disease. DM-1992 completed a Phase 2 trial for Parkinsons disease, and Depomed announced a summary of the results of that trial in November 2012. Depomed continues to evaluate clinical and regulatory strategies and commercial prospects for DM-1992. Depomeds principal executive offices are located at 7999 Gateway Boulevard, Suite 300, Newark, California 94560, and its telephone number at that location is (510) 744-8000.
Additional information concerning Depomed is included in the Depomed reports incorporated by reference in this prospectus/offer to exchange. See the section in this prospectus/offer to exchange titled Where You Can Find More Information.
40
Horizon regularly considers a variety of potential transactions to acquire products in primary care, orphan diseases and specialty businesses. As part of this process, following a meeting on February 11, 2015 with one of its financial advisors, Horizon identified Depomed as a possible acquisition target. The following is a chronology of the events leading up to this prospectus/offer to exchange.
On February 24, 2015, the Horizon Board held a regularly scheduled meeting in Dublin, Ireland, and discussed, among other things, a possible combination with Depomed and authorized management to make a proposal to Depomed.
On March 11, 2015, Mr. Timothy P. Walbert, Horizons Chairman of the Board, President and Chief Executive Officer, spoke to Mr. James A. Schoeneck, President and Chief Executive Officer of Depomed, about engaging in confidential discussions to combine the two companies. Mr. Schoeneck declined to engage citing less than ideal timing.
On March 12, 2015, Depomed announced that it had entered into a $575 million secured debt facility bearing interest at 9.75% over the three month LIBOR (subject to a 1% LIBOR floor), to finance the NUCYNTA acquisition.
On March 13, 2015, Horizon announced the closing of its offering of $400 million of 2.50% Exchangeable Senior Notes due 2022, which we refer to as the Horizon Exchangeable Senior Notes, including the full exercise of the option to purchase additional notes.
On March 24, 2015, the Transaction Committee of Horizon, which we refer to as the Transaction Committee, which had been delegated authority to oversee the proposals made to Depomed and authorize changes to the terms of the proposals, at a meeting in Dublin, Ireland, discussed, among other things, the potential combination with Depomed, including changes in Depomeds stock price since February 2015 and the terms of Depomeds recent high yield financing, including expected breakage costs. The Transaction Committee authorized Horizon to continue to pursue the proposed combination, within authorized terms, and authorized the engagement of Citigroup Global Markets Inc., which we refer to as Citi, and Jefferies LLC, which we refer to as Jefferies, to serve as financial advisors in connection with the potential transaction.
On March 30, 2015, Horizon announced that it was acquiring Hyperion for approximately $1.1 billion in cash pursuant to a two-step tender offer. Horizon subsequently completed a public offering of its ordinary shares with net proceeds of $475.2 million on April 21, 2015 and the private placement of $475 million of aggregate principal amount of 6.625% senior notes due 2023 on April 29, 2015. On May 7, 2015, Horizon Pharma, Inc., an indirect wholly-owned subsidiary of Horizon, and certain additional Horizon subsidiaries entered into a credit agreement for a five-year $400 million term loan facility that bears interest, at each borrowers option, at a rate equal to either LIBOR plus the applicable margin of 3.5% per year (subject to a 1.0% LIBOR floor) or the prime lending rate, plus an applicable margin of 4.5%, and borrowed $400 million. Also on May 7, 2015, Horizon completed its acquisition of Hyperion.
On May 7, 2015, the Horizon Board, at its regular meeting in Dublin, Ireland, discussed, among other things, the continuing interest of Horizon to pursue a combination with Depomed, the recent stock price performance of Depomed and the proposed acquisition structure.
On May 14, 2015, Mr. Walbert requested a meeting with Mr. Schoeneck. Mr. Schoeneck responded on May 19, 2015 that he would be available for a call on May 27, 2015.
41
On May 27, 2015, Mr. Walbert conveyed to Mr. Schoeneck in a phone conversation Horizons proposal to offer Depomed shareholders $29.25 per share in an all-stock combination that represented an approximate 40% premium to Depomeds closing share price of $20.88 on May 27, 2015. Mr. Schoeneck indicated that he would discuss the proposal with his board and get back to Mr. Walbert. Immediately, following the call, Mr. Walbert sent Mr. Schoeneck the following letter:
May 27, 2015
Mr. James A. Schoeneck
President and Chief Executive Officer
Depomed, Inc.
7999 Gateway Blvd., Suite 300
Newark, CA 94560
Dear Jim,
Thank you for taking the time to speak today. Congratulations to you and your team on closing the NUCYNTA transaction and for the progress that youve made over the last year.
As we discussed today, there is compelling rationale for the combination of our respective companies and we propose an all-stock combination of Depomed, Inc. (Depomed) and Horizon Pharma, Inc., a wholly owned subsidiary of Horizon Pharma plc, (both referred to hereafter as Horizon Pharma) the details of which are further presented in this letter. We believe an all-stock combination will not only offer a compelling near-term value premium to Depomed shareholders, but will create a considerable amount of long-term value for our combined shareholders and provide significant benefits to the patients, employees and physicians we each serve.
Horizon Pharmas Proposal
Horizon Pharma proposes to offer Depomed shareholders $29.25 per share in an all-stock combination. This represents an approximate 40% premium to Depomeds current share price of $20.88 as of close today, May 27, 2015. We would expect to establish a fixed exchange ratio with you upon executing a definitive agreement. Our proposal contemplates a large change-in-control premium. In addition, we would expect that the effective premium post-announcement and at closing could ultimately be much higher given the demonstrable benefits of this transaction, which we are confident our shareholders will recognize. You should note that within one month of the announcement of the acquisition of Hyperion Therapeutics on March 30, 2015, Horizon Pharma ordinary shares traded at a premium of approximately 45% to our pre-announcement price. Under the contemplated proposal, Depomed shareholders would own approximately 27% of the combined company. We would also offer Depomed one independent director on the Horizon Pharma board. Further, the culture we have created at Horizon Pharma would offer an attractive platform for employees of Depomed. We would anticipate that Depomeds existing convertible notes would rollover into the combined companys capital structure and we would refinance Depomeds existing senior secured notes and incur any associated breakage costs. Given our recent financing experience, we would expect to replace this debt at less than one-half your current interest cost, a cost savings that will benefit Depomeds shareholders.
Other Considerations
This preliminary proposal has been unanimously approved and supported by Horizon Pharmas board of directors. We do not anticipate any issues in obtaining the necessary Horizon Pharma shareholder and regulatory approvals for the completion of this transaction.
Overview of the Combined Company
The combined company will be significantly larger and more diversified than either company individually today and will be positioned extremely well for future sustainable growth. With full-year pro forma projected 2015
42
sales and adjusted EBITDA in excess of $950 million and $350 million, respectively, as well as more than 700 sales reps and 13 marketed products, the combined company will immediately be at an enhanced level of critical mass. Given our proposed all-stock consideration, the pro forma capital structure will provide additional financial flexibility for future M&A activity. Further, our access to the capital markets would only be enhanced as a result of the increased size and scale of the new company, again a benefit that would enhance Depomeds shareholders returns.
Combination Benefits to Depomed Shareholders
As we have discussed, a combination of Horizon Pharma and Depomed has a clear and compelling strategic rationale. Relative to other larger specialty pharmaceutical companies, Horizon Pharma is still in the early stages of implementing its growth strategy, and we view a combination with Depomed as a natural next step in our evolution. We believe our proposal provides Depomeds shareholders considerable value and the opportunity to participate in additional future shareholder value creation through the following:
| A compelling premium today with participation in the substantial potential upside of the combined company. Based on the demonstrable benefits of the combination, the historic stock price reaction to transactions in our sector and Horizon Pharmas ordinary shares recent reaction to the acquisition of Hyperion Therapeutics, the 40% premium we offer today could be expected to increase further following announcement. |
| Horizon Pharmas tax-efficient corporate platform provides immediate benefits to Depomed shareholders, as well as additional benefits over the long-term as Horizon Pharma continues to implement its aggressive business development strategy via product and company acquisitions. We estimate the acquisition of Depomed will provide substantial accretion to Horizon Pharmas adjusted EPS. |
| The ability to further accelerate NUCYNTA sales under Horizon Pharmas commercial platform. |
| Further diversification of revenue sources and commercial scale. |
| A proven leadership team with a proven track record of M&A success. |
Overview of Horizon Pharma plc
Horizon Pharma is a specialty biopharmaceutical company focused on improving patients lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. The Company markets seven medicines through its orphan, primary care and specialty care business units. Horizon Pharma has an experienced, proven and established leadership team with a successful track record of delivering significant shareholder value. Under the leadership of our management team, Horizon Pharma has grown net sales from $74 million in 2013 to $297 million in 2014 and expects approximately $600 million in net sales in 2015. The continued growth of our base business as well as rapid integration of acquisitions has transformed Horizon Pharma into a company with a market capitalization of over $5 billion today.
Overview of Horizon Pharmas Successful Commercial Model
Horizon Pharmas leadership team has developed a differentiated commercial model that has helped Horizon Pharma to rapidly adapt to the evolving market landscape we face in our sector. We have established three distinct business units in orphan diseases, primary care and specialty care with independent management teams and unique commercial strategies. An acquisition in any one of the business units does not affect the operations or management of the other two business units. This structure has enhanced our ability to seamlessly integrate and accelerate net sales of acquired products and companies over the last two years. Currently, our specialty business unit commercializes one product, RAYOS, allowing for rapid integration of additional products.
43
Horizon Pharmas Successful Acquisition History
We actively pursue accretive acquisitions that offer attractive synergies, enhance our strategic position and accelerate future growth. Horizon Pharma has successfully completed four acquisitions over the last 19 months, which has allowed us to rapidly grow net sales and EBITDA as well as diversify our business. Horizon Pharmas net sales are expected to increase to $600+ million in 2015. Our acquisitions have greatly enhanced value creation and substantially reduced risk by diversifying our sources of revenue. For the first quarter of 2015 and pro forma for the Hyperion Therapeutics transaction, no product represented more than 23% of our net sales. We believe that we are only at the beginning of our growth potential and a combination with Depomed is a key opportunity to enhance the Horizon Pharma growth platform, which will benefit our combined shareholders in the future.
Horizon Pharmas Recent Capital Markets Activity
We have raised $1.775 billion in four financings in the past three months. In addition to lowering our average cash interest costs to approximately 4.7%, these transactions broadened Horizon Pharmas investor base dramatically and many of the largest institutional investors in the world are now significant holders of Horizon Pharma securities. These transactions were an important step for Horizon Pharma to further establish our track record in the equity, convertible securities and debt markets, which should benefit our future funding needs, including our ability to act quickly and aggressively with respect to financing future acquisition opportunities.
Next Steps
We are prepared to move expeditiously to consummate the proposed combination. We have engaged a team of advisors to assist us with this transaction: Citigroup Global Markets Inc. and Jefferies LLC as lead financial advisors and Cooley LLP and Skadden, Arps, Slate, Meagher & Flom LLP as legal advisors. We have completed substantial due diligence on Depomed based on publicly available information and have only a short list of confirmatory due diligence that we believe can be completed within several days. We have set up an electronic data room and are prepared to meet with you, your team and advisors as early as your team is available to facilitate your reciprocal due diligence.
This letter does not create any binding obligation on the part of either Horizon Pharma or Depomed. No such obligation will exist until a mutually acceptable definitive agreement is executed. This proposal is provided to you on the condition that its existence, its contents and our discussions will be confidential and will not be disclosed publicly or to any third party (other than to Depomeds legal and financial advisors on a confidential basis). We retain the right to withdraw this proposal upon any unauthorized disclosure.
This is truly a unique opportunity for both of our companies and shareholders. We look forward to working with you and Depomeds board as well as its management team on a successful combination of Horizon Pharma and Depomed.
Best regards
/s/ Timothy P. Walbert
Timothy P. Walbert
Chairman, President and Chief Executive Officer
On May 28, 2015, Horizon engaged Citibank as a financial advisor for the proposed transaction and on July 3, 2015, Horizon engaged Jefferies as a financial advisor for the proposed transaction.
On June 1, 2015, Mr. Walbert sent an e-mail to Mr. Schoeneck requesting an in-person meeting in New York on June 3, 2015 in conjunction with an investor conference and indicating that he was seeking an understanding of when to expect a response to Horizons proposal from the Depomed Board.
44
On June 8, 2015, Mr. Walbert and Mr. Schoeneck spoke by telephone. During the call, Mr. Schoeneck indicated that he had reviewed the proposal with his board, that Depomed had engaged a law firm to advise Depomed in connection with the proposal, but that Depomed had not yet engaged a financial advisor, that Depomed needed more time to complete its valuation work and that Depomed was scheduling a board meeting sometime the following week to review the proposal.
On June 12, 2015, Mr. Walbert sent the following letter to Mr. Schoeneck to address the issues raised in the June 8, 2015 call:
June 12, 2015
Mr. James A. Schoeneck
President and Chief Executive Officer
Depomed, Inc.
7999 Gateway Blvd., Suite 300
Newark, CA 94560
Dear Jim,
I appreciate the preliminary feedback on Horizon Pharmas proposal to combine with Depomed and your intent to review this with your board next week. Ahead of that meeting, I want to address a few of the points you raised and also reiterate the seriousness of Horizons proposal, which offers a compelling value proposition to Depomed shareholders. I will continue to make myself available to meet in-person as we are committed to expediting a successful transaction.
Valuation
Horizon Pharmas proposal represents compelling value to Depomed shareholders. As outlined in the letter dated May 27, 2015, Horizon Pharma proposes to offer Depomed shareholders $29.25, which represents an approximate 40 percent premium to Depomeds share price on May 27, 2015, an approximate 40 percent premium to the current 30-day VWAP and a 6 percent premium to the all-time high closing share price. Our proposed acquisition price is higher than the share price targets for six of the seven analysts who provide a share price target for Depomed, and higher than the median share price target of $26.50. Depomeds share price has increased approximately 80 percent in the 12 months and approximately 250 percent in the two years prior to the submission of our proposal. We are offering your shareholders the opportunity to realize a meaningful premium off of that performance and, should they wish to continue to hold the shares we are offering, we believe they will be the beneficiary of our combined business operations, realized operational synergies, and a more efficient tax and capital structure.
Horizon Pharma Equity Currency
I am surprised by your initial concern about receiving Horizon Pharma stock as currency for the proposed transaction. We believe stock rather than cash would be preferable as currency to your shareholders who would be able to benefit from the considerable upside potential of the combined company. Our shareholders continue to be very enthusiastic about the Horizon Pharma equity story as evidenced by the continued growth of large, influential long-term fundamental investors in our shareholder base. The investor community remains bullish on our stock, with 10 analysts that actively cover Horizon Pharma recommending a buy with a median share price target of approximately $37.50, representing nearly 20 percent upside to the current share price. It is also worth noting that Horizon Pharma shareholders own approximately 50 percent of Depomeds outstanding shares, thereby substantially reducing the risk that your shareholders would need to be educated on Horizon or the benefits of a combined business. That being said, those of your shareholders who choose to exit at announcement or closing could do so with ease given the substantial liquidity in our stock. Given this liquidity, and a fixed exchange ratio deal as outlined in our original proposal, we would not anticipate any negative impact to our stock and therefore to the proposed acquisition price.
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While historical performance is not an indicator of future growth, Id like to reiterate that within one month of the recent Hyperion Therapeutics acquisition announcement, Horizon Pharma shares traded at a premium of approximately 45 percent to our pre-announcement price. In our previous transaction history, Horizon Pharma shares have traded up 17 percent on average on the day of announcement. We estimate that the acquisition of Depomed will provide substantial accretion to Horizon Pharmas adjusted EPS. Furthermore, Horizon Pharma is still in the early stages of implementing our growth strategy and is best positioned relative to other larger pharmaceutical companies to deliver near-term growth, which will benefit Depomed shareholders. Horizon Pharma shares are a best-in-class currency that will provide significant long-term value to Depomed shareholders.
Timing
For the many reasons summarized in the proposal letter, the combination of our companies has a clear and compelling strategic rationale that will create significant value for our respective shareholders. We are prepared to immediately take the necessary steps to maximize the relaunch of NUCYNTA while simultaneously driving revenue of the other products in Depomeds portfolio.
Horizon Pharma is committed to this transaction and is prepared to engage immediately. We believe a definitive agreement can be rapidly achieved.
Best regards,
/s/ Timothy P. Walbert
Timothy P. Walbert
Chairman, President and Chief Executive Officer
On June 18, 2015, Jeff Himawan, a member of the Horizon Board, called Peter Staple, Chairman of the Depomed Board, to encourage Depomed to engage in discussions with Horizon regarding a possible combination.
On June 20, 2015, the Transaction Committee of Horizon met telephonically to discuss the status of discussions with Depomed.
On June 25, 2015, Mr. Schoeneck sent a letter to Mr. Walbert indicating that the Depomed Board had unanimously rejected Horizons proposal.
On June 29, 2015, Mr. Himawan communicated electronically with Mr. Staple about Horizons proposal.
On the same day, Horizons financial advisors, Citi and Jefferies, spoke with Depomeds financial advisors, Morgan Stanley and Leerink Partners LLC, which we refer to as Leerink, about Horizons pending acquisition proposal. Morgan Stanley and Leerink told Citi and Jefferies that Horizons proposal was not compelling enough to justify engaging further.
On June 30, 2015, the Horizon Transaction Committee held a telephonic meeting to consider next steps in light of the Depomed Boards rejection of Horizons proposal and stated unwillingness to engage in any discussions about value or price based on Horizons May 27th proposal. The Transaction Committee authorized Horizon to issue a public letter to the Depomed Board in response to Depomeds rejection of the proposal.
On July 7, 2015, Horizon delivered a letter to Depomed further reiterating the acquisition proposal and its value and issued a press release detailing the proposal.
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Later that day on July 7, 2015, Horizon held a conference call to answer questions about its proposed acquisition of Depomed and discuss the benefits of such an acquisition.
On the same day, Depomed confirmed receipt of the acquisition proposal from Horizon.
On July 10, 2015, one of Depomeds financial advisors, Leerink, spoke with one of Horizons financial advisors, Citi, and suggested that if Horizon were to increase its proposed price to acquire Depomed by $3.00 to $4.00 per share in Horizon ordinary shares, Depomed would engage in a constructive dialogue with Horizon regarding negotiating a transaction.
During the weekend of July 10, 2015, Depomeds financial advisors spoke with Horizons financial advisors, and Horizons financial advisors indicated that Horizon would be willing to increase its proposed price to acquire Depomed by $3.00 to $32.25 per share in Horizon ordinary shares, contingent on Depomed engaging in constructive dialogue toward a transaction. Depomeds financial advisors stated that they would discuss the new price with Depomeds management and discuss with the Depomed Board on July 12, 2015, and would follow up with Horizons financial advisors after the Depomed Board meeting of that day. Depomeds financial advisors never followed up and Depomed instead announced the next day the adoption of a rights agreement and the bylaws amendment discussed immediately below.
On July 12, 2015, Depomed adopted a rights agreement declaring a dividend of one right for each outstanding share of Depomed common stock. The plan is triggered by, among other things, a person or group acquiring 10% or more of the outstanding shares of company stock of Depomed. See the section of this prospectus/offer to exchange titled Depomed Poison Pill Rights Agreement for a more detailed description of the Depomed Rights Agreement.
On the same day, Depomed amended its previous bylaws and instituted various notice and information requirements with respect to the shareholders right to call a special meeting, making it more difficult and time-consuming to do so.
On July 13, 2015, Horizon issued a press release voicing its disappointment with Depomeds decision to limit shareholders ability to take advantage of Horizons acquisition proposal by implementing the Depomed Rights Agreement and amending the Depomed bylaws to delay and make more difficult the calling of a special meeting.
On July 18, 2015, Mr. Himawan spoke to Mr. Staple to encourage Depomed to engage in discussions with Horizon.
On July 21, 2015, Horizon delivered the following letter to Depomed increasing its proposed price to acquire Depomed to $33.00 per share in Horizon Ordinary Shares:
July 21, 2015
Board of Directors
Depomed, Inc.
7999 Gateway Blvd., Suite 300
Newark, CA 94560
Dear Madam and Sirs,
It has been almost two months since we formally communicated our proposal to acquire Depomed, Inc. (Depomed). We remain surprised and disappointed by your lack of willingness to engage in a constructive dialogue with the Horizon Pharma plc (Horizon) team regarding our offer.
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We announced yesterday our estimated net sales for the second quarter of 2015 as well as new guidance with respect to estimated 2015 net sales and adjusted EBITDA. Horizons net sales for the second quarter of 2015 of $170 to $172 million represents an increase of greater than 50 percent versus the first quarter of 2015 and greater than 160 percent versus the second quarter of 2014. These results demonstrate the strength of our management team and the commercial model we have developed. We suggest our second quarter results and increased guidance should provide additional evidence of the value Horizons commercial and management teams would contribute to the future growth of Depomeds medicines.
Since making our offer public on July 7, 2015, to acquire 100 percent of Depomeds issued and outstanding shares of common stock for a price of $29.25 per share in Horizon ordinary shares, we have had the opportunity to discuss our proposal with both Depomed and Horizon shareholders. Based on our conversations with many of your shareholders, including some of your largest shareholders, we are confident they and the broader investment community believe a combination of our two companies represents clear and compelling strategic logic and would create significant immediate and long-term value for Depomed and Horizon shareholders.
As we have communicated to your advisors and you previously, Horizon remains committed to an acquisition of Depomed and we are prepared to consider all paths necessary to complete the transaction; however, our preferred path remains a friendly, negotiated transaction. To demonstrate our commitment to a friendly transaction, we verbally communicated to you an increase to our proposed price to acquire Depomed to $32.25 from $29.25 per share in Horizon ordinary shares. Despite this significant price increase, which we believed would act as a catalyst to facilitate engagement with Depomed, our revised proposal was summarily rejected. The continued lack of engagement with Horizon to negotiate a transaction as well as the governance measures you have put in place to disenfranchise your shareholders in an attempt to prevent or delay a transaction are inconsistent with how your investors have communicated they would like Depomeds board and management to proceed.
In our effort to pursue a friendly, negotiated transaction, we are prepared to further increase our proposal price to $33.00 per share in Horizon ordinary shares, contingent on Depomed rapidly entering into good faith discussions regarding a transaction. Based on public information available to us, we believe $33.00 is a full and fair price for Depomed and represents an approximate 60 percent premium to the Depomed share price on the day prior our original proposal being made public. We urge you to thoughtfully evaluate this revised proposal and engage with us to facilitate a transaction over the next several days. We and our advisors stand ready to immediately meet with your management team and board to negotiate a mutually acceptable agreement.
This letter does not create any binding obligation on the part of Horizon. No such obligation will exist until a mutually acceptable definitive agreement is executed.
Best regards,
/s/ Timothy P. Walbert
Chairman, President and Chief Executive Officer
On the same day, Depomed confirmed receipt of the revised acquisition proposal from Horizon.
On July 23, 2015, Mr. Walbert contacted Mr. Schoeneck to yet again encourage discussions on the potential combination.
From July 9, 2015 through July 28, 2015, Horizon, through its indirect wholly-owned subsidiary, Horizon Pharma, Inc., purchased approximately 750,000 shares of Depomed common stock, representing approximately 1.25% of the outstanding shares of Depomed common stock as of May 8, 2015.
On July 29, 2015, Depomed issued a press release announcing that its board had unanimously rejected Horizons July 21, 2015 offer of $33.00 per share in Horizon ordinary shares.
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On the same day, Depomed sent a letter to Horizon stating that the Depomed Board had rejected the revised acquisition proposal from Horizon.
On July 30, 2015, Mr. Walbert had a discussion with Mr. Schoeneck to request feedback regarding a value and terms that would compel Depomed to engage with Horizon. Mr. Schoeneck committed to follow up within one day.
On July 31, 2015, Morgan Stanley and Leerink, financial advisors to Depomed, informed Citi and Jefferies, financial advisors to Horizon, that Depomed again would not be providing any guidance other than that Horizon should submit a substantially more compelling offer.
On the same day, Mr. Walbert sent a letter via email to Mr. Schoeneck further clarifying Horizons proposal to ensure consistency with the message being delivered to Depomed by its financial advisors and reiterating the value being offered by Horizon to the Depomed shareholders. Additionally, the letter made clear that if Depomed did not provide feedback on what value and terms it would be willing to consider and Depomed did not engage in constructive discussions with Horizon, Horizon would take its proposal directly to Depomeds shareholders and challenge the decision making of the Depomed Board.
On August 1, 2015, letters substantially similar to the July 31st letter sent by Mr. Walbert to Mr. Schoeneck were sent via email by Mr. Himawan to Mr. Staple and by Mike Grey, Lead Independent Director of the Horizon board of directors, to Vince Anido, Jr. Ph.D., a member of the Depomed Board.
On August 3, 2015 Horizon filed the solicitation.
On August 3, 2015, Horizon issued a press release announcing, among other things, that it had submitted to Depomed a Record Date Request Notice (as defined in the Depomed bylaws), which we refer to as Horizons Record Date Request Notice, to begin the process for calling a Depomed shareholder meeting to consider the proposals set forth in the solicitation (other than the election proposal, which Horizon subsequently proposed adding to the agenda of what Horizon is now calling the Removal and Bylaw Amendments Special Meeting in the solicitation pursuant to a supplement to Horizons Record Date Request Notice, which we refer to as the Supplemental Record Date Request Notice, submitted to Depomed on August 19, 2015) and delivered such notice to Depomed in accordance with the terms of the Depomed bylaws.
On the same day, Horizon announced it is judicially challenging the Depomed Rights Agreement and the Depomed bylaws amendments that delay and make more difficult the calling of a special meeting. See the section of this prospectus/offer to exchange titled The OfferCertain Legal Matters for additional background on the foregoing litigation.
On that same day, Horizon sent a letter to Depomed requesting clarification as to how Depomed would apply certain portions of the Depomed bylaws to the special meeting process.
On the same day, Depomed announced it would review Horizons Record Date Request Notice and that Depomed was filing a lawsuit to assert a claim for violation of the California Uniform Trade Secrets Act and breach of contract and alleging that Horizon made fraudulent and misleading statements to Depomed shareholders. Depomed also filed a copy of the complaint on a current report filed with the SEC. See the section of this prospectus/offer to exchange titled The OfferCertain Legal Matters for additional background on the foregoing litigation.
On August 6, 2015, the Horizon Board held a regularly scheduled meeting in Dublin, Ireland, and discussed, among other things, a possible combination with Depomed and authorized the offer and second-step merger, including the inclusion of the cash component and the election.
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On August 7, 2015, Mr. Schoeneck publicly released a letter to Mr. Walbert indicating its unwillingness to make a counter offer to Horizons proposal.
On August 10, 2015, Depomed sent a letter to Horizon asking Horizon to clarify the first proposal set forth in Horizons Record Date Request Notice submitted to Depomed on August 3, 2015 and confirming that unaffiliated beneficial owners of shares of Depomed common stock will not be required to provide information that would not be customary for a solicitation process of this nature.
On August 12, 2015, Horizon sent a letter to Depomed in response to the letter immediately above providing clarification with respect to the proposal and acknowledging Depomeds confirmation that unaffiliated beneficial owners of shares of Depomed common stock would not be required to provide information that would not be customary for a solicitation process of this nature.
On August 13, 2015, Horizon issued a press release and delivered a letter to the Depomed Board reiterating its proposal to acquire Depomed for $33.00 per share in Horizon ordinary shares and fixing the exchange ratio of such offer based at 0.95 Horizon ordinary shares for each share of Depomed common stock based on the 15-day volume weighted average price of a Horizon ordinary share as of August 12th, or $34.74 per share. Additionally, in that same press release and letter, Horizon announced that, subject to its ongoing discussions with Depomed shareholders, it would be willing to amend the proposal to offer Depomed shareholders a cash-stock mix with up to 25% of the consideration in cash at the election of each respective Depomed shareholder, subject to certain terms and conditions, including a reduction in the total consideration per share to $32.50 per share to partially offset incremental costs associated with including cash as a component of the consideration. The letter read as follows:
August 13, 2015
Board of Directors
Depomed, Inc.
7999 Gateway Blvd., Suite 300
Newark, CA 94560
Dear Madam and Sirs:
We and many of your largest shareholders continue to be disappointed by Depomeds unwillingness to sit down with us, sign a confidentiality agreement, and engage in good faith discussions that would lead to a successful combination of our two companies. The vast majority of shareholders we speak to believe Horizon Pharma and Depomed together would comprise a powerful new enterprise. Your shareholders would benefit significantly from the combination of our two companies in two ways: first, from the initial 60% premium we have offered and, second, from being an owner in the new company which, together, we believe would offer greater upside potential as a leading global biopharmaceutical company.
Since we made our initial acquisition proposal of $29.25 a share on May 27th, we have acted in good faith and attempted to engage in consensual negotiations. Depomeds initial private rejection on June 25th of our $29.25 offer was followed by your advisors suggestion that Depomed would engage with us if we increased our offer by $3.00 a share from $29.25 to $32.25. In an act of good faith and reliance on that guidance, we privately moved our offer to $32.25. Not only did Depomed renege and not engage, on July 12th, you adopted a poison pill and a series of amendments to Depomeds bylaws, the effect of which was to disenfranchise your shareholders and delay by several months your shareholders ability to call a special meeting and take action on your failure to engage with us. On July 21st, we then publicly communicated our private price increase and even increased our offer from $32.25 to $33.00 a share to once again try to engage in consensual negotiations. Yet again, you publicly rejected our revised proposal of $33.00 that same day.
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In an attempt to exhaust every possibility of engaging in consensual negotiations, we again sought to engage privately with Jim Schoeneck to enter negotiations. When Jim and I spoke on Thursday July 30th, we did indeed offer to discuss value and possibly include cash as a component of our offer in an amount up to 25% and Jim stated it was helpful and he would potentially come back to us with a counter proposal after discussing our proposal with a few people. Importantly, I communicated to Jim that our willingness to discuss value and possibly include cash in our offer was conditioned upon Depomed entering into consensual negotiations. The next day, Depomeds advisors simply told us they have no feedback and we needed to bid higher, focusing not on value but on some notion of pro forma revenue contribution. This reversal is further evidence of the boards apparent unwillingness to deal with Horizon Pharma in good faith.
Therefore, we want to make clear to you that:
| We stand by our proposal to acquire all the outstanding shares of Depomed for $33.00 a share in Horizon Pharma stock, assuming we can come to a negotiated agreement quickly. |
| We will fix the exchange ratio based on the 15-day volume weighted average price of Horizon Pharmas stock as of August 12th, which is $34.74 per share, and results in an exchange ratio of .95 Horizon Pharma shares for every Depomed share. |
| As we indicated to Jim Schoeneck in private discussions on Thursday July 30th, we would be willing to make our proposal a cash-stock mix with up to 25% of the consideration in cash at the election of Depomeds shareholders. To that end, we have begun to discuss with your shareholders their preference for a proposal with this consideration option. As we do so, we are also highlighting to your shareholders that there are obvious costs to us and to them associated with including cash as a component of consideration. These costs include: |
| Breakage costs of approximately $38 million associated with Depomeds current convertible bonds that are triggered upon cash consideration exceeding 10%. |
| Financing commitment costs associated with a cash offer equal to greater than $2 million per month. |
| While we stand by our $33.00 per share all-stock offer, if Depomeds shareholders prefer, we would alternatively be prepared to offer a combination of cash and stock at $32.50 per share to partially offset the above incremental costs associated with including cash as a component of the consideration. |
Additionally, we believe Depomeds shareholders understand that the period of time one can extract value from patented pharmaceutical products is finite. Depomeds medicines are no different. Based on our analysis, every three months of delay to the consummation of a transaction between our companies reduces the value of Depomeds assets to us by approximately $50 million. Further, Depomed is not investing in internal research capable of discovering new clinical candidates and is therefore dependent upon acquiring additional medicines to build future value. However, it appears to investors and us that Depomeds ability to borrow additional funds to affect potential acquisitions is substantially limited by its current levels of debt. As a result, your entrenchment tactics to date, if used to lengthen the time required to consummate a transaction, could actually cost Depomeds shareholders considerable value.
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We urge you to act now by sitting down with us to negotiate a mutually beneficial transaction that would serve the best interests of both Depomeds and Horizon Pharmas shareholders. We remain confident Depomeds shareholders will support such efforts.
Best regards,
/s/ Timothy P. Walbert
Timothy P. Walbert
Chairman, President and Chief Executive Officer
On the same day, Depomed issued a press release, among other things, commenting on the Horizon August 13, 2015 letter and indicating that the Depomed Board, consistent with its fiduciary duties, would carefully review and evaluate the revised offer to determine the course of action it believes is in the best interests of Depomed and its shareholders.
On August 13, 2015 and August 14, 2015, Horizon, through its indirect wholly-owned subsidiary, Horizon Pharma, Inc., purchased 350,000 and 400,000 shares of Depomed common stock, respectively, and as of August 14, 2015 held an aggregate of 1,500,000 shares of Depomed common stock, representing approximately 2.5% of the outstanding shares of Depomed common stock as of July 30, 2015.
On August 17, 2015, Mr. Walbert sent a letter via email to Mr. Schoeneck reiterating Horizons desire to reach a consensually negotiated transaction that is mutually beneficial to the companies respective shareholders, and noting that based solely upon feedback from Depomed investors, it was Horizons understanding that Mr. Schoeneck and the Depomed Board were ready to meaningfully engage with Horizon. To pave the way for meaningful dialogue, a confidentiality agreement was included with the letter for Depomeds review and execution.
From August 17, 2015, through August 19, 2015, Horizon, through its indirect wholly-owned subsidiary, Horizon Pharma, Inc., purchased 750,000 shares of Depomed common stock, and now holds an aggregate of 2,250,000 shares of Depomed common stock, representing approximately 3.7% of the outstanding shares of Depomed common stock as of July 30, 2015.
On August 19, 2015, Horizon submitted to Depomed the Supplemental Record Date Request Notice to provide for the additional proposal to elect the Horizon nominees to the Depomed Board, and delivered such notice to Depomed in accordance with the Depomed bylaws.
On the same day, Horizon issued a press release announcing the election proposal and the Horizon nominees to the Depomed Board.
On the same day, Horizon filed an amendment to the Horizon solicitation with the SEC to amend the purposes of the special meeting of Depomed shareholders to include the election of the Horizon nominees to the Depomed Board, contingent upon the proposal to remove the current Depomed Board being passed by the Depomed shareholders.
On the same day, following Horizons submission of the Supplemental Record Date Request Notice, issuance of its foregoing press release and filing of its amendment to the solicitation with the SEC, Depomed issued a press release and delivered a letter to Horizon announcing that the Depomed Board had unanimously rejected the Horizon proposal as reiterated by Horizon on August 13, 2015 at a fixed exchange ratio of 0.95 Horizon ordinary shares for each share of Depomed common stock. The Depomed Board also pre-emptively rejected Horizons possible amendment of the Horizon proposal to offer Depomed shareholders a cash-stock mix with up to 25% of the consideration in cash at the election of each respective Depomed shareholder, subject to certain terms and conditions.
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On August 21, 2015, Horizon Pharma, Inc. filed an ex parte application with the Superior Court of the State of California, County of Santa Clara, for an order to shorten the time for the Court to hear a preliminary injunction motion to enjoin enforcement of the Depomed Rights Agreement and Sections 2(b), 2(c) and 2(d) of the Depomed bylaws. That same day, Depomed filed an ex parte application with the Court for expedited discovery, a briefing schedule and hearing on a preliminary injunction motion for Depomeds claims. See the section of this prospectus/offer to exchange titled The OfferCertain Legal Matters for additional background on the foregoing litigation.
On the same day, Depomed sent a letter to Horizon indicating, among other things, that it viewed Horizons Record Date Request Notice as premature and that it would be willing to treat Horizons Record Date Request Notice, together with the Supplemental Record Date Request Notice, as a new Record Date Request Notice under the Depomed bylaws that Depomed would deem to have been delivered as of August 19, 2015 rather than August 3, 2015, thereby at a minimum delaying the setting of the request record date for a special meeting by up to 16 days from Horizons initial submission of Horizons Record Date Request Notice.
On August 26, 2015, Horizon sent the following letter in response to the foregoing Depomed letter that, among other things, asked that Depomed reconsider such rejection but affirmed that, under Depomeds then-current interpretation of the Depomed bylaws, Horizon was willing to request a second, additional special meeting of shareholders to consider and vote upon the election proposal:
August 26, 2015
Depomed, Inc.
7999 Gateway Blvd, Suite 300
Newark, CA 94560
Attention: Matthew M. Gosling, Senior Vice President
General Counsel and Secretary
Re: Your August 21, 2015 Correspondence
Ladies and Gentlemen:
Horizon Pharma, Inc. (HPI), a Delaware corporation and indirect wholly-owned subsidiary of Horizon Pharma public limited company (HPP and, together with HPI, Horizon), and HPP are writing in response to the August 21, 2015 letter from Depomed, Inc. (the Company) to Horizon.
Your August 21 letter confirms to us our view that the Companys current board of directors (the Board) and management are not acting in the best interests of the Companys shareholders and are working primarily to entrench themselves and impede shareholder action by imposing non-substantive procedural hurdles that serve only to unnecessarily waste corporate assets and cause unwarranted delay.
As your letter recounts, on August 3, 2015, we submitted a record date request notice to the Company under the Companys current bylaws (the Record Date Request Notice) and filed a preliminary solicitation statement with the U.S. Securities and Exchange Commission (the SEC) (the Solicitation Statement) to call a special meeting of the Companys shareholders (the Special Meeting) to consider and vote on three stand-alone proposals to (1) remove the current Board, contingent on the shareholder election of successor directors, (2) amend the Companys current bylaws to eliminate what we believe are illegal and onerous procedural and informational requirements imposed on shareholder-called special meetings and shareholder proposals by the Board and (3) restrict the Board from further amending the Companys bylaws to prevent any further delay and entrenchment tactics from the Board and management. Your letter claims in particular that it was unclear [both] what was contemplated by the foregoing removal proposal because no proposal to elect new directors was included and how the Board could continue to operate effectively if the removal proposal was adopted by the
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Companys shareholders, then incorrectly concluding that our Record Date Request Notice was premature. Both our Record Date Request Notice and the Solicitation Statement were crystal clear on such points. As stated in each, if such removal proposal were adopted, the directors will remain on the Board until successors are duly elected and qualified at a special or annual meeting of the shareholders of the Company. The Company would continue to operate under the current Board until successors were elected. We again emphasized this in a letter to the Company dated August 12, 2015 and in our August 14, 2015 and August 19, 2015 amended Solicitation Statements.
A proposal to elect new directors is obviously not a required element of our Record Date Request Notice or the calling of the Special Meeting.
On August 19, 2015, however, after having identified a slate of highly qualified, independent replacement directors before the Company had set any request record date and consistent with the Companys current bylaws, we submitted a supplement to the Record Date Request Notice that added a proposal to elect new directors contingent on the adoption of our removal proposal. That same day, we accordingly filed a second amended Solicitation Statement to include such election proposal. In these materials, we also stated our belief that such supplement should be treated as having been delivered as of August 3 so as not to restart the 28-day period the Board has granted itself under the Companys current bylaws to set a request record date.
We believed, and continue to believe, that the Company must, if it is acting in the best interests of its shareholders, accept our August 19 supplement to the August 3rd Record Date Request Notice. On August 19, we merely supplemented the Record Date Request Notice before the Company had set a request record date and before we had filed any definitive solicitation statement for the Special Meeting. The Company is not, therefore, prejudiced in any way by such supplement and based on an August 3 date for the Record Date Request Notice, still had nearly two weeks from the August 19 supplement to consider our consolidated Record Date Request Notice under its own self-made special meeting process. In fairly and timely supplementing the Record Date Request Notice, we had every hope in holding a single special meeting at which shareholders can vote on the simultaneous removal and replacement of the incumbent Board. Yet, whether this would be possible was and remains up to the Board.
As your August 21 letter makes clear, the Company has rejected our supplement under the Companys self-made special meeting process based on no apparent good corporate governance principle. Instead, the Company has offered us and its other shareholders a choice between delay and more delay. As your letter suggests, for the Company to entertain [our] consolidated [R]ecord [D]ate [R]equest [N]otice and permit us to avoid the delay, expense, waste and formality of having to call a second special meeting to consider our election proposal, the Companys shareholders will nonetheless have to suffer up to a 16-day delay in the setting of the request record date, assuming the Company does not notify us of any further flaws it finds in our good-faith attempt to comply with its self-made special meeting process. Alternatively, you suggest that the Company will consider our original Record Date Request Notice without the supplement, requiring us, together with other Company shareholders, to call a second special meeting to consider the election proposal under an entirely new special meeting process under the Companys current bylaws, in addition to any further delays arising from your review of our original Record Date Request Notice.
In offering such equally improper options based on the Companys current bylaws, we cannot help but wonder whether such apparent determination on your part to delay any shareholder action suggests a deeper concern at the Company over how its shareholders, once given a chance, will vote on our proposals, whether presented at one or two special meetings.
That said, we can only assume that you, like us, would like to avoid the needless expense of a second special meeting. If you would reconsider your rejection of our August 19 supplement and accept it as a valid supplement to the August 3rd Record Date Request Notice, please promptly let us and fellow Company shareholders know.
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Assuming you do not reconsider your rejection, then per the request of your August 21 letter, we elect to stand by the Record Date Request Notice as submitted on August 3 without the election proposal and expect that you will set the request record date on or before August 31 as required by the Companys current bylaws. We ask, however, that you then treat our August 19 supplement as a stand-alone record date request notice for a second special meeting under the Companys current bylaws that incorporates any additional information as stated in the August 19 supplement from the Record Date Request Notice.
If you choose to continue treating the Record Date Request Notice and our August 19 supplement as separate record date request notices for separate special meetings under the Companys current bylaws, we ask that the Company set the request record dates for each of the meetings as promptly as practicable and each as of the same date so that the same group of Company shareholders can act in calling the two related special meetings. In our view, there is no legitimate justification for doing it any other way. Moreover, as you know, under the Companys current bylaws, by setting the same request record date for each of the meetings, you would facilitate our ability to call the special meetings as close in time as possible within the same 35-to-60 day window following your receipt of the valid requests to call the special meetings under the Companys current bylaws.
We respectfully request that a copy of this letter be furnished promptly to each member of the Board.
Very truly yours,
HORIZON PHARMA, INC.
/s/ Brian K. Beeler
Executive Vice President, General Counsel
On August 28, 2015, Horizon filed an amendment to the Horizon solicitation with the SEC to provide for the calling of the two related special meetings of Depomed shareholders per the foregoing Horizon letter to consider the removal and bylaw amendment proposals and then the election proposal.
On August 31, 2015, Depomed sent a letter to Horizon indicating that it would set the request record date for a special meeting of shareholders to consider only Horizons removal and bylaw amendment proposals as October 29, 2015. Depomed did not, however, confirm the validity of Horizons original August 3rd Record Date Request Notice for such meeting and reserved the right to nonetheless contest the validity of such notice.
On September 8, 2015, Horizon filed the definitive Horizon solicitation providing for the calling of the two related special meetings of Depomed shareholders to consider the removal and bylaw amendment proposals and the election proposal.
Also on September 8, 2015, Horizon commenced the offer and later that day filed a premerger notification under the HSR Act relating to the proposed acquisition of Depomed.
On September 11, 2015, Horizon filed a preliminary proxy statement with respect to an extraordinary general meeting of Horizon shareholders to obtain their approval of the issuance of Horizon ordinary shares contemplated in connection with the offer and the second-step merger. On September 25, 2015, Horizon filed an amendment to this preliminary proxy statement.
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On October 7, 2015, Horizon sent the following letter to Depomed on behalf of Horizon and the holders of more than 10% of the outstanding shares of Depomed common stock requesting that Depomed notice and hold the two special meetings of Depomed shareholders to consider the removal and bylaw amendment proposals and the election proposal:
October 7, 2015
Depomed, Inc.
7999 Gateway Blvd, Suite 300
Newark, CA 94560
Attention: Depomed, | Inc. Board of Directors; and |
Matthew | M. Gosling, Senior Vice President |
General | Counsel and Secretary |
Re: | Request for Special Meetings of Shareholders of Depomed, Inc. |
Ladies and Gentlemen:
In accordance with Section 2(d) of Depomed, Inc.s (you or the Company) Amended and Restated Bylaws, effective July 12, 2015 (the Bylaws), the undersigned Company shareholder Horizon Pharma, Inc., a wholly owned subsidiary of Horizon Pharma public limited company (we or the Requesting Shareholder), on its own behalf as the holder of record of 2,250,000 shares of common stock, no par value, of the Company (Company Common Stock) and on behalf of all other Company shareholders who have submitted WHITE and BLUE proxy cards and voting instruction forms to the Requesting Shareholder authorizing it to submit the Special Meeting Requests included with this letter as the Removal and Bylaw Amendments Special Meeting Request Form and the Election Special Meeting Request Form (the Horizon Special Meeting Request Forms) (collectively with the Requesting Shareholder, the Requesting Shareholders), hereby submits the Horizon Special Meeting Request Forms and accompanying proxy cards and voting instruction forms to request that you notice and hold two special meetings of the Companys shareholders (the Special Meetings) for the purposes and the matters proposed to be acted on at the Special Meetings set forth in (i) the Record Date Request Notice (as defined in the Bylaws) delivered to the Company by the Requesting Shareholder on August 3, 2015 (the Removal and Bylaw Amendments Record Date Request Notice) and (ii) the Record Date Request Notice delivered to the Company by the Requesting Shareholder on August 19, 2015 (the Election Record Date Request Notice and, collectively with the Removal and Bylaw Amendments Record Date Request Notice, the Horizon Record Date Request Notices).
The Requesting Shareholder, together with the other Requesting Shareholders, is the holder of more than 10% of the outstanding shares of Company Common Stock as of September 8 or September 17, 2015, the most recent dates on which Mediant Communications and Broadridge have updated their respective lists of beneficial owners of shares of Company Common Stock, as applicable.
The Board of Directors and management now know the extent to which the Companys shareholders want the Special Meetings to be held. Given the substantial shareholder support, the Board of Directors should call the Special Meetings now or accelerate the Request Record Dates (as defined in the Bylaws).
We understand that shareholders have until the Record Request Dates that you set to revoke their proxies and certain shareholders may elect to sell shares of Company Common Stock before then. However, given todays submission, the Company cannot legitimately expect for there to be less than 10% of shareholders supporting the request on the applicable Request Record Date. As you know, this solicitation is merely to call the Special Meetings. Both the Company and the Requesting Shareholder will have ample opportunity to make their case to shareholders on the merits of the proposals once the Special Meetings are called.
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Despite the submission accompanying this letter, the Requesting Shareholder intends to, and reserves the right to, continue soliciting and submitting WHITE and BLUE proxy cards and voting instruction forms from additional shareholders.
The Company has heard what proxy advisory firms ISS, Glass Lewis and Proxy Mosaic think and now it knows what its shareholders are thinking. Accordingly, we urge the Company to permit the Requesting Shareholder to set the date for the Special Meetings without further undue delay. Copies of the reports of ISS, Glass Lewis and Proxy Mosaic are attached hereto.
Accordingly, the Requesting Shareholder respectfully requests that the Company recognize that the Horizon Record Date Request Notices comply with the Bylaws and, without further undue delay, permit the Requesting Shareholder to set the date for the Special Meetings as December 4, 2015, or such other date as the Requesting Shareholder and the Company may mutually determine to be appropriate to ensure the timely exercise of the shareholders franchise.
As we have said, we stand ready to meet with you to negotiate a consensual transaction that would be in the best interests of our respective shareholders. Clearly, a combination of our two businesses makes strategic and financial sense and the sooner we can come to an agreement the sooner shareholders can realize the potential benefits.
Sincerely yours,
HORIZON PHARMA, INC. |
/s/ Timothy P. Walbert |
Name: Timothy P. Walbert |
Title: Chairman, President and CEO |
On October 9, 2015, Depomed sent a letter to Horizon indicating, among other things, that it viewed Horizons deliveries of the special meeting requests as premature and only after the two record dates of October 29 and November 13, 2015 would Horizon be able to deliver a valid special meeting request pursuant to the Depomed bylaws for each such meeting.
Effective October 9, 2015, the HSR Condition was satisfied by the expiration of the waiting period.
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We believe that the combination of Horizon Pharma and Depomed represents a strategically compelling and value-creating opportunity for Depomed shareholders and Horizon Pharma and its shareholders. The offer should be compelling to Depomed shareholders as they will receive:
| Significant Immediate Value. Based on the closing price of a share of Depomed common stock on NASDAQ on July 6, 2015 (i.e., $20.64 per share of Depomed common stock), the last full trading day before Horizon made public its proposal to acquire Depomed, and the 15-day volume weighted average price of a Horizon ordinary share as of August 12, 2015 (i.e., $34.74 per Horizon ordinary share), the Horizon share price used to calculate the share exchange ratio, the offer represented a premium of $12.36 per share of Depomed common stock, or approximately 60% above the closing price per share of Depomed common stock on July 6, 2015. |
| Substantial Long-Term Value. Depomed shareholders will have a substantial ongoing equity interest in the combined company, allowing Depomed shareholders to benefit from the synergies and growth opportunities of the combined company. |
We believe that a combined Horizon and Depomed will have substantial strategic benefits, including:
| Increased Diversification and Complementary Products. The combined company will be significantly larger and more diversified than either company individually today, with 13 marketed products and more than 700 sales representatives, and will be positioned for future sustainable growth. For example, while NUCYNTA currently accounts for approximately 60% of Depomeds net sales, on a pro forma basis, no single medicine would have comprised more than 21% of the combined companys net sales for the second quarter of 2015. Additionally, Depomeds marketed products are complementary to Horizons existing products and fit within Horizons specialty and primary care business units. |
| Combined Revenue. We believe that the combined company will be able to achieve significantly greater revenue than either company alone. On a pro forma basis, we estimate that the combined company would have had $497.1 million of total net revenues for the six months ended June 30, 2015, which on an annualized basis would result in approximately $1.0 billion in 2015 net revenues. We also believe the combined company will be able to achieve greater net sales of Depomeds products than Depomed could achieve by remaining an independent company as a result of a larger combined sales force and through adoption of our differentiated commercial model, including our Prescriptions Made Easy, or PME, program. Pursuant to our commercialization plans for the combined company, we expect to implement a sales force consisting of (i) 290 sales representatives dedicated to NUCYNTA and Gralise, (ii) a separate 40 person neurology focused sales force to promote CAMBIA and (iii) Zipsor promoted by Horizons 325 person primary care force. Horizon has historically used its commercial model to increase significantly the revenue of products it has acquired. For example, in the first quarter of 2014 Horizon successfully re-launched VIMOVO in the United States, which it acquired from AstraZeneca in November 2013, and increased its annual net sales from $20.0 million in 2013 under AstraZeneca to $163.0 million for 2014, an increase of over 800%. In the first quarter of 2015 Horizon successfully re-launched PENNSAID 2%, which it acquired from Nuvo Research Inc. in October of 2014, and increased its net sales to $47.6 million in the first half of 2015, as compared to full-year net sales of approximately $14.0 million in 2014 under Mallinckrodt Pharmaceuticals, Nuvo Research Inc.s then marketing partner for PENNSAID 2%. |
| Lower Borrowing Rate. The combined company will have a lower borrowing rate on existing debt obligations than Depomeds current borrowing rate. Horizon raised $1.775 billion in four financings in March through May 2015 and lowered its weighted-average annual cash interest rate on debt to approximately 4.7%, compared to the weighted-average annual cash interest rate on debt of approximately 7.7% for Depomed. Further, after excluding the interest costs on Horizons outstanding exchangeable notes and Depomeds outstanding convertible notes, Horizons and Depomeds weighted-average annual cash interest rates would be 5.7% and 10.8%, respectively. |
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| Enhanced Ability to Execute on Growth Strategy. We believe that the combined company would be better positioned to execute on Horizons strategy of achieving both organic growth and growth through acquisitions and in-licensing by increasing its market capitalization, as well as strengthening its balance sheet, free cash flow and capitalization, thereby further enabling the combined company to execute on larger potential acquisition transactions. |
| Improved Tax Efficiencies. The combined company will remain an Irish public limited company with an efficient corporate structure to support the combined companys organic growth and its acquisition strategy. We expect the combined company to have a mid-single digit cash tax rate, increasing to the low-teens over the next five years, which will be significantly lower than Depomeds reported tax rate for its fiscal year 2014 and its expected future cash tax rate after use of its net operating losses. Depomeds combined effective federal and state tax rate for its fiscal year 2014 was 38.2% under existing law. |
| Synergies. As a result of the proposed transaction, we believe that the costs of operating Depomeds existing business could be significantly reduced through the elimination of certain general and administrative costs, including consolidation of locations, reductions in headcount, and elimination of duplicate external costs, including public company expenses. |
Except if the Depomed Board refuses to remove the obstacles it has imposed, including the obstacles described in the Anti-Takeover Device Condition, we believe that there are no material obstacles to consummating the offer and the second-step merger expeditiously:
| No Significant Regulatory Hurdles to Business Combination. Based on publicly available information, Horizon believes that only clearance under the HSR Act is required to complete the offer and the second-step merger and that clearance under the HSR Act was obtained as of October 9, 2015. |
| Available Cash Funding. Horizon expects to have sufficient cash resources available to complete the transactions contemplated by the offer and the second-step merger and to pay fees, expenses and other related amounts, as discussed in more detail in the section of this prospectus/offer to exchange titled The OfferSource and Amount of Funds. |
We realize there can be no assurance about future results, including results expected as described in the reasons listed above, such as assumptions regarding potential synergies or other benefits to be realized following the offer. Horizon Pharmas reasons for the offer and all other information in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections of this prospectus/offer to exchange titled Risk Factors and Forward-Looking Statements.
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Horizon is offering to exchange, for each issued and outstanding share of Depomed common stock, validly tendered and not withdrawn before the expiration date, the Stock Consideration set forth on the cover page of this prospectus/offer to exchange. No fractional Horizon ordinary shares will be issued upon exchange of shares of Depomed common stock and, you will receive cash in lieu of any fractional Horizon ordinary shares to which you may be entitled.
The offer will expire at 5:00 p.m., Eastern time, on November 6, 2015, unless Horizon extends the period of time for which the offer is open, in which case the expiration time will be the latest time and date on which the offer, as so extended, expires.
The offer is subject to a number of conditions, which are described in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer. Horizon expressly reserves the right, subject to the applicable rules and regulations of the SEC, to waive any condition of the offer described herein in its discretion, except for the Competition Laws Condition, Registration Statement Condition, Anti-Takeover Device Condition, Horizon Shareholder Approval Condition, and Stock Exchange Listing Condition, each of which cannot be waived. Horizon expressly reserves the right to make any changes to the terms and conditions of the offer (subject to any obligation to extend the offer pursuant to the applicable rules and regulations of the SEC).
If you are the owner of record of your shares of Depomed common stock and you tender your shares of Depomed common stock in the offer, you will not have to pay any brokerage fees or similar expenses. If you own your shares of Depomed common stock through a broker, dealer, commercial bank, trust company or other nominee and your broker, dealer, commercial bank, trust company or other nominee tenders your shares of Depomed common stock on your behalf, your broker or such other nominee may charge a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.
The purpose of the offer is for Horizon to acquire control of, and as soon as practicable thereafter, the entire equity interest of, Depomed. Horizon intends, as soon as practicable after the consummation of the offer, to cause Depomed to merge with Purchaser, after which Depomed would be a direct, wholly-owned subsidiary of Horizon. Since making its initial public proposal on July 7, 2015, and subsequent proposals on July 21, 2015, and August 13, 2015, Horizon has continued to publicly express a desire to enter into a negotiated business combination with Depomed and publicly announced the proposals that Horizon has submitted to the Depomed Board. Despite our repeated attempts to engage the Depomed Board and Depomeds management in friendly and confidential discussions, the Depomed Board and Depomeds management have refused to engage in meaningful discussions with us, have rejected Horizons prior proposals, and have even created new obstacles for shareholder consideration of our proposed combination with Depomed by, among other things, amending the Depomed bylaws to hinder Depomed shareholders statutory right to call a special meeting and the process for shareholder proposal submission and adopting the Depomed Rights Agreement, or so-called poison pill, that precludes a party from acquiring the 10% of the votes of Depomed necessary to call a special shareholders meeting or privately soliciting up to ten other shareholders for the purpose of calling a special meeting.
In light of Depomeds unwillingness to meaningfully engage with Horizon with respect to a negotiated transaction and the Depomed Boards public statements with respect to Horizons prior proposals, and because Horizon does not believe that it is appropriate for the Depomed Board to have a veto right over whether the offer is made available to Depomed shareholders, Horizon is making the offer directly to Depomed shareholders on the terms and conditions set forth in this prospectus/offer to exchange as an alternative to a negotiated transaction. See the section of this prospectus/offer to exchange titled Background of the Offer.
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In the event Horizon accepts shares of Depomed common stock for exchange in the offer, Horizon intends to acquire Depomed pursuant to the second-step merger. After the second-step merger, former remaining Depomed shareholders will no longer have any ownership interest in Depomed and will be shareholders of Horizon.
See the sections of this prospectus/offer to exchange titled The OfferPurpose of the Offer; Second-Step Merger; The OfferStatutory Requirements; Approval of Second-Step Merger and The OfferPlans for Depomed.
Subject to applicable law, Horizon reserves the right to amend the offer in any respect or terminate it, including in connection with entering into a merger agreement with Depomed. Holders of Depomed common stock should be aware that no merger agreement has been entered into between Horizon and Depomed. See the sections of this prospectus/offer to exchange titled The OfferPlans for Depomed and The OfferExtension, Termination and Amendment.
Horizon estimates that, assuming that all outstanding shares of Depomed common stock are tendered in the offer, upon the consummation of the offer and the second-step merger, to exchange the former Depomed shareholders (including former holders of Depomeds outstanding convertible notes) will own, in the aggregate, approximately 32.2% of the shares of the combined company then outstanding, or approximately 31.7% on a fully diluted basis. For a more detailed discussion of the assumptions on which these estimates are based, see the section of this prospectus/offer to exchange titled The OfferOwnership of Horizon After the Offer.
Unless otherwise specifically noted herein, all references to dollars and $ shall refer to U.S. dollars.
Consideration Payable in the Second-Step Merger
In the second-step merger, each remaining share of Depomed common stock (other than shares held by Horizon and its affiliates and shares held in treasury by Depomed) will be cancelled and converted into the right to receive the Stock Consideration with respect to such shareholders shares. See the sections of this prospectus/offer to exchange titled The OfferPurpose of the Offer; Second-Step Merger and The OfferStatutory Requirements; Approval of the Second-Step Merger.
The offer is scheduled to expire at 5:00 p.m., Eastern time, on November 6, 2015, unless extended by Horizon. For more information, you should read the discussion under the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment.
Extension, Termination and Amendment
Subject to the applicable rules and regulations of the SEC and the terms and conditions of the offer, Horizon expressly reserves the right (but will not be obligated) (1) to extend, for any reason, the period of time during which the offer is open; (2) to delay acceptance for exchange of, or the exchange of, shares of Depomed common stock in order to comply in whole or in part with applicable law (any such delay shall be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires Horizon to pay the consideration offered or to return shares of Depomed common stock deposited by or on behalf of Depomed shareholders promptly after the termination or withdrawal of the offer); (3) to amend or terminate the offer without accepting for exchange or exchanging any shares of Depomed common stock, including under circumstances where any of the conditions referred to in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer have not been satisfied or if Horizon or any of its affiliates enters into a definitive agreement or announces an agreement in principle with Depomed providing for a merger or other business combination or transaction with or involving Depomed or any of its subsidiaries, or the purchase or exchange of securities or assets of Depomed or any of its subsidiaries, or Horizon and Depomed reach any other agreement or understanding, in either case,
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pursuant to which it is agreed or provided that the offer will be terminated; and (4) to amend the offer or to waive any conditions to the offer at any time, except for the Competition Laws Condition, Registration Statement Condition, Anti-Takeover Device Condition, Horizon Shareholder Approval Condition and Stock Exchange Listing Condition, in each case by giving oral or written notice of such delay, termination, waiver or amendment to the exchange agent and by making public announcement thereof.
Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by a public announcement thereof. In the case of an extension, the related announcement will be issued no later than 9:00 a.m. Eastern time, on the next business day after the previously scheduled expiration time. Subject to applicable law (including Rules 14d-4(d)(i), 14d-6(c) and 14e-1 under the Exchange Act, which require that any material change in the information published, sent or given to Depomed shareholders in connection with the offer be promptly disseminated to shareholders in a manner reasonably designed to inform shareholders of such changes) and without limiting the manner in which we may choose to make any public announcement, Horizon will have no obligation to publish, advertise or otherwise communicate any information of this type, other than by issuing a press release or other announcement.
Rule 14e-1(c) under the Exchange Act requires Horizon to pay the consideration offered or return the shares of Depomed common stock tendered promptly after the termination or withdrawal of the offer.
If Horizon increases or decreases the percentage of shares of Depomed common stock being sought or the consideration offered in the offer and the offer is scheduled to expire at any time before the expiration of 10 business days from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified above, the offer will be extended until the expiration of 10 business days from, and including, the date of such notice. If Horizon makes a material change in the terms of the offer (other than a change in the percentage of securities sought or the consideration offered in the offer) or in the information concerning the offer, or waives a material condition of the offer, Horizon will extend the offer, if required by applicable law, for a period sufficient to allow Depomed shareholders to consider the amended terms of the offer. Horizon will comply with Rule 14d-4(d)(2) under the Exchange Act in connection with material changes to the terms of the offer.
This prospectus/offer to exchange, the letter of transmittal and all other relevant materials are being mailed to record holders of shares of Depomed common stock and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Depomeds shareholders lists, or, if applicable, who are listed as participants in a clearing agencys security position listing for subsequent transmittal to beneficial owners of shares of Depomed common stock by Horizon.
As used in this prospectus/offer to exchange, when we refer to a business day, we mean any day other than a Saturday, Sunday or federal holiday, and consisting of the time period from 12:01 a.m. through 12:00 midnight, Eastern time. If, prior to the expiration time, Horizon increases the consideration being exchanged for shares of Depomed common stock pursuant to the offer, such increased consideration will be received by all shareholders whose shares of Depomed common stock are exchanged pursuant to the offer, whether or not such shares of Depomed common stock were tendered prior to the announcement of the increase of such consideration.
No subsequent offering period will be available after the offer.
Exchange of Shares of Depomed Common Stock; Delivery of Horizon Ordinary Shares
Upon the terms and subject to the conditions of the offer (including, if the offer is extended or amended, the terms and conditions of any extension or amendment), Horizon will accept for exchange promptly after the expiration time all shares of Depomed common stock validly tendered and not properly withdrawn (in accordance with the procedure set out in the section of this prospectus/offer to exchange titled The Offer
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Withdrawal Rights) prior to the expiration time. Horizon will exchange all shares of Depomed common stock validly tendered and not withdrawn promptly following the acceptance of shares of Depomed common stock for exchange pursuant to the offer. Horizon expressly reserves the right, in its discretion, but subject to the applicable rules and regulations of the SEC, to delay acceptance for and thereby delay exchange of shares of Depomed common stock in order to comply in whole or in part with applicable laws or if any of the conditions referred to in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer have not been satisfied or if any event specified in that section has occurred. All Horizon ordinary shares to be issued to holders of Depomed common stock in connection with the offer or the second-step merger shall be issued in uncertificated book entry form.
In all cases, Horizon will exchange all shares of Depomed common stock tendered and accepted for exchange pursuant to the offer only after timely receipt by the exchange agent of: (1) the certificates representing such shares of Depomed common stock (or a timely confirmation of a book-entry transfer of such shares of Depomed common stock into the exchange agents account at DTC, pursuant to the procedures set forth in the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering, which we refer to as a book-entry confirmation), (2) the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agents Message and (3) any other documents required under the letter of transmittal. When we refer to an Agents Message, we mean a message transmitted by DTC to, and received by, the exchange agent and forming a part of the book-entry confirmation which states that DTC has received an express acknowledgment from the participant in DTC tendering the shares of Depomed common stock that are the subject of such book-entry confirmation, that such participant has received and agrees to be bound by the letter of transmittal and that Horizon may enforce such agreement against such participant.
For purposes of the offer, Horizon will be deemed to have accepted for exchange, and thereby exchanged, shares of Depomed common stock validly tendered and not properly withdrawn, if and when Horizon gives oral or written notice to the exchange agent of Horizons acceptance for exchange of such shares of Depomed common stock pursuant to the offer. Upon the terms and subject to the conditions of the offer, exchange of shares of Depomed common stock accepted for exchange pursuant to the offer will be made by deposit of the Stock Consideration being exchanged therefor with the exchange agent, which will act as agent for tendering Depomed shareholders for the purpose of receiving the Stock Consideration from Horizon and transmitting such Stock Consideration to tendering Depomed shareholders whose shares of Depomed common stock have been accepted for exchange. Under no circumstances will Horizon pay interest on the Stock Consideration for shares of Depomed common stock, regardless of any extension of the offer or other delay in making such exchange.
If any tendered shares of Depomed common stock are not accepted for exchange for any reason, or if certificates representing such shares of Depomed common stock are submitted evidencing more shares of Depomed common stock than are tendered, certificates evidencing unexchanged or untendered shares of Depomed common stock will be returned, without expense, to the tendering Depomed shareholder (or, in the case of Depomed common stock tendered by book-entry transfer into the exchange agents account at DTC pursuant to the procedures set forth below under the section in this prospectus/offer to exchange titled The OfferProcedure for Tendering, such shares of Depomed common stock will be credited to an account maintained at DTC), promptly following expiration or termination of the offer.
Horizon reserves the right to transfer or assign, in whole or in part from time to time to one or more of its affiliates, the right to exchange all or any portion of the shares of Depomed common stock tendered pursuant to the offer, but any such transfer or assignment will not relieve Horizon of its obligations under the offer or prejudice the rights of the tendering Depomed shareholders to exchange shares of Depomed common stock validly tendered and accepted for exchange pursuant to the offer.
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Cash in Lieu of Fractional Horizon Ordinary Shares
Horizon will not issue certificates representing fractional Horizon ordinary shares pursuant to the offer or second-step merger. To the extent that you would be entitled to fractional shares, those fractional entitlements will be paid in cash in the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the closing price of a Horizon ordinary share on NASDAQ on the last business day prior to the date that Horizon accepts shares of Depomed common stock for exchange pursuant to the offer.
Procedure for Tendering Shares
In order for Depomed shareholders to validly tender shares of Depomed common stock pursuant to the offer, the exchange agent must receive prior to the expiration time the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, together with any required signature guarantees or, in the case of a book-entry transfer, an Agents Message, and any other documents required by the letter of transmittal, at one of its addresses set forth on the back cover of this prospectus/offer to exchange and either (1) the certificates representing tendered shares of Depomed common stock must be received by the exchange agent at such address or such shares of Depomed common stock must be tendered pursuant to the procedure for book-entry transfer described below and a book-entry confirmation must be received by the exchange agent (including an Agents Message), in each case prior to the expiration time, or (2) the tendering Depomed shareholder must comply with the guaranteed delivery procedures described below.
The method of delivery of share certificates and all other required documents, including delivery through DTC, is at the option and risk of the tendering Depomed shareholder, and the delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.
Book-Entry Transfer
The exchange agent will establish accounts with respect to the shares of Depomed common stock at DTC for purposes of the offer. Any financial institution that is a participant in the system of DTC may make a book-entry delivery of shares of Depomed common stock by causing DTC to transfer such shares of Depomed common stock into the exchange agents account at DTC in accordance with DTCs procedures for such transfer. However, although delivery of shares of Depomed common stock may be effected through book-entry transfer at DTC, an Agents Message and any other required documents must, in any case, be received by the exchange agent at one of its addresses set forth on the back cover of this prospectus/offer to exchange prior to the expiration time. Delivery of documents to DTC does not constitute delivery to the exchange agent.
Signature Guarantees
No signature guarantee is required on a letter of transmittal (1) if the letter of transmittal is signed by a registered holder of shares of Depomed common stock who has not completed either the box titled Special Issuance or Payment Instructions or the box titled Special Delivery Instructions on the letter of transmittal or (2) if shares of Depomed common stock are tendered for the account of a financial institution that is a member of the Security Transfer Agent Medallion Signature Program, or by any other Eligible Guarantor Institution, as such term is defined in Rule 17Ad-15 under the Exchange Act (each of which we refer to as an Eligible Institution). In all other cases, all signatures on letters of election and transmittal must be guaranteed by an Eligible Institution. If a certificate representing shares of Depomed common stock is registered in the name of a person other than the signer of the letter of transmittal, then such certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate, with the signature(s) on such certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the letter of transmittal.
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Guaranteed Delivery
If a Depomed shareholder desires to tender shares of Depomed common stock pursuant to the offer and such shareholders certificates representing such shares of Depomed common stock are not immediately available, such shareholder cannot deliver such certificates and all other required documents to the exchange agent prior to the expiration time, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such shares of Depomed common stock may nevertheless be tendered, provided that all the following conditions are satisfied:
1. | the tender is made by or through an Eligible Institution; |
2. | a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Horizon, is received by the exchange agent prior to the expiration time as provided below; and |
3. | the share certificates (or book-entry confirmation) representing all tendered shares of Depomed common stock, in proper form for transfer, in each case together with the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agents Message in lieu of the letter of transmittal), and any other documents required by the letter of transmittal, are received by the exchange agent within three NASDAQ trading days after the date of execution of such notice of guaranteed delivery. |
The notice of guaranteed delivery may be delivered by hand or mail or by facsimile transmission to the exchange agent and must include a guarantee by an Eligible Institution in the form set forth in such notice of guaranteed delivery.
In all cases, exchange of shares of Depomed common stock tendered and accepted for exchange pursuant to the offer will be made only after timely receipt by the exchange agent of the certificates representing such shares of Depomed common stock, or a book-entry confirmation of the delivery of such shares of Depomed common stock, and the letter of transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agents Message, and any other documents required by the letter of transmittal.
Determination of Validity
Horizons interpretation of the terms and conditions of the offer (including the letter of transmittal and the instructions thereto) will be final and binding to the fullest extent permitted by law. All questions as to the form of documents and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any shares of Depomed common stock will be determined by Horizon in its discretion, which determination shall be final and binding to the fullest extent permitted by law. Horizon reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. Horizon also reserves the absolute right to waive any condition of the offer to the extent permitted by applicable law except for the Competition Laws Condition, Registration Statement Condition, Anti-Takeover Device Condition, Horizon Shareholder Approval Condition and Stock Exchange Listing Condition. No tender of shares of Depomed common stock will be deemed to have been validly made until all defects and irregularities relating thereto have been cured or waived. None of Horizon or any of its respective affiliates or assigns, the exchange agent, the information agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.
A tender of shares of Depomed common stock pursuant to any of the procedures described above will constitute the tendering Depomed shareholders acceptance of the terms and conditions of the offer, as well as the tendering Depomed shareholders representation and warranty to Horizon that (1) such shareholder owns the tendered shares of Depomed common stock (and any and all other shares of
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Depomed common stock or other securities issued or issuable in respect of such shares of Depomed common stock), (2) the tender complies with Rule 14e-4 under the Exchange Act, (3) such shareholder has the full power and authority to tender, sell, assign and transfer the tendered shares of Depomed common stock (and any and all other shares of Depomed common stock or other securities issued or issuable in respect of such shares of Depomed common stock) and (4) when the same are accepted for exchange by Horizon, Horizon will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims.
The acceptance for exchange by Horizon of shares of Depomed common stock pursuant to any of the procedures described above will constitute a binding agreement between the tendering Depomed shareholder and Horizon upon the terms and subject to the conditions of the offer.
Appointment
By executing a letter of transmittal, or through delivery of an Agents Message, as set forth above, a tendering Depomed shareholder irrevocably appoints designees of Horizon as such shareholders agents, attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the letter of transmittal, to the full extent of such shareholders rights with respect to the shares of Depomed common stock tendered by such shareholder and accepted for exchange by Horizon (and with respect to any and all other shares of Depomed common stock or other securities issued or issuable in respect of such shares of Depomed common stock on or after the date of the commencement of the offer). All such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered shares of Depomed common stock (and such other shares of Depomed common stock and securities). Such appointment will be effective when, and only to the extent that, Horizon accepts such shares of Depomed common stock for exchange. Upon appointment, all prior powers of attorney and proxies given by such shareholder with respect to such shares of Depomed common stock (and such other shares of Depomed common stock and securities) will be revoked, without further action, and no subsequent powers of attorney or proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Horizon will, with respect to the shares of Depomed common stock (and such other shares of Depomed common stock and securities) for which the appointment is effective, be empowered to exercise all voting, consent and other rights of such shareholder as they in their discretion may deem proper at any annual or special meeting of Depomed shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Horizon reserves the right to require that, in order for shares of Depomed common stock to be deemed validly tendered, immediately upon Horizons acceptance of shares of Depomed common stock for exchange, Horizon must be able to exercise full voting, consent and other rights with respect to such shares of Depomed common stock (and such other shares of Depomed common stock and securities).
The foregoing proxies are effective only upon acceptance for exchange of shares of Depomed common stock tendered pursuant to the offer. The offer does not constitute a solicitation of proxies (absent an exchange of shares of Depomed common stock) for any meeting of Depomed shareholders, which will be made only pursuant to separate proxy materials complying with the requirements of the rules and regulations of the SEC.
Tenders of shares of Depomed common stock made pursuant to the offer are irrevocable except that such shares of Depomed common stock may be withdrawn at any time prior to the expiration time and, if Horizon has not accepted shares of Depomed common stock for exchange, at any time following 60 days from commencement of the offer. If Horizon elects to extend the offer, is delayed in its acceptance for exchange of shares of Depomed common stock or is unable to accept shares of Depomed common stock for exchange pursuant to the offer for any reason, then, without prejudice to Horizons rights under the offer, the exchange agent may, on behalf of Horizon, retain tendered shares of Depomed common stock, and such shares of Depomed common stock may not be withdrawn except to the extent that tendering Depomed shareholders are entitled to withdrawal rights as
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described in this section. Any such delay will be by extension of the offer to the extent required by law. See the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment.
For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the exchange agent at one of its addresses set forth on the back cover page of this prospectus/offer to exchange. Any such notice of withdrawal must specify the name of the person who tendered the shares of Depomed common stock to be withdrawn, the number of shares of Depomed common stock to be withdrawn and the name of the registered holder of such shares of Depomed common stock, if different from that of the person who tendered such shares of Depomed common stock. If certificates representing shares of Depomed common stock to be withdrawn have been delivered or otherwise identified to the exchange agent, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the exchange agent and, unless such shares of Depomed common stock have been tendered by or for the account of an Eligible Institution, the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution. If shares of Depomed common stock have been tendered pursuant to the procedure for book-entry transfer as set forth in the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares of Depomed common stock.
Withdrawals of tendered shares of Depomed common stock may not be rescinded. Any tendered shares of Depomed common stock properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the offer. However, withdrawn shares of Depomed common stock may be re-tendered at any time prior to the expiration time by following one of the procedures described in the section of this prospectus/offer to exchange titled The OfferProcedure for Tendering.
All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Horizon in its discretion, which determination will be final and binding to the fullest extent permitted by law. None of Horizon or any of its respective affiliates or assigns, the exchange agent, the information agent or any other person will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification.
Announcement of Results of the Offer
Horizon will announce the final results of the offer, including whether all of the conditions to the offer have been satisfied or waived and whether Horizon will accept the tendered shares of Depomed common stock for exchange after the expiration time. The announcement will be made by a press release.
Certain Tax Consequences of the Transactions
This section contains a general discussion of the material U.S. federal income and Irish tax consequences of the Transactions. For purposes of this discussion, the term Transactions includes the formation and capitalization of Purchaser, the offer, the second-step merger and, possibly, a third-step merger that may be executed immediately following the second-step merger, if deemed appropriate by Horizon, in which Depomed would be merged with and into Diosail Merger Two Corporation a directly, wholly-owned Delaware subsidiary of Horizon that has been formed solely to participate in a possible third-step merger. The separate corporate existence of Purchaser will cease as a result of the second-step merger, and Depomed will continue as the surviving entity and as a wholly-owned subsidiary of Horizon. If the third-step merger is completed, the separate corporate existence of Depomed will cease as a result of the third-step merger, and Diosail Merger Two Corporation will continue as the surviving entity and as a wholly-owned subsidiary of Horizon.
The discussion under the caption U.S. Federal Income Tax Consequences of the Transactions addresses (i) the material U.S. federal income tax consequences of the Transactions to Depomed and Horizon and (ii) the material U.S. federal income tax consequences to U.S. holders (as defined below) of exchanging shares of Depomed common stock for Horizon ordinary shares and/or cash in the Transactions. This discussion is based in
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part on certain representations and other statements made in certificates delivered to counsel in the course of preparing this discussion. If any such representations and other statements made in such certificates is inaccurate, or by the time of the completion of the Transactions becomes inaccurate, then the discussion may no longer be accurate. No ruling has been or will be requested from the IRS in connection with the Transactions. No opinion of counsel regarding the tax treatment of the Transactions will be delivered in connection with the Transactions beyond the discussion set forth below. There is no closing condition with respect to any step of the Transactions to the effect that the Transactions will result in any particular tax treatment. The IRS will not be precluded from asserting and a court will not be precluded from sustaining, a conclusion contrary to the statements contained in this description. Accordingly, there can be no assurance that any particular U.S. federal income tax treatment will be obtained. All holders of Depomed common stock are advised and expected to consult their own tax advisors regarding the U.S. federal income tax consequences of the Transactions in light of their personal circumstances and the consequences of the Transactions under U.S. federal non-income tax laws and state, local, and non-U.S. tax laws.
The discussion of the Transactions and of ownership and disposition of shares received in the Transactions under Certain Irish Tax Consequences of the Transactions addresses certain Irish tax considerations of the Transactions.
The discussion below is not a substitute for an individual analysis of the tax consequences of the Transactions. You should consult your own tax adviser regarding the particular U.S. (federal, state and local), Irish and other non-U.S. tax consequences of these matters in light of your particular situation.
U.S. Federal Income Tax Consequences of the Transactions
Scope of Discussion
The following is a summary of the material U.S. federal income tax consequences of the Transactions generally expected to be applicable to Horizon, Depomed and Horizon shareholders and to U.S. holders of Depomed common stock. The summary is based upon the existing provisions of the Code, applicable U.S. Treasury Regulations, which we refer to as the Treasury Regulations, judicial authority, administrative rulings effective as of the date hereof, and the income tax treaty between Ireland and the United States, which we refer to as the tax treaty. These laws and authorities are subject to change, possibly with retroactive effect. Any such change, which may or may not be retroactive, could alter the tax consequences to the holders of Depomed common stock as described herein. The discussion below does not address any state, local or non-U.S. tax consequences or any U.S. federal tax consequences other than U.S. federal income tax consequences (such as estate and gift tax consequences) that are applicable to U.S. holders. The tax treatment of the Transactions to the holders of Depomed common stock will vary depending upon their particular situations.
The summary below is limited to U.S. holders who hold shares of Depomed common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). It is intended only as a summary of the material U.S. federal income tax consequences of the Transactions and does not purport to be a complete analysis or listing of all of the potential tax effects relevant to participating in the Transactions. In particular, this discussion does not deal with all U.S. federal income tax considerations that may be relevant to particular holders in light of their particular circumstances, such as (a) holders who are dealers, brokers or traders in securities, (b) holders who are subject to the alternative minimum tax provisions of the Code, (c) holders who are non-U.S. persons or entities, (d) holders who are grantor trusts, banks, financial institutions, insurance companies, regulated investment companies, real estate investment trusts, or tax-exempt entities, (e) holders who are (i) partnerships, limited liability companies that are not treated as corporations for U.S. federal income tax purposes, subchapter S corporations, and other pass-through or fiscally transparent entities or (ii) persons who hold their Depomed common stock through such an entity, (f) holders who acquired their Depomed common stock in connection with stock option or stock purchase plans or in other compensatory transactions, (g) holders
who hold Depomed common stock as part of an integrated investment (including a straddle) comprised of
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Depomed common stock, and one or more other positions or other risk reduction strategy, (h) holders who hold Depomed common stock subject to the constructive sale provisions of Section 1259 of the Code, (i) holders who are certain former citizens or residents of the United States, (j) holders who have a functional currency other than the dollar, (k) holders that own (or are deemed to own, indirectly or by attribution) 5% or more of the Depomed common stock prior to the Transactions or 5% or more of the Horizon ordinary shares following the Transactions, (l) holders who generally mark their securities to market for U.S. federal income tax purposes, or (m) holders who hold shares that constitute qualified small business stock within the meaning of Section 1202 of the Code.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Depomed common stock, the tax treatment of a partner generally will depend on the status of the partner and on the activities of the partnership. Partnerships holding shares of Depomed common stock and partners in such partnerships should consult their tax advisers.
For purposes of this discussion, a U.S. holder is a beneficial owner of Depomed common stock that is, for U.S. federal income tax purposes, (i) a citizen or resident of the United States, (ii) a U.S. domestic corporation or an entity taxable as a U.S. domestic corporation, (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if a U.S. court can exercise primary supervision over the trusts administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or the trust has made a valid election to be treated as a U.S. person under applicable Treasury Regulations.
The following discussion does not address (a) the tax consequences of transactions effectuated before, after, or at the same time as the Transactions, whether or not they are in connection with the Transactions, including, without limitation, transactions in which Depomed shares are acquired or Horizon shares are disposed of, (b) the tax consequences to holders of options issued by Depomed that are assumed, replaced, exercised, or converted, as the case may be, in connection with the Transactions, (c) the tax consequences of the receipt of Horizon shares other than in exchange for Depomed shares or (d) the tax consequences of the ownership or disposition of Horizon shares acquired in the Transactions.
Certain U.S. Federal Income Tax Consequences of the Transactions to Horizon, Depomed and Horizon Shareholders
Horizon, Depomed and the Horizon shareholders will recognize no gain or loss for U.S. federal income tax purposes solely as a result of the Transactions.
Section 7874 of the Code provides that if, following an acquisition of a U.S. corporation by a foreign corporation, at least 80% of the acquiring foreign corporations stock (by vote or value) is considered to be held by former shareholders of the U.S. corporation by reason of holding stock of such U.S. corporation and the expanded affiliated group which includes the acquiring foreign corporation does not have substantial business activities in the country in which the acquiring foreign corporation is created or organized, then the foreign corporation would be treated as a U.S. corporation for U.S. federal tax purposes even though it is a corporation created and organized outside the United States. Although Depomed shareholders are expected to receive less than 80% (by both vote and value) of the shares in Horizon by reason of their ownership of Depomed common stock, Horizon would nevertheless be treated as a U.S. corporation for U.S. federal tax purposes if the Transactions were integrated with the Vidara Merger.
For purposes of determining whether the 80% threshold described in the preceding paragraph is met, multiple acquisitions of U.S. corporations by a foreign corporation, if made pursuant to a plan or series of related transactions, are treated as a single acquisition. If multiple acquisitions of U.S. corporations are treated as a single acquisition, all shareholders of the acquired U.S. corporations would be aggregated to determine if the 80% threshold is met.
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Horizon believes that, in the Vidara Merger, the Horizon, Inc. shareholders received less than 80% (by both vote and value) of the shares of Horizon and consequently that the test set forth above to treat Horizon as a foreign corporation was satisfied. However, the law and Treasury regulations promulgated under Section 7874 of the Code are relatively new and somewhat unclear, and the IRS may not agree that the requirements to treat Horizon as a foreign corporation were met in the Vidara Merger. Moreover, even if such requirements were met in the Vidara Merger, the IRS may assert that the Transactions should be integrated with the Vidara Merger. In the event the IRS were to prevail with such assertion, Horizon would be treated as a U.S. corporation for U.S. federal tax purposes. Because the Horizon Board did not consider the possibility of acquiring Depomed before February 24, 2015, Horizon does not believe that the Transactions should be integrated with the Vidara Merger. As a consequence, Horizon does not believe that it should be treated as a U.S. corporation for U.S. federal income tax purposes as a result of the Transactions, but it cannot assure you that the IRS will agree with this position and/or would not successfully challenge Horizons status as a foreign corporation. If such a challenge by the IRS were successful, significant adverse tax consequences would result for Horizon. We have assumed for the purpose of this discussion that Horizon will be treated as a foreign corporation.
Certain U.S. Federal Income Tax Consequences of the Transactions to Depomed Shareholders
The material U.S. federal income tax considerations of the Transactions for the Depomed shareholders will depend on (a) whether the Transactions constitute or do not constitute a reorganization within the meaning of Section 368 of the Code and (b) whether the Transactions (or any step thereof) are (is) a transaction subject to Section 367(a)(1) of the Code. It is the intention of Horizon that the Transactions qualify as such a reorganization; however, if Horizon is unable to complete the various steps of the Transactions as contemplated, for example, if litigation interrupts the completion of the Transactions, the Transactions may not qualify as a reorganization.
Section 367(a)(1) of the Code and the Treasury Regulations promulgated thereunder provide that where a U.S. shareholder exchanges stock in a U.S. corporation for stock in a foreign corporation in a transaction that qualifies as a reorganization within the meaning of Section 368(a) of the Code, the U.S. shareholder is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met. Whether the requirements are met depends on the facts that exist at the effective time of the reorganization. While it is expected that these requirements will be satisfied, no assurance can be given that the IRS will not challenge whether the Transactions met these requirements or that a court would not sustain such a challenge. If at the effective time of the Transactions a requirement to exempt the Transactions from Section 367(a)(1) of the Code is not met, a U.S. holder of Depomed common stock would recognize gain, but not loss on the exchange of Horizon ordinary shares for Depomed common stock.
If the Transactions constitute a reorganization within the meaning of Section 368 of the Code and Section 367(a)(1) of the Code does not apply
If the Transactions will be completed as described in this prospectus/offer to exchange and are deemed a single integrated transaction, the Transactions will constitute a reorganization within the meaning of Section 368 of the Code. Assuming that the Transactions will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368 of the Code and Section 367(a)(1) of the Code does not apply, the following material U.S. federal income tax consequences will result:
| Subject to the discussion below regarding the treatment of cash received in lieu of fractional shares, a holder of Depomed common stock who receives Horizon ordinary shares will not recognize gain or loss on the exchange; |
| The aggregate tax basis of the Horizon ordinary shares received by a Depomed shareholder in the Transactions (including any fractional share deemed received, as described below) will be equal to the aggregate tax basis of the shares of Depomed common stock surrendered in exchange therefor; |
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| The holding period of the Horizon ordinary shares received by a Depomed shareholder in the Transactions will include the holding period of the shares of Depomed common surrendered in exchange therefor; and |
| Generally, cash payments received by Depomed shareholders in lieu of fractional Horizon ordinary shares will be treated as if such fractional shares were issued in the Transactions and then redeemed by Horizon for cash resulting in a recognition of gain or loss equal to the difference, if any, between the shareholders basis in the fractional share and the amount of cash received. The gain or loss recognized by shareholders will be a capital gain and will be long term capital gain if the shareholders holding period for its Depomed common stock is more than one year. |
For purposes of the above discussion of the bases and holding periods for shares of Depomed common stock and Horizon ordinary shares, shareholders who acquired different blocks of Depomed common stock at different times for different prices must calculate their gains and losses and holding periods separately for each identifiable block of such stock exchanged, converted, cancelled, or received in the Transactions.
If the Transactions do not constitute a reorganization within the meaning of Section 368 of the Code
If the Transactions do not constitute a reorganization within the meaning of Section 368 of the Code because all of the steps required for qualification as a reorganization are not completed or are completed but under circumstances such that the steps are not treated as a single integrated transaction for U.S. federal income tax purposes, the following material U.S. federal income tax consequences will result:
| The Transactions will be treated as a taxable exchange of Horizon ordinary shares for Depomed common stock. U.S. holders of Depomed common stock should recognize gain or loss on the exchange equal to the difference between the fair market value of the Horizon ordinary shares received in the Transactions and the U.S. holders adjusted tax basis in the Depomed common stock surrendered in the Transactions. Any such gain or loss will be capital gain or loss and will be a long-term capital gain or loss if the U.S. holder has held its Depomed common stock for more than one year at the time of the U.S. holders disposition of the Depomed common stock pursuant to the Transactions. Any capital gain or loss will be a short-term gain or loss if the holding period for the Depomed common stock is one year or less at such time. The use of a capital loss to offset other income is subject to limitations. |
| A U.S. holder that recognizes gain or loss pursuant to the Transactions will have an adjusted tax basis in the Horizon ordinary shares received equal to the fair market value of the Horizon ordinary shares at the time of the U.S. holders disposition of the Depomed common stock pursuant to the Transactions. The holding period for the Horizon ordinary shares received by a U.S. holder will commence on the day after such date. |
If the Transactions qualify as a reorganization but Section 367(a)(1) of the Code applies
If the Transactions constitute a reorganization within the meaning of Section 368 of the Code but the requirements that must be satisfied to avoid the application of Section 367(a)(1) of the Code to the Transactions are not met, the following material U.S. federal income tax consequences will result:
| U.S. holders of Depomed common stock will recognize gain but not loss on the exchange of their Depomed common stock for Horizon ordinary shares. The amount of gain recognized will equal the difference between the fair market value of the Horizon ordinary shares received in the Transactions and the U.S. holders adjusted tax basis in the Depomed common stock surrendered in the Transactions. Any such gain will be capital gain and will be a long-term capital gain if the U.S. holder has held its Depomed common stock for more than one year at the time of the U.S. holders disposition of the Depomed common stock pursuant to the Transactions. Any capital gain will be a short-term gain if the holding period for the Depomed common stock is one year or less at such time. |
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| A U.S. holder that recognizes gain pursuant to the Transactions will have an adjusted tax basis in the Horizon ordinary shares received equal to the fair market value of the Horizon ordinary shares at the time of the U.S. holders disposition of the Depomed common stock pursuant to the Transactions. The holding period for the Horizon ordinary shares received by a U.S. holder will commence on the day after such date. |
| A U.S. holder that has a loss inherent in its shares of Depomed common stock will not recognize that loss. The U.S. federal income tax consequences of the Transactions for that U.S. holder will be the same as those that would apply if the Transactions qualified as a reorganization within the meaning of Section 368 of the Code and Section 367(a)(1) of the Code did not apply, as discussed above. |
Information Reporting and Backup withholding
In general, information reporting requirements will apply to cash consideration received by U.S. holders of Depomed common stock in lieu of fractional Horizon ordinary shares. Certain noncorporate Depomed shareholders may be subject to backup withholding, currently at a rate of 28%, on cash received in lieu of fractional ordinary shares, if any, pursuant to the Transactions. Backup withholding will not apply, however, to a Depomed shareholder who (a) furnishes a correct taxpayer identification number and certifies that the Depomed shareholder is not subject to backup withholding on IRS Form W-9 or a substantially similar form, (b) provides a certification of foreign status on an appropriate Form W-8 or successor form, or (c) is otherwise exempt from backup withholding. If a Depomed shareholder does not provide a correct taxpayer identification number on IRS Form W-9 or a substantially similar form, the Depomed shareholder may be subject to penalties imposed by the IRS. Holders should consult their tax advisers regarding the application of information reporting and backup withholding to their particular situations and whether any amount withheld may be allowed as a refund or a credit against the holders U.S. federal income tax liability.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY. EACH HOLDER OF DEPOMED COMMON STOCK SHOULD CONSULT HIS, HER OR ITS TAX ADVISER AS TO THE PARTICULAR CONSEQUENCES THAT MAY APPLY TO SUCH HOLDER.
Certain Irish Tax Consequences of the Transactions to Horizon
Irish stamp duty generally arises in connection with the transfer of shares of an Irish company or the transfer of shares in a non-Irish company in exchange for shares of an Irish company, in each case unless an exemption applies. Accordingly, the exchange of shares of Depomed common stock for the issue of Horizon ordinary shares would be subject to Irish stamp duty unless exemption applies. We believe, however, that Horizon may be able to obtain a confirmation from the Revenue Commissioners of Ireland that:
(a) | Irish stamp duty should not apply to a transfer of shares of Depomed common stock through the systems of the Depository Trust Company, which we refer to herein as DTC, where those shares of Depomed common stock are listed on NASDAQ; and |
(b) | the Revenue Commissioners of Ireland will not seek to levy Irish stamp duty in connection with the transfer of shares of Depomed common stock where such duty arises solely because the issue of Horizon ordinary shares comprises a portion of the consideration being paid in respect of such transfer because each of those transactions, taken separately (i.e., the issue of Horizon ordinary shares and the transfer of shares of Depomed common stock), would not individually give rise to such a charge. |
Horizon intends to request the aforementioned written confirmation of the Revenue Commissioners of Ireland and an acknowledgement that no Irish stamp duty will apply in connection with the second-step merger by operation of law.
There is no guarantee however that the Revenue Commissioners will provide either or both of the above referenced confirmations in connection with the offer or the second-step merger. In the event that the Revenue
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Commissioners do not grant an applicable confirmation and Irish stamp duty applies to a transfer of a share of Depomed common stock in connection with the offer or second-step merger, such stamp duty would be chargeable at a rate of 1 percent of the market value of such share of Depomed common stock as at the date of transfer and Purchaser would be liable for paying such tax.
Certain Irish Tax Consequences of the Transactions to Future Holders of Horizon Ordinary Shares
The rate of stamp duty (where applicable) on transfers of shares of Irish incorporated companies is 1% of the price paid or the market value of the shares acquired, whichever is greater. Where Irish stamp duty arises it is generally a liability of the transferee or in the case of a transfer by way of a gift or for less than market value, all parties to the transfer. Irish stamp duty (if any) may become payable by holders of shares of Depomed common stock following the completion of the offer or the second-step merger in connection with the transfer of the Horizon ordinary shares received in connection with the Transactions, subject to the below.
Shares Held through DTC
A transfer of Horizon ordinary shares effected by means of the transfer of book entry interests in DTC will not be subject to Irish stamp duty.
Shares Held Outside of DTC or Transferred into or out of DTC
A transfer of Horizon ordinary shares where any party to the transfer holds such shares outside of DTC may be subject to Irish stamp duty. A Horizon shareholder who holds Horizon ordinary shares outside of DTC may transfer those shares into DTC without giving rise to Irish stamp duty provided that the Horizon shareholder would be the beneficial owner of the related book-entry interest in those shares recorded in the systems of DTC (and in exactly the same proportions) as a result of the transfer and at the time of the transfer into DTC there is no sale of those book-entry interests to a third party being contemplated by the Horizon shareholder. Similarly, a Horizon shareholder who holds Horizon ordinary shares through DTC may transfer those shares out of DTC without giving rise to Irish stamp duty provided that the Horizon shareholder would be the beneficial owner of the shares (and in exactly the same proportions) as a result of the transfer, and at the time of the transfer out of DTC there is no sale of those shares to a third party being contemplated by the Horizon shareholder.
Due to the potential Irish stamp duty charge on transfers of Horizon ordinary shares, it is strongly recommended that those Depomed shareholders who do not hold their shares through DTC (or through a broker who in turn holds such shares through DTC) should arrange for the transfer of any Horizon ordinary shares received in connection with the Transactions into DTC as soon as possible following the completion of the offer or the closing of the second-step merger, as applicable.
IN LIGHT OF THE FOREGOING, HOLDERS ARE URGED TO CONSULT AND MUST RELY ON THE ADVICE OF THEIR OWN TAX ADVISERS REGARDING THE TAX CONSEQUENCES TO THEM OF THE TRANSACTIONS, INCLUDING APPLICABLE U.S. FEDERAL, STATE, LOCAL, IRISH AND OTHER FOREIGN, AND OTHER TAX CONSEQUENCES.
Ownership of Horizon After the Offer
Upon consummation of the offer and the second-step merger, former Depomed shareholders (including former holders of Depomeds outstanding convertible notes) will own, in the aggregate, approximately 32.2% of the Horizon ordinary shares then outstanding, or approximately 31.7% on a fully diluted basis. These estimates assume that:
| other than as described below, no additional shares of common stock of Depomed are issued during the pendency of the offer and closing of the second-step merger beyond the 60,311,961 shares of Depomed common stock outstanding as of July 30, 2015, as reported in Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015; |
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| no additional ordinary shares of Horizon are issued during the pendency of the offer and closing of the second-step merger beyond the 159,208,982 Horizon ordinary shares outstanding as of August 15, 2015; |
| the closing of the offer will constitute a make-whole fundamental change under the terms of the indenture governing Depomeds convertible notes, all holders of the convertible notes will convert their notes in connection with such make-whole fundamental change and prior to the consummation of the second-step merger, and Depomed will elect to settle such conversions entirely in shares of Depomed common stock (and for purposes of such settlement such shares are valued at $33.00 per share). Based on publicly available information, Horizon estimates that Depomed will need to issue approximately 19,167,261 shares of its common stock in connection with these conversions; |
| each share of Depomed common stock outstanding immediately prior to the closing of the second-step merger, (a) excluding, for purposes of this calculation, the shares of Depomed common stock acquired by Purchaser pursuant to the tender (which shares will be cancelled for no consideration upon the closing of the second-step merger) and (b) including, for purposes of this calculation, the approximately 19,167,261 shares of Depomed common stock Horizon assumes will be issued upon settlement of the Depomed convertible notes and the 2,250,000 shares of Depomed common stock indirectly owned by Horizon through one of its subsidiaries, will be cancelled and automatically converted into the right to receive the Stock Consideration; |
| the information about outstanding Depomed options and restricted stock units contained in Depomeds Annual Report on Form 10-K for the year ended December 31, 2014, is accurate and does not change during the pendency of the offer and closing of the second-step merger and, in connection with the second-step merger, (1) each outstanding option to purchase shares of Depomed common stock will be assumed and converted into an option to purchase Horizon ordinary shares on substantially the same terms (including with respect to vesting) except (A) each such option will be exercisable for that number of Horizon ordinary shares (rounded down to the nearest whole share) equal to the product of (x) the number of shares of Depomed common stock subject to such option immediately prior to the consummation of the second-step merger and (y) the stock exchange ratio (i.e., 0.95), and (B) the exercise price of such option will be appropriately adjusted so that such option has the same intrinsic value immediately before and after such conversion), (2) each outstanding restricted stock unit of Depomed will be cancelled and converted into a restricted stock unit designated in Horizon ordinary shares subject to substantially the same terms (including with respect to vesting) except that such restricted stock unit will be converted into the right to receive a number of Horizon ordinary shares (rounded down to the nearest whole share) equal to the product of (x) the number of shares of Depomed common stock subject to such restricted stock unit immediately prior to the consummation of the second-step merger and (y) the stock exchange ratio (i.e., 0.95), and (3) the treasury method is applied to the Depomed options assuming a per share price of Depomed common stock of $33.00, assuming all outstanding options and restricted stock units vest without forfeitures and all vested options are exercised without lapsing; |
| the number of Horizon options, restricted stock units, performance stock units and warrants outstanding as of August 15, 2015 does not change during the pendency of the offer and closing of the second-step merger and are convertible into 14,464,591 Horizon ordinary shares, which assumes that (1) 2,987,176 Horizon ordinary shares are issuable pursuant to Horizons outstanding performance stock units, which is based on the level of achievement of the performance metrics as of August 15, 2015, and (2) the treasury method is applied to Horizons options and warrants assuming a per share price of Horizon ordinary shares of $34.74, assuming all outstanding options and restricted stock units vest without forfeitures and all vested options are exercised without lapsing; and |
| Horizon repays the Horizon Exchangeable Senior Notes, when such notes mature or are presented for conversion, exclusively in cash from future sources of cash available from operations or new financings. |
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Purpose of the Offer; Second-Step Merger
The purpose of the offer is for Horizon to acquire control of, and as soon as practicable thereafter, the entire equity interest of, Depomed. Horizon intends, as soon as practicable after consummation of the offer, to cause Depomed to merge with Purchaser, after which Depomed would be a direct, wholly-owned subsidiary of Horizon. The purpose of the second-step merger is for Horizon to acquire all issued and outstanding shares of Depomed common stock that are not acquired in the offer.
In the second-step merger, each remaining share of Depomed common stock (other than shares held by Horizon and its affiliates and shares held in treasury by Depomed, if any), which we refer to as a remaining share, will be cancelled and converted into the right to receive the Stock Consideration.
Unless Horizon is able to acquire at least 90% of Depomeds outstanding shares of common stock in the offer, because a vote of a majority of the then outstanding shares of Depomed common stock would be required to approve the second-step merger and a period of several weeks will be needed to comply with applicable shareholder solicitation requirements, there will likely be a delay of several weeks before holders of the remaining shares of Depomed common stock would be able to receive the Stock Consideration in the second-step merger. Horizon does not intend to pay interest on the merger consideration and, because such consideration will be comprised solely of Horizon ordinary shares, if the price of Horizon ordinary shares declines during the pendency of the second-step merger, Depomed shareholders could receive less value for their shares of Depomed common stock upon the consummation of the second-step merger than the value they would have received had they tendered their Depomed common shares into the offer. After the second-step merger, Horizon will own all of the issued and outstanding shares of Depomed common stock. See the sections of this prospectus/offer to exchange titled The OfferStatutory Requirements; Approval of the Second-Step Merger; and The OfferPlans for Depomed.
Statutory Requirements; Approval of the Second-Step Merger
Under Section 1101(e) of the California General Corporation Law, which we refer to as CGCL, if Horizon, through Purchaser, owns more than 50% of the voting power of Depomed following completion of the offer and prior to the second-step merger, and if the second-step merger consideration where to include anything other than non-redeemable Horizon ordinary shares, cash in lieu of receiving fractional shares, or any combination of the two, all holders of outstanding shares of Depomed common stock would be required to consent to the second-step merger. However, because the second-step merger consideration would be the Stock Consideration, comprised solely of Horizon ordinary shares, under the CGCL the second-step merger would need to be approved only by a majority of the holders of Depomed common stock entitled to cast a vote on the matter, and not all holders of outstanding shares of Depomed common stock.
If Horizon acquires, through Purchaser pursuant to the offer or otherwise, at least a majority of the outstanding shares of Depomed common stock, Horizon would be considered an interested party under Section 1203 of the CGCL. In order to comply with the requirements of an interested party under Section 1203 of the CGCL, in the event that Horizon successfully completes the offer, Horizon intends to deliver to the Depomed shareholders whose shares of Depomed common stock are cancelled and converted into the right to receive the Stock Consideration in the second-step merger an affirmative opinion in writing from its independent financial advisor as to the fairness of the consideration to the Depomed shareholders in the second-step merger.
Under Section 1110 of the CGCL, if Horizon acquires, through Purchaser pursuant to the offer or otherwise, at least 90% of the then outstanding shares of Depomed common stock, Horizon will be able to effect the second-step merger without a vote of Depomeds shareholders or approval of the Depomed Board. In such event, Horizon intends to take all necessary and appropriate actions to cause the second-step merger to become effective as promptly as practicable after such acquisition, without a meeting of Depomed shareholders. Under Section 1110(h) of the CGCL, however, if Horizon owns less than all of the outstanding shares of Depomed following the completion of the offer and as of immediately prior to such short-form merger, Horizon must have given at least 20 days prior notice of the short-form merger to each of Depomeds shareholders. If Horizon does not acquire at least 90% of the outstanding shares of Depomed common stock through Purchaser pursuant to the
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offer or otherwise, and a vote of the Depomed shareholders is required under applicable law, a longer period of time may be required to effect the second-step merger. See the section of this prospectus/offer to exchange titled The OfferPurpose of the Offer; Second-Step Merger.
Under the Section 1300(b) of the CGCL, shareholders of a California corporation whose shares are listed on a national securities exchange generally do not have dissenters rights unless the shareholder is required to participate in the offer or merger and by the terms of the offer or merger must accept anything other than shares of a publicly traded corporation, cash in lieu of receiving fractional shares, or any combination of the two. Because Depomed shareholders may elect not to participate in the offer and because both the Depomed common stock and Horizon ordinary shares are listed on NASDAQ, Depomed shareholders do not have dissenters rights in connection with the offer or the second-step merger.
The offer is the first step in Horizons plan to acquire all of the issued and outstanding shares of Depomed common stock. Horizon intends, promptly following acceptance for exchange and exchange of shares of Depomed common stock in the offer, to effect the second-step merger pursuant to which Horizon will acquire all remaining shares of Depomed common stock. See the sections of this prospectus/offer to exchange titled The OfferPurpose of the Offer; Second-Step Merger and The OfferStatutory Requirements; Approval of the Second-Step Merger.
On August 3, 2015, Horizon filed a preliminary solicitation statement pursuant to which it is seeking revocable proxies from Depomed shareholders to empower Horizon to deliver written requests to Depomeds Corporate Secretary to call a special meeting of Depomed shareholders to consider and vote upon the removal proposal and the Depomed bylaws amendment proposals. On August 19, 2015, Horizon filed an amendment to the Horizon solicitation with the SEC to amend the purposes of and the matters to be considered and voted upon at of the special meeting to include the election proposal. On August 28, 2015, Horizon, in response to Depomeds decision to not accept the amendment of the purposes of the special meeting in the Horizon solicitation to include the election proposal without delaying the record date for determining which Depomed shareholders may call the special meeting, further amended the Horizon solicitation to provide for two special meetings, one to consider and vote upon the removal proposal and the Depomed bylaws amendment proposals and a second to consider and vote upon the election proposal. On September 8, 2015, Horizon filed the definitive Horizon solicitation for calling the two special meetings. See the section in this prospectus/offer to exchange titled Background of the Offer for a discussion of Horizons offer to merge with Depomed. In order for Depomeds Corporate Secretary to call a special meeting, Depomed must receive a written request for a special meeting from the holders of record of at least 10% of the outstanding Depomed common stock along with Special Meeting Requests that include substantial amounts of information signed by shareholder submitting the Special Meeting Request (capitalized terms in this sentence are used as defined in the Depomed bylaws). See the section in this prospectus/offer to exchange titled Comparison of Holders Rights.
Since making its initial public proposal on July 7, 2015, and subsequent proposals on July 21, 2015 and August 13, 2015, Horizon has continued to publicly express a desire to enter into a negotiated business combination with Depomed and publicly announced the proposals that Horizon has submitted to the Depomed Board. Despite our repeated attempts to engage the Depomed Board and Depomeds management in friendly and confidential discussions, the Depomed Board and Depomeds management have refused to engage in meaningful discussions with us, have rejected Horizons prior proposals, and have even created new obstacles for shareholder consideration of our proposed combination with Depomed by, among other things, amending the Depomed bylaws to hinder Depomed shareholders statutory right to call a special meeting and the process for shareholder proposal submission and adopting the Depomed Rights Agreement, or so-called poison pill, that precludes a party from acquiring the 10% of the votes of Depomed necessary to call a special shareholders meeting or privately soliciting up to ten other shareholders for the purpose of calling a special meeting.
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In light of Depomeds unwillingness to meaningfully engage with Horizon with respect to a negotiated transaction with Depomed and the Depomed Boards public statements with respect to Horizons prior proposals and because Horizon does not believe that it is appropriate for the Depomed Board to have a veto right over whether the offer is made available to Depomed shareholders, Horizon is making the offer directly to Depomed shareholders on the terms and conditions set forth in this prospectus/offer to exchange as an alternative to a negotiated transaction. See the section of this prospectus/offer to exchange titled Background of the Offer.
If, and to the extent that, Horizon (and/or any of Horizons subsidiaries) acquires control of Depomed or otherwise obtains access to the books and records of Depomed, Horizon intends to conduct a detailed review of Depomeds business, operations, capitalization and management and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such strategies could include, among other things, changes in Depomeds business, facility locations, corporate structure, rationalization of employment and cost levels, research and product development, commercial strategies, capitalization, management structure and personnel or dividend policy.
Except as indicated in this prospectus/offer to exchange, neither Horizon nor any of Horizons subsidiaries has any current plans or proposals that relate to or would result in (1) any extraordinary transaction, such as a merger, reorganization or liquidation of Depomed or any of its subsidiaries, (2) any purchase, sale or transfer of a material amount of assets of Depomed or any of its subsidiaries, (3) any material change in the present dividend policy, or indebtedness or capitalization of Depomed or any of its subsidiaries, (4) any change in the current Depomed Board or management of Depomed or any change to any material term of the employment contract of any executive officer of Depomed, (5) any other material change in Depomeds corporate structure or business, (6) any class of equity security of Depomed being delisted from a national stock exchange or ceasing to be authorized to be quoted in an automated quotation system operated by a national securities association or (7) any class of equity securities of Depomed becoming eligible for termination of registration under Section 12(g)(4) of the Exchange Act.
Effect of the Offer on the Market for Shares of Depomed Common Stock; NASDAQ Listing; Registration under the Exchange Act; Margin Regulations
Effect of the Offer on the Market for the Shares of Depomed common stock
The exchange of shares of Depomed common stock by Horizon pursuant to the offer will reduce the number of shares of Depomed common stock that might otherwise trade publicly and will reduce the number of holders of shares of Depomed common stock, which could adversely affect the liquidity and market value of the remaining shares of Depomed common stock held by the public. The extent of the public market for Depomed common stock and the availability of quotations reported in the over-the-counter market depends upon the number of shareholders holding Depomed common stock, the aggregate market value of the shares remaining at such time, the interest of maintaining a market in the shares on the part of any securities firms and other factors. According to the Depomed 10-K, there were, as of February 25, 2015, 59,558,855 shares of Depomed common stock outstanding held by 23 holders of record. According to the Depomed Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on August 3, 2015, as of July 30, 2015, there were 60,311,961 shares of Depomed common stock outstanding. Horizon intends, as soon as practicable after consummation of the offer, to cause Depomed to merge with Purchaser.
NASDAQ Listing
The shares of Depomed common stock are listed on NASDAQ. Depending upon the number of shares of Depomed common stock exchanged pursuant to the offer and the number of Depomed shareholders remaining thereafter, the shares of Depomed common stock may no longer meet the requirements of NASDAQ for continued listing and may be delisted from NASDAQ. According to NASDAQs published guidelines, NASDAQ would consider delisting the shares of Depomed common stock if, among other things, (1) the number of total shareholders of Depomed should fall below 400, (2) the market value of the publicly held Depomed common stock should fall below $5 million, or (3) the number of publicly held shares of Depomed common
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stock (exclusive of holdings of officers and directors of Depomed and their immediate families and any other person who is the beneficial owner of 10% or more) should fall below 750,000.
If, as a result of the exchange of shares of Depomed common stock pursuant to the offer or otherwise, the shares of Depomed common stock no longer meet the requirements of NASDAQ for continued listing and the listing of the shares of Depomed common stock is discontinued, the market for the shares of Depomed common stock could be adversely affected. If NASDAQ were to delist the shares of Depomed common stock, it is possible that the shares of Depomed common stock would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or other sources. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares of Depomed common stock on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Horizon cannot predict whether the reduction in the number of shares of Depomed common stock that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the shares of Depomed common stock or whether it would cause future market prices to be greater or less than the consideration being offered in the offer. If shares of Depomed common stock are not delisted prior to the second-step merger, then shares of Depomed common stock will cease to be listed on NASDAQ upon consummation of the second-step merger. Horizon intends, promptly after consummation of the offer, to cause Depomed to merge with Purchaser.
Registration Under the Exchange Act
Depomed common stock is currently registered under the Exchange Act. This registration may be terminated upon application by Depomed to the SEC if Depomed common stock is not listed on a national securities exchange and there are fewer than 300 record holders. Termination of registration would substantially reduce the information required to be furnished by Depomed to holders of Depomed common stock and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders meetings and the requirements of Exchange Act Rule 13e-3 with respect to going private transactions, no longer applicable to Depomed common stock. In addition, affiliates of Depomed and persons holding restricted securities of Depomed may be deprived of the ability to dispose of these securities pursuant to Rule 144 under the Securities Act. If registration of Depomed common stock is not terminated prior to the second-step merger, then the registration of Depomed common stock under the Exchange Act will be terminated upon consummation of the second-step merger. Horizon intends, promptly after consummation of the offer, to cause Depomed to merge with Purchaser.
Margin Regulations
Shares of Depomed common stock are currently margin securities, as such term is defined under the rules of the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve Board, which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the offer, it is possible that the shares of Depomed common stock might no longer constitute margin securities for purposes of the margin regulations of the Federal Reserve Board, in which event such shares of Depomed common stock could no longer be used as collateral for loans made by brokers. In addition, if registration of the shares of Depomed common stock under the Exchange Act were terminated, the shares of Depomed common stock would no longer constitute margin securities. Horizon intends, promptly after consummation of the offer, to cause Depomed to merge with Purchaser.
Notwithstanding any other provision of the offer and in addition to (and not in limitation of) Horizons right to extend and amend the offer at any time, in its discretion, Horizon shall not be required to accept for exchange any shares of Depomed common stock tendered pursuant to the offer, shall not (subject to any applicable rules and
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regulations of the SEC, including Rule 14e-1(c) under the Exchange Act) be required to make any exchange for shares of Depomed common stock accepted for exchange and may extend, terminate or amend the offer, if immediately prior to the expiration of the offer, in the reasonable judgment of Horizon, any one or more of the following conditions shall not have been satisfied:
Minimum Tender Condition
There shall have been validly tendered and not properly withdrawn prior to the expiration of the offer, a number of shares of Depomed common stock which, together with any other shares of Depomed common stock that Purchaser then owns or has a right to acquire, is a majority of the total number of outstanding shares of Depomed common stock on a fully diluted basis as of the date that we accept shares of Depomed common stock for exchange pursuant to the offer.
Anti-Takeover Device Condition
The Depomed Board shall have redeemed the poison pill rights issued pursuant to the Depomed Rights Agreement, or those poison pill rights shall have been otherwise rendered inapplicable to the offer and the second-step merger.
Horizon Shareholder Approval Condition
Horizon shareholders shall have approved the issuance of Horizon ordinary shares contemplated in connection with the offer and the second-step merger, in accordance with the rules of NASDAQ, on which the Horizon ordinary shares are listed. Horizon filed a preliminary proxy statement with respect to an extraordinary general meeting of Horizon shareholders to obtain this approval on September 11, 2015.
Competition Laws Condition
The Competition Laws Condition shall have been satisfied. In addition the waiting period (or extension thereof) applicable to the offer and the second-step merger under any applicable antitrust laws and regulations (other than the HSR Act) shall have expired or been terminated, and any approvals or clearances determined by Horizon to be required or advisable thereunder shall have been obtained.
Stock Exchange Listing Condition
The Horizon ordinary shares issuable to Depomed shareholders in connection with the offer and the second-step merger shall have been approved for listing on NASDAQ, subject to official notice of issuance.
Registration Statement Condition
The registration statement of which this prospectus/offer to exchange is a part shall have become effective under the Securities Act. No stop order suspending the effectiveness of the registration statement shall have been issued, and no proceedings for that purpose shall have been initiated or be threatened, by the SEC.
No Injunction Condition
No court or other governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, statute or ordinance, common law, rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award or agency requirement (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the offer and the second-step merger.
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Due Diligence Condition
Horizon shall have been given access to Depomeds non-public information on Depomeds business, assets, and liabilities to complete its confirmatory due diligence review, including access to unredacted versions of all material contracts filed by Depomed with the SEC, managed care contracts, manufacturing supply agreements, manufacturing transfer plans, intellectual property and patent litigation related documents and information, information on Food and Drug Administration required clinical trials and other planned clinical trials and other supply chain and license agreements, and related cost and other financial data, and Horizon shall have concluded, in its reasonable judgment, that there are no material adverse facts or developments concerning or affecting Depomeds business, assets and liabilities that have not been publicly disclosed prior to the commencement of the offer.
No Depomed Material Adverse Effect Condition
Since December 31, 2014, there shall not have occurred any Depomed Material Adverse Effect which has not been cured, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, would reasonably be expected to have or result in a Depomed Material Adverse Effect.
When we refer to a Depomed Material Adverse Effect, we mean any effect, change, claim, event or circumstance, which collectively we refer to as an Effect, that, considered together with all other Effects, is or would reasonably be expected to be or to become materially adverse to, or has or would reasonably be expected to have or result in a material adverse effect on the assets, liabilities (whether matured or unmatured, absolute or contingent, or otherwise), business, financial condition or results of operations of Depomed taken as a whole; provided, that in no event shall any Effects resulting from any of the following, alone or in combination, be deemed to constitute, or be taken into account in determining whether there has occurred, a Depomed Material Adverse Effect: (a) conditions generally affecting the pharmaceutical industry or the U.S. or global economy as a whole, to the extent that such conditions do not have a disproportionate impact on Depomed taken as a whole; (b) general conditions in the financial markets, and any changes therein (including any changes arising out of acts of terrorism, war, weather conditions or other force majeure events), to the extent that such conditions do not have a disproportionate impact on Depomed, taken as a whole; (c) changes in GAAP (or any interpretations of GAAP) or legal requirements applicable to Depomed or any of its subsidiaries; (d) the failure to meet internal projections, forecasts or budgets of revenues, earnings or other financial metrics, in and of itself (it being understood, however, that, except as otherwise provided in clauses (a), (b), (c), or (e) of this sentence, any Effect giving rise to or contributing to any such failure may give rise to a Depomed Material Adverse Effect and may be taken into account in determining whether a Depomed Material Adverse Effect has occurred); or (e) Effects resulting directly from the announcement or pendency of the offer or second-step merger.
Other Conditions to the Offer
None of the following events shall have occurred and be continuing and be of a nature that we determine makes it inadvisable for us to complete the offer or second-step merger:
(1) there shall be threatened, instituted or pending any action, proceeding or application before any court, government or governmental authority or other regulatory or administrative agency or commission, domestic or foreign, (i) which challenges the acquisition by Horizon of Depomed common stock, seeks to restrain, delay or prohibit the consummation of the offer or the second-step merger or seeks to obtain any material damages or otherwise directly or indirectly relates to the offer or the second-step merger, (ii) which seeks to prohibit or impose material limitations on Horizons acquisition, ownership or operation of all or any portion of Horizons or Depomeds businesses or assets (including the businesses or assets of their respective affiliates and subsidiaries) or of Depomed common stock (including, without limitation, the right to vote the shares purchased by Horizon or an affiliate thereof, on an equal basis with all other shares of Depomed common stock on all matters presented to the shareholders of Depomed), or seeks to compel Horizon to dispose of or hold separate all or any portion of its own or Depomeds businesses or assets (including the businesses or assets of their respective
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affiliates and subsidiaries) as a result of the transactions contemplated by the offer or the second-step merger, (iii) which might adversely affect Depomed, Horizon, or any of their respective affiliates or subsidiaries, which we refer to as an Adverse Effect, or result in a diminution in the value of shares of Depomed common stock or the benefits expected to be derived by us as a result of the transactions contemplated by the offer and the second-step merger, which we refer to as a Diminution in Value, or (iv) which seeks to impose any condition to the offer or the second-step merger unacceptable to Horizon, except that this condition will not fail to be satisfied as a result of a governmental entity requiring that Horizon (A) sell, divest, license or otherwise dispose of any and all of the capital stock, assets, rights, products or businesses of either Depomed and its subsidiaries or Horizon and its subsidiaries or (B) accept any other restriction on the activity of Depomed and its subsidiaries or Horizon and its subsidiaries, in each case in connection with any approval determined by Horizon to be required or advisable under any applicable competition law;
(2) other than the waiting periods under the HSR Act and any other applicable antitrust laws and regulations, any statute, rule, regulation or order or injunction shall be sought, proposed, enacted, promulgated, entered, enforced or deemed or become applicable to the offer, the second-step merger or the transactions contemplated by the offer or second-step merger that might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (iv) of paragraph (1) above, except that this condition will not fail to be satisfied as a result of a governmental entity requiring that Horizon (i) sell, divest, license or otherwise dispose of any and all of the capital stock, assets, rights, products or businesses of either Depomed and its subsidiaries or Horizon and its subsidiaries or (ii) accept any other restriction on the activity of Depomed and its subsidiaries or Horizon and its subsidiaries, in each case in connection with any approval determined by Horizon to be required or advisable under any applicable competition law;
(3) there shall have occurred (i) any general suspension of, or limitation on times or prices for, trading in securities on any national securities exchange or in the over-the-counter market, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) the outbreak or escalation of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any governmental authority or other regulatory agency on, or any other event which might affect the extension of credit by, banks or other lending institutions, (v) a suspension of or limitation (whether or not mandatory) on the currency exchange markets or the imposition of, or material changes in, any currency or exchange control laws in the United States or (vi) in the case of any of the foregoing existing at the time of the commencement of the offer, a material acceleration or worsening thereof;
(4) other than the poison pill rights issued pursuant to the Depomed Rights Agreement, since December 31, 2014, Depomed or any subsidiary of Depomed shall have (i) issued, distributed, pledged or sold, or authorized, or proposed the issuance, distribution, pledge or sale of (A) any shares of its capital stock (other than sales or issuances pursuant to the present terms of employee stock awards outstanding on the date of this prospectus/offer to exchange) of any class (including, without limitation, Depomed common stock) or securities convertible into or exchangeable for any such shares of capital stock, or any rights, warrants or options to acquire any such shares or convertible securities or any other securities of Depomed (other than any employee awards referred to in the financial statements in Depomeds Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015), (B) any other securities in respect of, in lieu of or in substitution for Depomed common stock or (C) any debt securities or any securities convertible into or exchangeable for debt securities or any rights, warrants or options entitling the holder thereof to purchase or otherwise acquire any debt securities, (ii) purchased or otherwise acquired, or proposed or offered to purchase or otherwise acquire, any outstanding shares of Depomed common stock or other securities, (iii) proposed, recommended, authorized, declared, issued or paid any dividend or distribution on any shares of Depomed common stock or any other security, whether payable in cash, securities or other property, (iv) altered or proposed to alter any material term of any outstanding security, (v) incurred, agreed to incur or announced its intention to incur any debt other than in the ordinary course of business and consistent with past practice, (vi) authorized, recommended, proposed or publicly announced its intent to enter into any merger, consolidation, liquidation, dissolution, business combination, acquisition or disposition of assets
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or securities other than in the ordinary course of business, any material change in its capitalization, any release or relinquishment of any material contractual or other rights or any comparable event, or taken any action to implement any such transaction previously authorized, recommended, proposed or publicly announced or (vii) entered into any other agreement or otherwise effected any other arrangement with any other party or with its officers or other employees of Depomed, which in any of the cases described in (i) through (vii) above might, individually or in the aggregate, have an Adverse Effect or result in a Diminution in Value;
(5) Depomed or any of its subsidiaries shall have amended or proposed or authorized any amendment to the Depomed articles of incorporation, which we refer to as the Depomed Articles, the Depomed bylaws or similar organizational documents, or we shall have learned that Depomed or any of its subsidiaries shall have proposed, adopted or recommended any such amendment, which has not previously been publicly disclosed by Depomed and also set forth in filings with the SEC prior to commencement of the offer, in a manner that, in the reasonable judgment of Horizon, might, directly or indirectly, (i) delay or otherwise restrain, impede or prohibit the offer or the second-step merger or (ii) prohibit or limit the full rights of ownership of shares of Depomed common stock by Horizon or any of its affiliates, including, without limitation, the right to vote any shares of Depomed common stock acquired by Horizon pursuant to the offer or otherwise on all matters properly presented to Depomed shareholders;
(6) Depomed or any of its subsidiaries shall have transferred into trust, escrow or similar arrangement any amounts required to fund any existing benefit, employment or severance agreements with any of its employees or shall have entered into or otherwise effected with its officers or any other employees any additional benefit, employment, severance or similar agreements, arrangements or plans other than in the ordinary course of business or entered into or amended any agreements, arrangements or plans so as to provide for increased benefits to such employee or employees as a result of or in connection with the transactions contemplated by the offer or the second-step merger;
(7)(i) a tender or exchange offer for some or all of the shares of Depomed common stock has been publicly proposed to be made or has been made by another person (including Depomed or any of its subsidiaries or affiliates, but excluding Horizon or any of its affiliates), or has been publicly disclosed, or Horizon otherwise learns that any person or group (as defined in Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial ownership of more than 5% of any class or series of capital stock of Depomed (including the Depomed common stock), through the acquisition of stock, the formation of a group or otherwise, or is granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 5% of any class or series of capital stock of Depomed (including the Depomed common stock) other than acquisitions for bona fide arbitrage purposes only and other than as disclosed in a Schedule 13D or 13G on file with the SEC on the date of this prospectus/offer to exchange, (ii) any such person or group which, prior to the date of this prospectus/offer to exchange, had filed such a Schedule with the SEC has acquired or proposes to acquire beneficial ownership of additional shares of any class or series of capital stock of Depomed, through the acquisition of stock, the formation of a group or otherwise, constituting 1% or more of any such class or series, or is granted any option, right or warrant, conditional or otherwise, to acquire beneficial ownership of additional shares of any class or series of capital stock of Depomed constituting 1% or more of any such class or series, (iii) any person or group has entered into a definitive agreement or an agreement in principle or made a proposal with respect to a tender or exchange offer or a merger, consolidation or other business combination with or involving Depomed or (iv) any person has filed a Notification and Report Form under the HSR Act or made a public announcement reflecting an intent to acquire Depomed or any assets or securities of Depomed; and
(8) Depomed or any of its subsidiaries shall have (i) granted to any person proposing a merger or other business combination with or involving Depomed or any of its subsidiaries or the purchase or exchange of securities or assets of Depomed or any of its subsidiaries any type of option, warrant or right which, in Horizons reasonable judgment, constitutes a lock-up device (including, without limitation, a right to acquire or receive any shares of Depomed common stock or other securities, assets or business of Depomed or any of its subsidiaries) or (ii) paid or agreed to pay any cash or other consideration to any party in connection with or in any way related to any such business combination, purchase or exchange.
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Each of the conditions under this section of this prospectus/offer to exchange titled The OfferConditions to the Offer is for the sole benefit of Horizon and may be asserted by Horizon regardless of the circumstances giving rise to any such conditions or may be waived by Horizon in whole or in part at any time and from time to time in Horizons sole discretion except for the Competition Laws Condition, Registration Statement Condition, Anti-Takeover Device Condition, Horizon Shareholder Approval Condition and Stock Exchange Listing Condition. The determination as to whether any condition has occurred shall be in Horizons reasonable judgment and that judgment shall be final and binding on all parties. The failure by Horizon at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Notwithstanding the fact that Horizon reserves the right to assert the occurrence of a condition following acceptance for exchange but prior to exchange in order to delay issuance of Horizon ordinary shares or cancel Horizons obligation to pay the consideration payable for properly tendered shares of Depomed common stock, Horizon will either promptly pay that consideration for properly tendered shares of Depomed common stock or promptly return such shares of Depomed common stock.
A public announcement shall be made of a material change in, or waiver of, such conditions, and the offer may, in certain circumstances, be extended in connection with any such change or waiver.
If, on or after the date hereof, Depomed should (1) split, combine or otherwise change the Depomed common stock or its capitalization, (2) acquire currently outstanding Depomed common stock or otherwise cause a reduction in the number of shares of outstanding Depomed common stock or (3) issue or sell additional Depomed common stock, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options to acquire, any of the foregoing, other than Depomed common stock issued pursuant to the exercise of stock options outstanding as of the date of this prospectus/offer to exchange, then, subject to the conditions of the offer above, Horizon, in its sole discretion, may make such adjustments as it deems appropriate in the offer price and other terms of the offer, including, without limitation, the number or type of securities offered to be purchased. Any such adjustment in the offer price or other terms of the offer shall be announced promptly and may result in the extension of the period of time in which the offer is open. See the section of this prospectus/offer to exchange titled The OfferExtension, Termination and Amendment.
If, on or after the date of this prospectus/offer to exchange, Depomed should declare or pay any cash dividend on the Depomed common stock or other distribution on the Depomed common stock, or issue with respect to the Depomed common stock any additional Depomed common stock, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to shareholders of record on a date prior to the transfer of the shares of Depomed common stock purchased pursuant to the offer to Horizon or its nominee or transferee on Depomeds stock transfer records, then, subject to the conditions of the offer above, (1) the offer price and other terms of the offer may, in Horizons sole discretion, be adjusted to reflect the amount of any such cash dividend or cash distribution and (2) the whole of any such non-cash dividend, distribution or issuance to be received by the tendering shareholders will (i) be received and held by the tendering shareholders for Horizons account and will be required to be promptly remitted and transferred by each tendering shareholder to the exchange agent for our account, accompanied by appropriate documentation of transfer, or (ii) at Horizons direction, be exercised for our benefit, in which case the proceeds of such exercise will promptly be remitted to Horizon. Pending such remittance and subject to applicable law, Horizon will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution, issuance or proceeds and may withhold the entire offer price or deduct from the offer price the amount or value thereof, as determined by Horizon in its sole discretion.
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General
Except as otherwise disclosed herein, based upon an examination of publicly available filings with respect to Depomed, Horizon is not aware of any licenses or other regulatory permits which appear to be material to the business of Depomed and which might be adversely affected by the acquisition of Depomed common stock by Horizon pursuant to the offer or the second-step merger or of any approval or other action by any governmental, administrative or regulatory agency or authority which would be required for the acquisition or ownership of Depomed common stock by Horizon pursuant to the offer. Should any such approval or other action be required, it is currently contemplated that such approval or action would be sought or taken. There can be no assurance that any such approval or action, if needed, would be obtained or, if obtained, that it will be obtained without substantial conditions or that adverse consequences might not result to Depomeds or Horizons business or that certain parts of Depomeds or Horizons business might not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken, any of which could cause Horizon to elect to terminate the offer without the acceptance for exchange of Depomed common stock thereunder. Horizons obligation under the offer to accept for exchange and issue Horizon ordinary shares is subject to certain conditions specified above.
Antitrust Clearance
The offer is subject to review by the FTC and the DOJ, which we collectively refer to as the antitrust agencies. Under the HSR Act, the offer may not be completed until certain information has been provided to the antitrust agencies and the applicable HSR Act waiting period has expired or been terminated.
Pursuant to the requirements of the HSR Act, Horizon filed a Notification and Report Form with respect to the Offer with the FTC and the DOJ on September 8, 2015. The waiting period under the HSR Act expired effective October 9, 2015. Accordingly, the condition to the offer requiring that the waiting period applicable to the offer under the HSR Act shall have expired or been terminated has been satisfied. The offer continues to be subject to the remaining conditions set forth in the section of this prospectus/offer to exchange titled The OfferConditions to the Offer.
Even though the requisite waiting period under the HSR Act has expired, at any time if the DOJ or the FTC believes before or after Purchasers acceptance for exchange shares of Depomed common stock pursuant to the offer that the offer would violate the U.S. federal antitrust laws by substantially lessening competition in any line of commerce affecting U.S. consumers, the FTC and the DOJ have the authority to challenge the transaction by seeking a federal court order enjoining the transaction, or if the shares of Depomed common stock have already been exchanged, requiring disposition of such shares or the divestiture of substantial assets of Horizon, Depomed or any of their respective subsidiaries or affiliates.
Based upon an examination of information available to Horizon relating to the businesses in which Horizon and Depomed and their respective subsidiaries are engaged, Horizon believes that the offer and second-step merger will not violate antitrust laws. Nevertheless, there can be no assurance that a challenge to the offer and second-step merger on antitrust grounds will not be made or that, if such a challenge is made, Horizon will prevail.
The antitrust agencies routinely assess the potential competitive effects of transactions reported under the HSR Act, such as Horizons proposed acquisition of Depomed common stock pursuant to the offer. At any time before or after the consummation of any such transactions, one of the antitrust agencies could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the exchange of shares pursuant to the offer or seeking divestiture of the Depomed common stock so acquired or divestiture of certain of Horizons or Depomeds assets. States and private parties may also bring legal actions under the antitrust laws. There can be no assurance that a challenge to the offer and/or the second-step merger on antitrust grounds will not be made, or if such a challenge is made, whether Horizon will prevail. See the section of this prospectus/offer to exchange titled The OfferConditions to the Offer for certain conditions to the offer, including conditions with respect to litigation and certain governmental actions.
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The offer and/or the second-step merger may also be subject to review by antitrust authorities in jurisdictions outside the United States. Under some of these jurisdictions, the offer and/or the second-step merger may not be consummated before a notification has been submitted to the relevant antitrust authority and/or certain consents, approvals, permits or authorizations have been obtained and/or the applicable waiting period has expired or has been terminated; in addition, there may be jurisdictions where the submission of a notification is only voluntary but advisable. Horizon intends to identify any such jurisdictions as soon as practicable, but based on information available to Horizon, Horizon believes that no such additional competition filings are required or advisable. If any such filing is necessary or advisable, Horizon intends to make all such notifications (at the sole discretion of Horizon) as soon as practicable. The consummation of the offer and/or of the second-step merger is subject to the condition that the waiting period (or extension thereof) applicable to the offer and the second-step merger under any applicable antitrust laws and regulations shall have expired or been earlier terminated, and any approvals or clearances determined by Horizon to be required or advisable thereunder shall have been obtained. Based on publicly available information, Horizon believes that only clearance under the HSR Act is required.
State Takeover Laws
A number of states have adopted laws and regulations applicable to offers to acquire securities of corporations which are incorporated in such states and/or which have substantial assets, shareholders, principal executive offices or principal places of business therein. In Edgar v. MITE Corporation, the Supreme Court of the United States held that the Illinois Business Takeover Statute, which made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and was therefore unconstitutional. In CTS Corporation v. Dynamics Corporation of America, the Supreme Court held that as a matter of corporate law, and in particular, those laws concerning corporate governance, a state may constitutionally disqualify an acquiror of Control Shares (ones representing ownership in excess of certain voting power thresholds, e.g., 20%, 33% or 50%) of a corporation incorporated in its state and meeting certain other jurisdictional requirements from exercising voting power with respect to those shares without the approval of a majority of the disinterested shareholders.
We do not believe that any state takeover laws purport to apply to the offer or the second-step merger. We have not attempted to comply with any state takeover statute or regulation. We reserve the right to challenge the applicability or validity of any state law purportedly applicable to the offer or the second-step merger and nothing in this prospectus/offer to exchange or any action taken in connection with the offer or the second-step merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the offer or the second-step merger and if an appropriate court does not determine that it is inapplicable or invalid as applied to the offer or the second-step merger, we might be required to file certain information with, or to receive approvals from, the relevant state authorities, we might be unable to accept for payment or pay for Depomed common stock tendered pursuant to the offer, or be delayed in consummating the offer or the second-step merger. In such case, we may not be obliged to accept for payment or pay for any shares of Depomed common stock tendered pursuant to the offer.
Litigation
Horizon Litigation to Invalidate Depomeds Poison Pill and Bylaw Amendments
On August 3, 2015, Horizon Pharma, Inc. filed a lawsuit in the Superior Court of the State of California, County of Santa Clara, naming as defendants Depomed and the members of the Depomed Board, Vicente J. Anido, Jr., Karen A. Dawes, Louis J. Lavigne, Jr., Samuel R. Saks, James A. Schoeneck, Peter D. Staple, and David B. Zenoff. The lawsuit is captioned Horizon Pharma, Inc. v. Vicente J. Anido, Jr., et al., Case Number 1:15-cv-283835. The lawsuit alleges that the adoption by the Depomed Board of the Depomed Rights Agreement and Sections 2(b), 2(c), 2(d), and 5(d) of the Depomed bylaws violates the CGCL, constitutes ultra vires acts, and breaches the fiduciary duties of the members of the Depomed Board. The lawsuit seeks, among other things, an order (i) declaring that the Depomed Rights Agreement and Sections 2(b), 2(c), and 2(d) of the Depomed bylaws are invalid under California law, (ii) declaring that the members of the Depomed Board breached their fiduciary
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duties by enacting the Depomed Rights Agreement and Sections 2(b), 2(c), 2(d), and 5(d) of the Depomed bylaws, (iii) enjoining the members of the Depomed Board from relying on, implementing, applying or enforcing either the Depomed Rights Agreement or Sections 2(b), 2(c), 2(d) or 5(d) of the Depomed bylaws, (iv) enjoining the members of the Depomed Board from taking any improper action designed to impede, or which has the effect of impeding, the proposed combination with Depomed or the efforts of Horizon to acquire control of Depomed, and (v) compelling the members of the Depomed Board to redeem the Depomed Rights Agreement or to render it inapplicable to Horizon.
The Superior Court has calendared for November 5, 2015 a hearing on a preliminary injunction motion by HPI to enjoin enforcement of the Depomed Rights Agreement and Sections 2(b), 2(c) and 2(d) of the Depomed bylaws.
Depomed Trade Secret Litigation
On August 3, 2015, Depomed filed a lawsuit in the Superior Court of the State of California, County of Santa Clara, against Horizon. The lawsuit is captioned Depomed, Inc. v. Horizon Pharma plc, Case Number 1:15-cv-283834. The complaint asserts a claim for violation of the California Uniform Trade Secrets Act and breach of contract in connection Horizons alleged use in proposing the proposed combination with Depomed of information obtained pursuant to a confidentiality agreement entered into as part of Horizons consideration of a business arrangement with Janssen Pharmaceuticals Inc. relating to its U.S. rights to NUCYNTA, which are now owned by Depomed. The complaint also alleges that Horizon made fraudulent and materially misleading statements to Depomeds shareholders. The lawsuit seeks, among other relief, an injunction (i) to prevent Horizon from continuing its allegedly improper and unlawful use of Depomeds confidential and trade secret data and (ii) to prevent Horizon from continuing to make and failing to correct its allegedly false and misleading statements in connection with the proposed combination with Depomed.
The Superior Court has calendared for November 5, 2015 a hearing on a preliminary injunction motion by Depomed.
Horizon Patent Litigation
On July 15, 2013, Horizon received a Paragraph IV Patent Certification from Actavis Laboratories FL, Inc. (formerly known as Watson Laboratories, Inc.Florida), which we refer to as Actavis FL, advising that Actavis FL had filed an Abbreviated New Drug Application, or ANDA, with the FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. On August 26, 2013, we, together with Jagotec AG, which we refer to as Jagotec, filed suit in the United States District Court for the District of New Jersey against Actavis FL, Actavis Pharma, Inc., Andrx Corp., and Actavis, Inc., seeking an injunction to prevent the approval of the ANDA.
On October 1, 2015, we, as well as Jagotec, entered into a License and Settlement Agreement, or the Actavis Settlement Agreement, with Actavis FL relating to our and Jagotecs on-going patent infringement litigation. In accordance with legal requirements, we, Jagotec and Actavis FL have submitted the Actavis Settlement Agreement to the U.S. Federal Trade Commission and the U.S. Department of Justice for review. The parties have agreed to file stipulations of dismissal with the court regarding the litigation. The Actavis Settlement Agreement provides for a full settlement and release by each party of all claims that relate to the litigation or under the patents with respect to Actavis FLs generic version of RAYOS tablets.
Under the Actavis Settlement Agreement, we and Jagotec granted Actavis FL a non-exclusive license to manufacture and commercialize Actavis FLs generic version of RAYOS tablets in the United States after the Generic Entry Date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Actavis FLs generic version of RAYOS tablets during certain limited periods prior to the Generic Entry Date. We and Jagotec also agreed that during the 180 days after the Generic Entry Date, the license granted to Actavis FL would be exclusive with respect to any third party generic version of RAYOS tablets.
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Under the Actavis Settlement Agreement, the Generic Entry Date is December 23, 2022; however, Actavis FL may be able to enter the market earlier in certain circumstances. Such events relate to the resolution of any other third party RAYOS patent litigation, the entry of other generic versions of RAYOS tablets or certain substantial reductions in RAYOS prescriptions over specified periods of time.
We and Jagotec also agreed not to sue or assert any claim against Actavis FL for infringement of any patent or patent application owned or controlled by us or Jagotec during the term of the Actavis Settlement Agreement based on Actavis FLs generic version of RAYOS tablets in the United States. In turn, Actavis FL agreed not to challenge the validity or enforceability of the licensed patents.
If we or Jagotec enter into any similar agreements with other parties with respect to generic versions of RAYOS tablets, we and Jagotec agreed to amend the Actavis Settlement Agreement to provide Actavis FL with terms that are no less favorable than those provided to the other parties with respect to the license terms, Generic Entry Date, permitted pre-market activities and notice provisions.
On November 13, 2014, Horizon received a Paragraph IV Patent Certification from Actavis FL advising that Actavis FL had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Actavis FL has not advised us as to the timing or status of the FDAs review of its filing. On December 23, 2014, Horizon filed suit in the United States District Court for the District of New Jersey against Actavis FL seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Actavis FL has infringed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of the patents. The subject patents are listed in the FDAs Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Actavis FLs ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. The court has not yet set a trial date for the Actavis FL action.
On December 2, 2014, Horizon received a Paragraph IV Patent Certification against Orange Book listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock Laboratories, LLC, which we refer to as Paddock, advising that Paddock had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On January 9, 2015, Horizon received from Paddock another Paragraph IV Patent Certification against newly Orange Book listed U.S. Patent No. 8,871,809. On January 13, 2015 and January 14, 2015, Horizon filed suits in the United States District Court for the District of New Jersey and the United States District Court for the District of Delaware, respectively, against Paddock seeking an injunction to prevent the approval of the ANDA.
On May 6, 2015, Horizon entered into a settlement and license agreement, which we refer to as the Perrigo settlement agreement, with Perrigo Company plc and its subsidiary Paddock, which we refer to collectively as Perrigo, relating to our on-going patent infringement litigation. The Perrigo settlement agreement provides for a full settlement and release by both us and Perrigo of all claims that were or could have been asserted in the litigation and that arise out of the issues that were the subject of the litigation or Perrigos generic version of PENNSAID 2%.
Under the Perrigo settlement agreement, Horizon granted Perrigo a non-exclusive license to manufacture and commercialize Perrigos generic version of PENNSAID 2% in the United States after the license effective date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Perrigos generic version of PENNSAID 2% during certain limited periods prior to the license effective date.
Under the Perrigo settlement agreement, the license effective date is January 10, 2029; however, Perrigo may be able to enter the market earlier in certain circumstances. Such events relate to the resolution of any other third party PENNSAID 2% patent litigation, the entry of other third party generic versions of PENNSAID 2% or certain substantial reductions in our PENNSAID 2% shipments over specified periods of time.
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Under the Perrigo settlement agreement, Horizon also agreed not to sue or assert any claim against Perrigo for infringement of any patent or patent application owned or controlled by us during the term of the Perrigo settlement agreement based on the manufacture, use, sale, offer for sale, or importation of Perrigos generic version of PENNSAID 2% in the United States.
In certain circumstances following the entry of other third party generic versions of PENNSAID 2%, Horizon may be required to supply Perrigo PENNSAID 2% as our authorized distributor of generic PENNSAID 2%, with us receiving specified percentages of any net sales by Perrigo. Horizon also agreed that if Horizon enters into any similar agreements with other parties with respect to generic versions of PENNSAID 2%, Horizon will amend the Perrigo settlement agreement to provide Perrigo with terms that are no less favorable than those provided to the other parties.
On February 2, 2015, Horizon received a Paragraph IV Patent Certification against Orange Book listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 from Taro Pharmaceuticals USA, Inc. and Taro Pharmaceutical Industries, Ltd., which we refer to collectively as Taro, advising that Taro had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On March 13, 2015, Horizon filed suit in the United States District Court for the District of New Jersey against Taro seeking an injunction to prevent the approval of the ANDA.
On September 9, 2015, Horizon entered into a settlement and license agreement, which we refer to as the Taro Settlement Agreement, with Taro relating to Horizons on-going patent infringement litigation. In accordance with legal requirements, Horizon and Taro submitted the Taro Settlement Agreement to the U.S. Federal Trade Commission and the U.S. Department of Justice for review. Horizon and Taro have also agreed to file stipulations of dismissal with the courts regarding the litigation. The Taro Settlement Agreement provides for a full settlement and release by both Horizon and Taro of all claims that were or could have been asserted in the litigation and that arise out of the issues that were subject of the litigation or Taros generic version of PENNSAID 2%.
Under the Taro Settlement Agreement, Horizon granted Taro a non-exclusive license to manufacture and commercialize Taros generic version of PENNSAID 2% in the United States after the license effective date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Taros generic version of PENNSAID 2% during certain limited periods prior to the license effective date.
Under the Taro Settlement agreement, the license effective date is January 10, 2029; however, Taro may be able to enter the market earlier in certain circumstances. Such events relate to the resolution of any other third party PENNSAID 2% patent litigation, the entry of other third party generic versions of PENNSAID 2% or certain substantial reductions in Horizons PENNSAID 2% shipments over specified periods of time.
Under the Taro Settlement Agreement, Horizon also agreed not to sue or assert any claim against Taro for infringement of any patent or patent application owned or controlled by Horizon during the term of the Taro Settlement Agreement based on the manufacture, use, sale, offer for sale, or importation of Taros generic version of PENNSAID 2% in the United States.
Horizon also agreed that if Horizon enters into any similar agreements with other parties with respect to generic versions of PENNSAID 2%, Horizon will amend the Taro Settlement Agreement to provide Taro with terms that are no less favorable than those provided to the other parties.
On March 18, 2015, Horizon received a Paragraph IV Patent Certification against Orange Book listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 from Lupin Limited, advising that Lupin Limited had filed an ANDA with the FDA for generic version of PENNSAID 2%. Lupin Limited has not advised us as to the timing or status of the FDAs review of its filing. On April 30, 2015, Horizon filed suit in the United States District Court for the District of New Jersey against Lupin Limited,
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seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Lupin Limited has infringed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of the patents. The subject patents are listed in the FDAs Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Lupin Limiteds ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. The court has not yet set a trial date for the Lupin Limited action.
Horizon received from IGI Laboratories, Inc., which we refer to as IGI, a Paragraph IV Patent Certification dated March 24, 2015 against Orange Book listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 advising that IGI had filed an ANDA with the FDA for a generic version of PENNSAID 2%. IGI has not advised us as to the timing or status of the FDAs review of its filing. On May 21, 2015, Horizon filed suit in the United States District Court for the District of New Jersey against IGI seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that IGI has infringed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of the patents. The subject patents are listed in the FDAs Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of IGIs ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. The court has not yet set a trial date for the IGI action.
Horizon received from Amneal Pharmaceuticals LLC, which we refer to as Amneal, a Paragraph IV Patent Certification dated April 2, 2015 against Orange Book listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 advising that Amneal had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Amneal has not advised us as to the timing or status of the FDAs review of its filing. On May 15, 2015, Horizon filed suit in the United States District Court for the District of New Jersey against Amneal seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Amneal has infringed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of the patents. The subject patents are listed in the FDAs Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Amneals ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. The court has not yet set a trial date for the Amneal action.
Currently, patent litigation is pending in the United States District Court for the District of New Jersey against four generic companies intending to market VIMOVO before the expiration of patents listed in the Orange Book. These cases are in the United States District Court for the District of New Jersey and have been consolidated for discovery purposes. They are collectively known as the VIMOVO cases, and involve the following sets of defendants: (i) Dr. Reddys Laboratories Inc. and Dr. Reddys Laboratories Ltd., which we refer to collectively as Dr. Reddys; (ii) Lupin Limited and Lupin Pharmaceuticals Inc., which we refer to collectively as Lupin; (iii) Mylan Pharmaceuticals Inc., Mylan Laboratories Limited, and Mylan Inc., which we refer to collectively as Mylan; and (iv) Actavis FL and Actavis Pharma, Inc. Patent litigation in the United States District Court for the District of New Jersey against a fifth generic company, Anchen Pharmaceuticals Inc., or Anchen, was dismissed on June 9, 2014 after Anchen recertified under Paragraph III. Horizon understands that Dr. Reddys has entered into a settlement with AstraZeneca with respect to patent rights directed to Nexium for the commercialization of VIMOVO, and that according to the settlement agreement, Dr. Reddys is now able to commercialize VIMOVO under AstraZenecas Nexium patent rights. The settlement agreement, however, has no effect on the Pozen Inc., or Pozen, VIMOVO patents, which are still the subject of patent litigations. As part of our acquisition of the U.S. rights to VIMOVO, Horizon has taken over and are responsible for the patent litigations that include the Pozen patents licensed to us under the amended and restated collaboration and license agreement for the United States with Pozen.
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The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4, 2013, May 10, 2013, June 28, 2013, October 23, 2013 and May 13, 2015 and collectively include allegations of infringement of U.S. Patent Nos. 6,926,907, 8,557,285, 8,852,636, and 8,858,996. On June 18, 2015, Horizon amended the complaints to add a charge of infringement of U.S. Patent No. 8,865,190. Horizon understands the cases arise from Paragraph IV Notice Letters providing notice of the filing of ANDAs with the FDA seeking regulatory approval to market generic versions of VIMOVO before the expiration of the patents-in-suit. Horizon understands the Dr. Reddys notice letters were dated March 11, 2011, November 20, 2012 and April 20, 2015; the Lupin notice letters were dated June 10, 2011 and March 12, 2014; the Mylan notice letters were dated May 16, 2013 and February 9, 2015; the Actavis notice letters were dated March 29, 2013 and November 5, 2013; and the Anchen notice letter was dated September 16, 2011. The court has issued a claims construction order and has set a pretrial schedule but has not yet set a trial date.
On February 24, 2015, Dr. Reddys Laboratories, Inc. filed a Petition for Inter Partes Review, which we refer to as an IPR, of U.S. Patent No. 8,557,285, one of the patents in litigation in the above referenced VIMOVO cases. The U.S. Patent and Trademark Office Patent Trial and Appeal Board, which we refer to as the PTAB, has not yet issued a decision with regard to whether or not the IPR will be instituted.
On May 21, 2015, the Coalition for Affordable Drugs VII LLC filed a Petition for IPR of U.S. Patent No. 6,926,907, one of the patents in litigation in the above referenced VIMOVO cases. The PTAB has not yet issued a decision with regard to whether or not the IPR will be instituted.
On June 5, 2015, the Coalition for Affordable Drugs VII LLC filed another Petition for IPR of U.S. Patent No. 8,858,996, one of the patents in litigation in the above referenced VIMOVO cases. The PTAB has not yet issued a decision with regard to whether or not the IPR will be instituted.
On August 7, 2015, the Coalition for Affordable Drugs VII LLC filed another Petition for IPR of U.S. Patent No. 8,852,636, one of the patents in litigation in the above referenced VIMOVO cases. The PTAB has not yet issued a decision with regard to whether or not the IPR will be instituted.
On August 12, 2015, the Coalition for Affordable Drugs VII LLC filed another Petition for IPR of U.S. Patent No. 8,945,621. The PTAB has not yet issued a decision with regard to whether or not the IPR will be instituted.
On August 19, 2015, Lupin filed Petitions for IPR of each of U.S. Patent Nos. 8,858,996, 8,852,636, and 8,865,190, three of the patents in litigation in the above referenced VIMOVO cases. The PTAB has not yet issued a decision with regard to whether or not each such IPR will be instituted.
On or about December 19, 2014, Horizon filed a Notice of Opposition with the European Patent Office relating to non-patentability over prior art regarding European patent EP 2611457, to Roberto Testi, et al., covering compositions and methods for treating FA with interferon gamma, e.g., ACTIMMUNE. In the European Union, the grant of a patent may be opposed by one or more private parties.
On March 17, 2014, Hyperion received notice from Par Pharmaceutical, Inc., which we refer to as Par, that it had filed an ANDA with the FDA seeking approval for a generic version of our product RAVICTI. The ANDA contained a Paragraph IV Patent Certification alleging that two of the patents covering RAVICTI, U.S. Patent No. 8,404,215, titled Methods of therapeutic monitoring of nitrogen scavenging drugs, which expires in March 2032, and U.S. Patent No. 8,642,012, titled Methods of treatment using ammonia scavenging drugs, which expires in September 2030, are invalid and/or will not be infringed by Pars manufacture, use or sale of the product for which the ANDA was submitted. Par did not challenge the validity, enforceability, or infringement of our primary composition of matter patent for RAVICTI, U.S. Patent No. 5,968,979 titled Triglycerides and ethyl esters of phenylalkanoic acid and phenylalkenoic acid useful in treatment of various disorders, which would have expired on February 7, 2015, but as to which Hyperion was granted an interim term of extension until
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February 7, 2016. Hyperion filed suit in the United States District Court for the Eastern District of Texas, Marshall Division, against Par on April 23, 2014 seeking an injunction to prevent the approval of Pars ANDA and/or to prevent Par from selling a generic version of RAVICTI, and Horizon has taken over and is responsible for this patent litigation.
On April 29, 2015, Par filed petitions for IPR of the 215 patent and the 012 patent. The PTAB has not yet issued a decision with regard to whether or not the IPRs will be instituted.
Depomed Patent Litigation
In July 2013, Janssen Pharma filed patent infringement lawsuits in the U.S. District Court for the District of New Jersey against Actavis Elizabeth LLC, Actavis Inc. and Actavis LLC, which we refer to collectively as Actavis, as well as Alkem Laboratories Limited and Ascend Laboratories, LLC, which we refer to collectively as Alkem. The patent infringement claims against Actavis and Alkem relate to their respective ANDAs seeking approval to market a generic version of NUCYNTA ER before the expiration of U.S. Reissue Patent No. 39,593, or the 593 Patent, U.S. Patent No. 7,994,364, or the 364 Patent, and, as to Actavis only, U.S. Patent No. 8,309,060, or the 060 Patent. The lawsuit also includes patent infringement claims against Actavis and Alkem in response to their respective ANDAs seeking approval to market a generic version of NUCYNTA before the expiration of the 593 and 364 Patents. In December 2013, Janssen Pharma filed an additional complaint in the U.S. District Court for the District of New Jersey against Alkem asserting that U.S. Patent No. 8,536,130, or the 130 Patent, relates to Alkems ANDA seeking approval to market a generic version of NUCYNTA ER. In August 2014, Janssen Pharma amended the complaint against Alkem to add additional dosage strengths.
In October 2013, Janssen Pharma received a Paragraph IV Notice from Sandoz, Inc. (Sandoz) with respect to NUCYNTA related to the 364 Patent, and a Paragraph IV Notice from Roxane Laboratories, Inc. (Roxane) with respect to NUCYNTA related to the 364 and 593 Patents. In response to those notices, Janssen Pharma filed an additional complaint in the U.S. District Court for the District of New Jersey against Roxane and Sandoz asserting the 364 Patent against Sandoz and the 364 and 593 Patents against Roxane. In April 2014, Janssen Pharma and Sandoz entered into a joint stipulation of dismissal of the case against Sandoz, based on Sandozs agreement not to market a generic version of NUCYNTA products prior to the expiration of the asserted patents. In June 2014, in response to a Paragraph IV Notice from Roxane with respect to NUCYNTA ER, Janssen Pharma filed an additional complaint in the U.S. District Court for the District of New Jersey asserting the 364, 593, and 130 Patents against Roxane.
In July 2014, in response to a Paragraph IV Notice from Watson Laboratories, Inc., which we refer to as Watson, with respect to the NUCYNTA oral solution product and the 364 and 593 Patents, Janssen Pharma filed a lawsuit in the U.S. District Court for the District of New Jersey asserting the 364 and 593 Patents against Watson.
At the time that the foregoing complaints were filed, Janssen Pharma was an exclusive U.S. licensee of the patents referred to above. On April 2, 2015, Depomed acquired the U.S. rights to the NUCYNTA ER and NUCYNTA from Janssen Pharma. As part of the acquisition, Depomed became the exclusive U.S. licensee of the patents referred to above. Depomed has since been added as a plaintiff to the pending ANDA lawsuits involving NUCYNTA ER and NUCYNTA. No trial date has been set.
On September 11, 2015, Depomed filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Actavis. The patent infringement claims against Actavis relate to Actavis ANDA seeking approval to market a generic version of NUCYNTA ER before the expiration of the 130 Patent. Actavis did not file a Paragraph IV certification on the 130 Patent. No trial date has been set.
Between March 2012 and May 2012, Depomed filed lawsuits in the U.S. District Court for the District of New Jersey in response to six ANDAs filed by companies seeking to market generic versions of 300mg and 600mg
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dosage strengths of Gralise prior to the expiration of Depomeds patents listed in the Orange Book for Gralise. The lawsuits were consolidated for purposes of all pretrial proceedings. Depomeds lawsuits against two of the six Gralise ANDA filers, Impax Laboratories and Watson Laboratories, have been dismissed as a result of the withdrawal of the ANDAs from consideration by the FDA. Depomeds lawsuit against another ANDA filer, Par, has been dismissed because the ANDA filer no longer seeks approval of its Gralise ANDA prior to the expiration of Depomeds Gralise Orange Book-listed patents. In April 2014, Depomed entered into settlement agreements with Incepta Pharmaceuticals and Abon Pharmaceuticals LLC, which we refer to collectively as Incepta, and with Zydus Pharmaceuticals USA Inc. and Cadila Healthcare Limited, which we refer to collectively as Zydus, pursuant to which Incepta and Zydus may begin selling generic versions of Gralise on January 1, 2024, or earlier under certain circumstances.
A bench trial involving the Actavis defendants was completed on May 20, 2014 as to U.S. Patent Nos. 6,635,280; 6,488,962; 7,438,927; 7,731,989; 8,192,756; 8,252,332; and 8,333,992, which expire between September 2016 and February 2024. In August 2014, the court ruled in Depomeds favor, finding that Actavis infringed all patent claims that Depomed asserted and upholding the validity of the patents. On September 15, 2014, Actavis filed a notice appealing the decision to the U.S. Court of Appeals for the Federal Circuit. On February 2, 2015, Actavis filed its opening brief with the U.S. Court of Appeals for the Federal Circuit. On April 10, 2015, Actavis and Depomed entered into a settlement agreement subject to review by the DOJ and the FTC, and the entry of orders dismissing the appeal and related federal district court litigation. By the terms of this agreement, Actaviss pending appeal is dismissed and Actavis may begin selling the generic versions of Gralise on January 1, 2024, or earlier under certain circumstances.
In November 2010, the FDA granted Gralise Orphan Drug designation for the management of PHN, but did not recognize Orphan drug exclusivity for Gralise in January 2011 when Gralise was approved for marketing in the U.S. In September 2012, Depomed filed an action in federal district court for the District of Columbia against the FDA seeking an order requiring the FDA to grant Gralise Orphan Drug exclusivity for the management of PHN. Briefing in the case was completed in March 2013 and a hearing on the summary judgment motion was held in August 2013. In September 2014, the court issued an order granting Depomeds request for summary judgment, and ordering the FDA to grant Orphan Drug exclusivity for Gralise for the management of PHN, which the FDA did formally in October 2014. On November 3, 2014, the FDA filed a notice appealing the order to the U.S. Court of Appeals for the Federal Circuit. On November 5, 2014, the government dismissed its appeal.
Depomed has sued Purdue Pharma, which we refer to as Purdue, and Endo Pharmaceuticals, which we refer to as Endo, for patent infringement in separate lawsuits filed in the U.S. District Court for the District of New Jersey. The lawsuits arise from Purdues commercialization of reformulated OxyContin® (oxycodone hydrochloride controlled-release) in the U.S. and Endos commercialization of OPANA® ER (oxymorphone hydrochloride extended-release) in the U.S. Depomed sued Purdue in January 2013 for infringement of U.S. Patent Nos. 6,340,475, or the 475 Patent, and 6,635,280, or the 280 Patent, which expire in September 2016. Depomed sued Endo in April 2013 for infringement of the 475 Patent, the 280 Patent and U.S. Patent No. 6,723,340, or the 340 Patent, which expires in October 2021. The Purdue and Endo lawsuits have been stayed pending completion of the Endo IPRs described below.
In response to two petitions filed by Purdue and six petitions filed by Endo, the PTAB has instituted an IPR of certain of the claims asserted in Depomeds lawsuits against Purdue and Endo. An IPR is a proceeding that became available in September 2012 in accordance with the America Invents Act. In an IPR, a petitioner may request that the PTAB reconsider the validity of issued patent claims on the basis of prior art in the form of printed publications and other patents. Any patent claim the PTAB determines to be unpatentable is stricken from the challenged patent. Any party may appeal final written decisions of the PTAB to the U.S. Court of Appeals for the Federal Circuit, but the PTABs decisions denying institution of an IPR are non-appealable. Accordingly, if the PTAB finds a challenged claim patentable, or declines to institute an IPR as to a challenged claim, the IPR petitioner is estopped from asserting in a patent infringement lawsuit that these claims are invalid on any ground the petitioner raised or reasonably could have raised in the IPR.
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In the Purdue IPRs, on July 10, 2014, the PTAB declined to institute an IPR as to two claims of the 475 patent and two claims of the 280 Patent. The PTAB instituted an IPR as to the other 15 claims of the 475 Patent and as to the other 10 claims of the 280 Patent asserted against Purdue. On October 14, 2014, Depomed submitted written responses to the Petitions, and on December 22, 2014, Purdue submitted replies. A PTAB hearing was held on March 19, 2015. On July 8, 2015, the PTAB issued final decisions confirming the patentability of all claims at issue.
Endo filed two IPR petitions for each of the 475 Patent, the 280 Patent and the 340 Patent. The PTAB declined to institute an IPR as to three of Endos petitions. The PTAB also declined to institute an IPR as to five claims of the 475 Patent, three claims of the 280 Patent and one claim of the 340 Patent in the Endo IPRs. The PTAB instituted an IPR as to the other 13 claims of the 475 Patent, as to the other ten claims of the 280 Patent and as to the other eight claims of the 340 patent asserted against Endo. The PTAB also declined to institute an IPR as to a number of Endos requested grounds. Discovery is complete, and oral arguments were heard on June 15, 2015. On September 16, 2015, the PTAB issued a final decision determining that eight of the nine challenged claims (of 19 total patent claims) of the 340 Patent are unpatentable. This decision has no impact on the expected market exclusivity of any of Depomeds products or receivable royalties, and Depomed is considering an appeal of the decision to the United States Court of Appeals for the Federal Circuit. On September 23, 2015, the PTAB issued final decisions confirming the patentability of all claims at issue for the 475 Patent and the 280 Patent. Based on the PTABs final decisions against the IPR challenges initiated by Purdue and Endo, Depomed will request that the U.S. District Court for the District of New Jersey lift the stay of the Purdue and Endo lawsuits described above. In those lawsuits, Endo and Purdue will not be able to assert invalidity arguments based on prior art they raised or could have raised in the IPRs.
On June 28, 2013, Depomed received from Banner Pharmacaps, which we refer to as Banner, a Notice of Certification for U.S. Patent Nos. 6,365,180; 7,662,858; 7,884,095; 7,939,518; and 8,110,606 under 21 U.S.C. § 355 (j)(2)(A)(vii)(IV), which we refer to as the Zipsor Paragraph IV Letter, certifying that Banner has submitted and the FDA has accepted for filing an ANDA for diclofenac potassium capsules, 25mg. The letter states that the Banner ANDA product contains the required bioavailability or bioequivalence data to Zipsor and certifies that Banner intends to obtain FDA approval to engage in commercial manufacture, use or sale of Banners ANDA product before the expiration of the above identified patents, which are listed for Zipsor in the Orange Book. U.S. Patent No. 6,365,180 expires in 2019 and U.S. Patent Nos. 7,662,858; 7,884,095; 7,939,518; and 8,110,606 expire in 2029. The Zipsor Paragraph IV letter indicates Banner has granted to Watson exclusive rights to Banners proposed generic Zipsor product.
On July 26, 2013, Depomed filed a lawsuit in the U.S. District Court for District of New Jersey against Banner and Watson for infringement of the patents identified above. The lawsuit was commenced within the 45 days required to automatically stay, or bar, the FDA from approving Banners ANDA for 25 mg diclofenac for 30 months or until a district court decision that is adverse to Depomed, whichever may occur earlier. Absent a court order, the 30-month stay would be expected to expire in December 2015.
On April 2, 2014, Depomed filed an amended complaint to include infringement of U.S. Patent Nos. 6,287,594 and 8,623,920, which were recently added to the Orange Book listing for Zipsor and expire in 2019 and 2029, respectively. The Court heard arguments for patent claim construction on March 3, 2015, and issued an order on March 26, 2015, in favor of Depomeds construction for all disputed terms. In May of 2015, the parties entered into a settlement agreement subject to review by the DOJ and the FTC. By the terms of this agreement, Watson may begin selling the generic version of Zipsor on March 24, 2022, or earlier under certain circumstances. On June 4, 2015, the Court entered an order staying the case pending the regulatory approval of the settlement agreement.
In addition to the approvals and clearances described in the Competition Laws Condition, the offer and the second-step merger may also be subject to review by government authorities and other regulatory agencies,
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including in jurisdictions outside the United States. Horizon intends to identify such authorities and jurisdictions as soon as practicable and to file as soon as practicable thereafter all notifications that it determines are necessary or advisable under the applicable laws, rules and regulations of the respective identified authorities, agencies and jurisdictions for the consummation of the offer and/or the second-step merger and to file all post-completion notifications that it determines are necessary or advisable as soon as practicable after completion has taken place.
Horizon will issue Horizon ordinary shares as consideration for the shares of Depomed common stock tendered pursuant to the offer. See the section of this prospectus/offer to exchange titled The Offer. Horizon estimates that the total amount of cash required to complete the transactions contemplated by the offer and the second-step merger will be approximately $725 million (inclusive of transaction fees and expenses, including fees associated with refinancing Depomeds existing credit facilities, but exclusive of litigation expenses and exclusive of any cash and cash equivalents from Depomed and exclusive of Depomed transactions costs). The estimated amount of cash required is based on Horizons due diligence review of Depomeds publicly available information to date and is subject to change. For a further discussion of the risks relating to Horizons limited due diligence review, see the section of this prospectus/offer to exchange titled Risk FactorsRisk Factors Relating to the Offer and the Second-Step Merger.
Horizon expects to have sufficient cash resources available to complete the transactions contemplated by the offer and the second-step merger. In addition to cash on hand, Horizon currently intends to borrow or otherwise finance up to $175 million to complete the acquisition of Depomed, to pay fees, expenses and amounts related to such acquisition and to fund certain short-term cash obligations of the combined company, including working capital.
Horizon has not negotiated the terms of or entered into any such financing agreement and Horizon cannot provide any assurances that additional financing will be available when and as needed or on terms that Horizon believes to be commercially reasonable. If Horizon cannot obtain such funding on terms Horizon considers to be reasonable, Horizon may seek other methods to increase available cash, including by delaying, reducing or otherwise foregoing potential revenue enhancing activities, which could have an adverse effect on Horizons business, operating results or financial condition.
The unaudited pro forma balance sheet is adjusted to reflect the debt expected to be issued of $175 million, and it is assumed that Horizon will incur approximately $1.8 million of debt discount. The pro forma interest expense reflects an estimated interest rate of 4.5%.
As of June 30, 2015, Horizon had approximately $667 million of cash and cash equivalents on hand (as reported in Horizons Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015). For a further discussion of the risks relating to Horizons debt obligations, see the section of this prospectus/offer to exchange titled Risk FactorsRisk Factors Relating to Horizon Following the Offer.
Certain Relationships with Depomed and Interest of Horizon and Horizons Executive Officers and Directors in the Offer
Except as set forth in this prospectus/offer to exchange, neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates or any of the other persons set forth in Schedule I has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Depomed, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as otherwise described in this prospectus/offer to exchange, there have been no contacts, negotiations or transactions during the past two years, between us
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or, to the best of our knowledge, any of the persons listed on Schedule I to this prospectus/offer to exchange, on the one hand, and Depomed or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, an exchange offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets.
As of the date of the offer, Horizon, through its indirect wholly-owned subsidiary, Horizon Pharma, Inc., owns 2,250,000 shares of Depomed common stock, representing approximately 3.7% of the outstanding shares of Depomed common stock as of July 30, 2015. The 2,250,000 shares of Depomed common stock were acquired by Horizon through ordinary brokerage transactions on the open market as set forth on Schedule II to this prospectus/offer to exchange. With the exception of the transactions in the last 60 days described in Schedule II, Horizon has not effected any transaction in securities of Depomed in the past 60 days.
The name, citizenship, business address, business telephone number, principal occupation or employment, and five-year employment history for each of the directors and executive officers of Horizon and certain other information are set forth in Schedule I to this prospectus/offer to exchange. Except as described in this prospectus/offer to exchange and in Schedule I hereto, none of Horizon or, after due inquiry and to the best knowledge and belief of Horizon, any of the persons listed on Schedule I to this prospectus/offer to exchange, has during the last five years (1) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Except as set forth in this prospectus/offer to exchange, to Horizons knowledge, after reasonable inquiry, none of the persons listed on Schedule I to this prospectus/offer to exchange, nor any of their respective associates or majority-owned subsidiaries, beneficially owns or has the right to acquire any securities of Depomed or has effected any transaction in securities of Depomed during the past 60 days.
We do not believe that the offer and the second-step merger will result in a change in control under any of Horizons equity plans or any agreement between Horizon and any of its employees (including the persons listed on Schedule I to this prospectus/offer to exchange). As a result, no stock options or other outstanding equity awards held by such persons will vest as a result of the offer and the second-step merger, nor will any employee (including the persons listed on Schedule I to this prospectus/offer to exchange) have any rights to enhanced severance payments or benefits upon certain types of terminations following the offer and the second-step merger.
Horizon has retained MacKenzie Partners, Inc., which we refer to as the information agent, in connection with the offer. The information agent may contact holders of shares of Depomed common stock by mail, telephone, facsimile, the Internet, e-mail, newspapers and other publications of general distribution and in person and may request brokers, dealers, commercial banks, trust companies and other nominees to forward materials relating to the offer to beneficial owners of shares of Depomed common stock. Horizon will pay the information agent a customary fee for these services and the solicitation and advisory services described below, in addition to reimbursing the information agent for its reasonable out-of-pocket expenses. Horizon agreed to indemnify the information agent against certain liabilities and expenses in connection with the offer.
In addition, Horizon has retained Computershare Trust Company, N.A. as the exchange agent in connection with the offer. Horizon will pay the exchange agent reasonable and customary compensation for its services in connection with the offer, will reimburse the exchange agent for its reasonable out-of-pocket expenses and will indemnify the exchange agent against certain liabilities and expenses.
Except as set forth above, Horizon will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of shares pursuant to the offer. Horizon will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers.
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The proposed combination with Depomed would be accounted for under the acquisition method of accounting under GAAP, with Horizon being the accounting acquirer, which means that Depomeds results of operations will be included with Horizons results of operations from the closing date and Depomeds consolidated assets and liabilities will be recorded at their fair values at the same date.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined statement of operations for each of the fiscal year ended December 31, 2014 and for the six months ended June 30, 2015 have been prepared by Horizon and give effect to the following transactions as if they had occurred on January 1, 2014:
(i) | The proposed acquisition of Depomed, which we refer to as the Depomed Acquisition, including the $175 million of new Horizon debt financing currently contemplated, which we refer to as the new Horizon debt financing, the extinguishment of Depomeds outstanding senior notes and the conversion of Depomeds outstanding convertible notes; |
(ii) | Horizons acquisition of Hyperion Therapeutics, Inc., which we refer to as Hyperion, through the merger of Ghrian Acquisition Inc., a wholly-owned subsidiary of Horizon Pharma, Inc., which we refer to as HPI, with and into Hyperion, with Hyperion continuing as the surviving corporation and as an indirect wholly-owned subsidiary of HPI, which we refer to as the Hyperion Acquisition; |
(iii) | the April 2015 equity offering by Horizon of 17,652,500 ordinary shares, which we refer to as the Equity Offering; |
(iv) | Horizons March 2015 private placement of $400 million in aggregate principal amount of Horizon Exchangeable Senior Notes; |
(v) | Horizons April 2015 private placement of $475 million in aggregate principal amount of 6.625% Senior Notes due 2023, which we refer to as the Horizon Senior Unsecured Notes; |
(vi) | Horizons entry into a five-year $400 million term loan facility on May 7, 2015, which we refer to as the Horizon Senior Secured Term Loan; |
(vii) | the acquisition by Depomed of the U.S. rights to NUCYNTA ER and NUCYNTA, which we refer to as the U.S. NUCYNTA Business, from Janssen on April 2, 2015, which we refer to as the NUCYNTA Acquisition; and |
(viii) | the merger of the businesses of HPI and Vidara on September 19, 2014, which we refer to as the Vidara Merger, including the issuance of 31,350,000 Horizon ordinary shares. |
Transactions (ii) to (vi) (inclusive) relate to the Hyperion Acquisition.
The unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines the historical consolidated balance sheets of Horizon and Depomed, giving effect to the proposed combination with Depomed, including the new Horizon debt financing, the extinguishment of Depomeds outstanding senior notes (as if such repayment had occurred on June 30, 2015) and the conversion of Depomeds outstanding convertible debt (as if such conversion had occurred on June 30, 2015 but giving effect to certain adjustments to the conversion ratio due to the completion of the exchange offer).
Horizon is not affiliated with Depomed and has not had the cooperation of Depomeds management or the ability to conduct independent due diligence on Depomed or its business in the preparation of these unaudited pro forma condensed combined financial statements. Horizon has not received information from Depomed concerning its business and financial condition for any purpose, including preparing these unaudited pro forma condensed combined financial statements. Accordingly, these unaudited pro forma condensed combined financial statements have been prepared by Horizon based on publicly available information, including Depomeds financial statements, filings with the SEC and other publicly available information. Actual facts and circumstances regarding Depomed or its business that are unknown to Horizon may result in adjustments, including material adjustments, to the pro forma financial statements.
The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the aforementioned transactions, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma
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condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial statements are based on and should be read in conjunction with:
| the historical unaudited consolidated financial statements of Horizon included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015; |
| the historical consolidated financial statements of Horizon included in its Annual Report on Form 10-K for the year ended December 31, 2014; |
| the historical unaudited consolidated financial statements of Hyperion included in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015; |
| the historical consolidated financial statements of Hyperion included in its Annual Report on Form 10-K for the year ended December 31, 2014; |
| the historical combined financial statements of Vidara included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014; |
| the historical unaudited consolidated financial statements of Depomed included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015; |
| the historical consolidated financial statements of Depomed included in its Annual Report on Form 10-K for the year ended December 31, 2014; and |
| the historical special purpose combined financial statements relating to the U.S. NUCYNTA Business and the unaudited pro forma condensed combined financial statements giving effect to the NUCYNTA Acquisition, included in Depomeds Current Report on Form 8-K/A filed on June 10, 2015. |
The unaudited pro forma condensed combined financial statements have been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined companys financial position or results of operations actually would have been had the transactions, including the proposed acquisition of Depomed, been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company.
The Depomed Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (which we refer to as ASC) 805, Business Combinations (which we refer to as ASC 805). The Hyperion Acquisition has been accounted for as a business combination and the Vidara Merger has been accounted for as a reverse acquisition under the acquisition method of accounting under the provisions of ASC 805.
The pro forma adjustments are preliminary and are based upon the best available information and certain assumptions that Horizons management believes are reasonable under the circumstances and which are described in the accompanying notes to the unaudited pro forma condensed combined financial information.
Under ASC 805, assets acquired and liabilities assumed are generally recorded at their acquisition date fair value. The preliminary fair value of identifiable tangible assets acquired, excluding inventory, and liabilities assumed from the Depomed Acquisition are based on their carrying value as of June 30, 2015. The preliminary fair value of inventories are recorded at their current fair values. The preliminary fair value of intangible assets acquired and contingent royalty liabilities assumed has been estimated using the income approach through a discounted cash flow analysis. After the closing of the Depomed Acquisition, Horizon will update the preliminary purchase price allocation based upon the fair market values as of the closing date of the Depomed Acquisition. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. Significant judgment is required in determining the estimated fair values of developed technology intangible assets and certain other assets and liabilities. Such a valuation required estimates and assumptions
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including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. Horizons management believes the estimated fair values that would be recognized for the assets acquired and the liabilities assumed are based on reasonable estimates and assumptions. However, the unaudited pro forma purchase price adjustments are preliminary and are subject to further adjustments as additional information becomes available and as additional analyses are performed, and such further adjustments may be material.
Certain financial information of Depomed, Hyperion and Vidara, as presented in their respective consolidated financial statements, has been reclassified to conform to the historical presentation in Horizons consolidated financial statements for purposes of preparation of the unaudited pro forma condensed combined financial information. See Notes 4, 5 and 6 for additional information on the reclassifications that were made to derive the Historical Vidara (after conforming reclassifications), Historical Hyperion (after conforming reclassifications) and Historical Depomed (after conforming reclassifications and the NUCYNTA Acquisition) columns in the unaudited pro forma condensed combined financial statements.
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Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2015
(In thousands, except for share data)
Historical Horizon Pharma plc |
Historical Depomed (after conforming reclassifications) (see Note 6) |
Depomed Acquisition Adjustments |
Pro Forma Combined |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 667,057 | $ | 94,094 | $ | 169,250 | 7 | (A) | $ | 165,248 | ||||||||||
28,465 | 7 | (B) | ||||||||||||||||||
(71,813 | ) | 7 | (C) | |||||||||||||||||
(450 | ) | 7 | (C) | |||||||||||||||||
(28,246 | ) | 7 | (D) | |||||||||||||||||
(693,109 | ) | 7 | (F) | |||||||||||||||||
Restricted cash |
600 | | | 600 | ||||||||||||||||
Marketable securities |
| 23,906 | (23,906 | ) | 7 | (B) | | |||||||||||||
Accounts receivable, net |
182,868 | 42,145 | | 225,013 | ||||||||||||||||
Receivables from collaborative partners |
| 747 | | 747 | ||||||||||||||||
Inventories, net |
20,299 | 10,376 | 32,100 | 7 | (E) | 62,775 | ||||||||||||||
Income taxes receivable |
| 13,891 | | 13,891 | ||||||||||||||||
Prepaid expenses and other current assets |
11,620 | 19,798 | | 31,418 | ||||||||||||||||
Deferred tax assets, current |
15,767 | 9,601 | 8,314 | 7 | (E) | 33,682 | ||||||||||||||
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|
|
|
|
|
|
|
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Total current assets |
898,211 | 214,558 | (579,395 | ) | 533,374 | |||||||||||||||
Marketable securities, long-term |
| 4,559 | (4,559 | ) | 7 | (B) | | |||||||||||||
Property and equipment, net |
9,773 | 16,013 | | 25,786 | ||||||||||||||||
Developed technology, net |
1,692,057 | | 3,350,000 | 7 | (E) | 5,042,057 | ||||||||||||||
In-process research and development |
66,000 | | | 66,000 | ||||||||||||||||
Other intangible assets, net |
7,466 | 1,062,579 | (1,062,579 | ) | 7 | (E) | 7,466 | |||||||||||||
Goodwill |
259,565 | | 1,104,910 | 7 | (E) | 1,364,475 | ||||||||||||||
Deferred tax assets, net, non-current |
| | | | ||||||||||||||||
Other assets |
9,615 | 7,445 | 4,000 | 7 | (A) | 14,392 | ||||||||||||||
(453 | ) | 7 | (F) | |||||||||||||||||
(6,215 | ) | 7 | (G) | |||||||||||||||||
|
|
|
|
|
|
|
|
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Total assets |
$ | 2,942,687 | $ | 1,305,154 | $ | 2,805,709 | $ | 7,053,550 | ||||||||||||
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|
|
|
|
|
|
|
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Liabilities and Shareholders Equity |
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Current liabilities: |
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Long-term debtcurrent portion |
$ | 4,000 | $ | | $ | 1,750 | 7 | (A) | $ | 5,750 | ||||||||||
Accounts payable |
26,224 | 1,684 | | 27,908 | ||||||||||||||||
Accrued expenses |
79,246 | 46,659 | | 125,905 | ||||||||||||||||
Accrued trade discounts and rebates |
136,836 | 56,585 | | 193,421 | ||||||||||||||||
Accrued royalitiescurrent portion |
42,574 | 9,548 | 50,400 | 7 | (E) | 102,522 | ||||||||||||||
Deferred revenuescurrent portion |
2,019 | | | 2,019 | ||||||||||||||||
Contingent consideration liability |
| 2,482 | 3,018 | 7 | (E) | 5,500 | ||||||||||||||
Deferred tax liabilities, net |
| | | | ||||||||||||||||
Other current liabilities |
| 1,098 | | 1,098 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
290,899 | 118,056 | 55,168 | 464,123 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Long-term liabilities: |
||||||||||||||||||||
Exchangeable notes, net |
274,305 | 236,315 | (236,315 | ) | 7 | (G) | 274,305 | |||||||||||||
Long-term debt, net, net of current |
858,593 | 562,516 | 171,500 | 7 | (A) | 1,030,093 | ||||||||||||||
(562,516 | ) | 7 | (F) | |||||||||||||||||
Accrued royalties, net of current |
128,913 | | 569,600 | 7 | (E) | 698,513 | ||||||||||||||
Contingent consideration liability |
| 12,238 | 10,262 | 7 | (E) | 22,500 | ||||||||||||||
Deferred revenues, net of current |
10,004 | | | 10,004 | ||||||||||||||||
Deferred tax liabilities, net, non-current |
121,039 | 18,994 | 624,008 | 7 | (E) | 764,041 | ||||||||||||||
Other long-term liabilities |
4,967 | 10,937 | | 15,904 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total Long-term liabilities |
1,397,821 | 841,000 | 576,539 | 2,815,360 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Shareholders Equity |
||||||||||||||||||||
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 158,732,528 shares issued and 158,348,162 shares outstanding at June 30, 2015; 232,100,289 shares issued and 231,715,923 shares outstanding at June 30, 2015 pro forma |
16 | 252,635 | (252,635 | ) | 7 | (H) | 16 | |||||||||||||
Treasury stock, 384,366 ordinary shares |
(4,585 | ) | | | (4,585 | ) | ||||||||||||||
Additional paid-in capital |
1,969,750 | 79,067 | (79,067 | ) | 7 | (H) | 4,518,096 | |||||||||||||
2,548,346 | 7 | (C) | ||||||||||||||||||
Accumulated other comprehensive loss |
(2,756 | ) | (32 | ) | 32 | 7 | (H) | (2,756 | ) | |||||||||||
(Accumulated deficit) retained earnings |
(708,458 | ) | 14,428 | (14,428 | ) | 7 | (H) | (736,704 | ) | |||||||||||
(28,246 | ) | 7 | (D) | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total shareholders equity |
1,253,967 | 346,098 | 2,174,002 | 3,774,067 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders equity |
$ | 2,942,687 | $ | 1,305,154 | $ | 2,805,709 | $ | 7,053,550 | ||||||||||||
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial information, which are an integral part of these pro forma financial statements.
100
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2015
(In thousands, except for share and per share data)
Historical Horizon plc |
Historical Hyperion Period Ended May 6, 2015 (see Note 5) |
Hyperion and Vidara Acquisition Accounting Adjustments |
Horizon Subtotal (after Hyperion Acquisition) |
Historical Depomed (after conforming reclassifications and the NUCYNTA Acquisition) (see Note 6) |
Depomed Acquisition Adjustments |
Pro Forma Combined |
||||||||||||||||||||||||||||||
Net sales |
$ | 285,962 | $ | 39,473 | $ | | $ | 325,435 | $ | 170,924 | $ | | $ | 496,359 | ||||||||||||||||||||||
Royalties |
| | | | 742 | | 742 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total revenues |
285,962 | 39,473 | | 325,435 | 171,666 | | 497,101 | |||||||||||||||||||||||||||||
Cost of goods sold |
90,679 | 5,636 | 31,927 | 8 | (A) | 121,724 | 92,603 | 167,339 | 8 | (G) | 381,666 | |||||||||||||||||||||||||
(6,495 | ) | 8 | (B) | |||||||||||||||||||||||||||||||||
(23 | ) | 8 | (C) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Gross profit |
195,283 | 33,837 | (25,409 | ) | 203,711 | 79,063 | (167,339 | ) | 115,435 | |||||||||||||||||||||||||||
Operating Expenses: |
||||||||||||||||||||||||||||||||||||
Research and development |
15,103 | 13,419 | (94 | ) | 8 | (C) | 28,428 | 12,677 | | 41,105 | ||||||||||||||||||||||||||
Sales and marketing |
105,119 | 6,052 | | 111,171 | | | 111,171 | |||||||||||||||||||||||||||||
General and administrative |
103,470 | 30,663 | (40,226 | ) | 8 | (C) | 93,907 | 99,047 | | 192,954 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total operating expenses |
223,692 | 50,134 | (40,320 | ) | 233,506 | 111,724 | | 345,230 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Operating loss |
(28,409 | ) | (16,297 | ) | 14,911 | (29,795 | ) | (32,661 | ) | (167,339 | ) | (229,795 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Other (Expense) Income, Net: |
||||||||||||||||||||||||||||||||||||
Interest expense, net |
(29,480 | ) | (427 | ) | (13,785 | ) | 8 | (D) | (43,692 | ) | (43,716 | ) | 38,316 | 8 | (H) | (49,092 | ) | |||||||||||||||||||
Loss on induced conversion of debt and debt extinguishment |
(77,624 | ) | (1,460 | ) | 56,808 | 8 | (E) | (20,816 | ) | | | (20,816 | ) | |||||||||||||||||||||||
1,460 | 8 | (E) | ||||||||||||||||||||||||||||||||||
Foreign exchange loss |
(924 | ) | | | (924 | ) | | | (924 | ) | ||||||||||||||||||||||||||
Other, net |
(10,069 | ) | 4,449 | 10,000 | 8 | (C) | 4,380 | | | 4,380 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total other expense, net |
(118,097 | ) | 2,562 | 54,483 | (61,052 | ) | (43,716 | ) | 38,316 | (66,452 | ) | |||||||||||||||||||||||||
Loss before (benefit) expense for income taxes |
(146,506 | ) | (13,735 | ) | 69,394 | (90,847 | ) | (76,377 | ) | (129,023 | ) | (296,247 | ) | |||||||||||||||||||||||
(Benefit) expense for income taxes |
(158,767 | ) | 1,609 | 27,064 | 8 | (F) | (130,094 | ) | (29,865 | ) | (50,319 | ) | 8 | (F) | (210,278 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net Income (Loss) |
$ | 12,261 | $ | (15,344 | ) | $ | 42,330 | $ | 39,247 | $ | (46,512 | ) | $ | (78,704 | ) | $ | (85,969 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net income (loss) per ordinary sharebasic |
$ | 0.09 | $ | (0.41 | ) | |||||||||||||||||||||||||||||||
Weighted average ordinary sharesbasic |
138,369,537 | 211,737,298 | ||||||||||||||||||||||||||||||||||
Net income (loss) per ordinary sharediluted |
$ | 0.08 | $ | (0.41 | ) | |||||||||||||||||||||||||||||||
Weighted average ordinary sharesdiluted |
145,031,882 | 211,737,298 |
See the accompanying notes to the unaudited pro forma condensed combined financial information, which are an integral part of these pro forma
financial statements.
101
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2014
(In thousands, except for share and per share data)
Historical Horizon Pharma plc |
Historical Vidara (after conforming reclassifications) (see Note 4) |
Vidara Acquisition Accounting Adjustments |
Historical Hyperion (after conforming reclassifications) (see Note 5) |
Hyperion Acquisition Accounting Adjustments |
Horizon Subtotal (after Vidara Merger and Hyperion Acquisition) |
Historical Depomed (after NUCYNTA Acquisition and conforming reclassifications) (see Note 6) |
Depomed Acquisition Accounting Adjustments |
Pro Forma Combined |
||||||||||||||||||||||||||||||||||||||||
Net sales |
$ | 296,955 | $ | 50,565 | $ | | $ | 113,584 | $ | | $ | 461,104 | $ | 285,337 | $ | | $ | 746,441 | ||||||||||||||||||||||||||||||
Royalties |
| | | | | | 1,821 | | 1,821 | |||||||||||||||||||||||||||||||||||||||
License and other revenue |
| | | | | | 31,515 | | 31,515 | |||||||||||||||||||||||||||||||||||||||
Non-cash PDL royalty revenue |
| | | | | | 242,808 | | 242,808 | |||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total revenues |
296,955 | 50,565 | | 113,584 | | 461,104 | 561,481 | | 1,022,585 | |||||||||||||||||||||||||||||||||||||||
Cost of goods sold |
78,753 | 11,290 | 28,955 | 9 | (A) | 18,353 | 91,476 | 9 | (I) | 217,762 | 176,342 | 333,303 | 9 | (N) | 727,407 | |||||||||||||||||||||||||||||||||
(11,065 | ) | 9 | (L) | |||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Gross profit |
218,202 | 39,275 | (17,890 | ) | 95,231 | (91,476 | ) | 243,342 | 385,139 | (333,303 | ) | 295,178 | ||||||||||||||||||||||||||||||||||||
Operating Expenses: |
||||||||||||||||||||||||||||||||||||||||||||||||
Research and development |
17,460 | 2,799 | (414 | ) | 9 | (M) | 20,715 | | 40,560 | 31,143 | | 71,703 | ||||||||||||||||||||||||||||||||||||
Sales and marketing |
120,276 | 17,664 | (8,600 | ) | 9 | (M) | 17,367 | | 146,707 | | | 146,707 | ||||||||||||||||||||||||||||||||||||
General and administrative |
88,957 | 8,253 | (40,227 | ) | 9 | (C) | 31,155 | | 79,659 | 165,216 | | 244,875 | ||||||||||||||||||||||||||||||||||||
(5,102 | ) | 9 | (M) | |||||||||||||||||||||||||||||||||||||||||||||
(3,377 | ) | 9 | (B) | |||||||||||||||||||||||||||||||||||||||||||||
Goodwill impairment |
| | | 30,201 | | 30,201 | | | 30,201 | |||||||||||||||||||||||||||||||||||||||
Depreciation and amortization |
| 487 | (487 | ) | 9 | (E) | | | | | | | ||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total operating expenses |
226,693 | 29,203 | (58,207 | ) | 99,438 | | 297,127 | 196,359 | | 493,486 | ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Operating (loss) income |
(8,491 | ) | 10,072 | 40,317 | (4,207 | ) | (91,476 | ) | (53,785 | ) | 188,780 | (333,303 | ) | (198,308 | ) | |||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Other (Expense) Income, Net: |
||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense, net |
(23,826 | ) | (605 | ) | | (1,046 | ) | (70,742 | ) | 9 | (F) | (96,774 | ) | (72,823 | ) | 61,597 | 9 | (O) | (108,000 | ) | ||||||||||||||||||||||||||||
(555 | ) | 9 | (K) | |||||||||||||||||||||||||||||||||||||||||||||
Non-cash interest expense on PDL liability |
| | | | | | (14,646 | ) | (14,646 | ) | ||||||||||||||||||||||||||||||||||||||
Loss on induced conversion of debt and debt extinguishment |
(29,390 | ) | | | | | (29,390 | ) | | | (29,390 | ) | ||||||||||||||||||||||||||||||||||||
Foreign exchange (loss) gain |
(3,905 | ) | 11 | | | | (3,894 | ) | | | (3,894 | ) | ||||||||||||||||||||||||||||||||||||
Loss on derivative fair value |
(214,995 | ) | | | | | (214,995 | ) | | | (214,995 | ) | ||||||||||||||||||||||||||||||||||||
Bargain purchase gain |
22,171 | | (22,171 | ) | 9 | (G) | | | | | | | ||||||||||||||||||||||||||||||||||||
Other, net |
(11,251 | ) | (298 | ) | 8,222 | 9 | (D) | (699 | ) | | (4,026 | ) | 215 | | (3,811 | ) | ||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total other expense, net |
(261,196 | ) | (892 | ) | (13,949 | ) | (1,745 | ) | (71,297 | ) | (349,079 | ) | (87,254 | ) | 61,597 | (374,736 | ) | |||||||||||||||||||||||||||||||
(Loss) income before (benefit) expense for income taxes |
(269,687 | ) | 9,180 | 26,368 | (5,952 | ) | (162,773 | ) | (402,864 | ) | 101,526 | (271,706 | ) | (573,044 | ) | |||||||||||||||||||||||||||||||||
(Benefit) expense for income taxes |
(6,084 | ) | 881 | (77 | ) | 9 | (H) | 303 | (63,481 | ) | 9 | (J) | (68,458 | ) | 38,945 | (105,965 | ) | 9 | (J) | (135,478 | ) | |||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Net (Loss) Income |
$ | (263,603 | ) | $ | 8,299 | $ | 26,445 | $ | (6,255 | ) | $ | (99,292 | ) | $ | (334,406 | ) | $ | 62,581 | $ | (165,741 | ) | $ | (437,566 | ) | ||||||||||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
|
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|
|||||||||||||||||||||||||||||||
Weighted average ordinary shares |
83,751,129 | 174,771,390 | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss per ordinary sharebasic and diluted |
$ | (3.15 | ) | $ | (2.50 | ) |
See the accompanying notes to the unaudited pro forma condensed combined financial information, which are an integral part of these pro forma financial statements.
102
1. | Description of pro forma transactions |
Proposed Acquisition of Depomed. On July 7, 2015, Horizon announced its original proposal to acquire all of the outstanding shares of common stock of Depomed for a per share consideration of $29.25 in an all-stock transaction valued at approximately $3.0 billion. On July 21, 2015, Horizon increased the value of its all-stock proposal to acquire all of the outstanding shares of common stock of Depomed to $33.00 per share, contingent on Depomed entering into good faith discussions regarding a transaction. The $33.00 per share offer represented a premium of approximately 60% to the closing price of shares of Depomed common stock on July 6, 2015. Subsequently, on August 13, 2015, Horizon confirmed its offer to acquire Depomed for $33.00 per share in Horizon ordinary shares and fixing the exchange ratio of such offer at 0.95 Horizon ordinary shares for each share of Depomed common stock based on the 15-day volume weighted average price of a Horizon ordinary share as of August 12, 2015, or $34.74 per share. The Depomed Acquisition adjustments in the unaudited pro forma condensed combined financial statements assume that each outstanding share of Depomed common stock will be converted in connection with the Depomed Acquisition into 0.95 Horizon ordinary shares, the entry into a new Horizon debt financing of approximately $175 million, the extinguishment of Depomeds outstanding senior notes and the conversion of Depomeds outstanding convertible notes.
Hyperion Acquisition. On May 7, 2015, Horizon completed its acquisition of Hyperion in which Horizon acquired all of the issued and outstanding shares of Hyperions common stock for $46.00 per share in cash or approximately $1.1 billion on a fully-diluted basis. Following the completion of the acquisition, Hyperion became a wholly-owned subsidiary of Horizon and was renamed as Horizon Therapeutics, Inc.
Horizon Exchangeable Senior Notes. On March 13, 2015, Horizon Pharma Investment Limited, a wholly-owned subsidiary of Horizon, completed its private placement of $400 million in aggregate principal amount of Horizon Exchangeable Senior Notes to several investment banks acting as initial purchasers who subsequently resold the Horizon Exchangeable Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act.
Equity Offering. On April 21, 2015, Horizon closed its underwritten public offering of 17,652,500 of its ordinary shares at a price to the public of $28.25 per share. The net proceeds to Horizon from such offering were approximately $475.2 million, after deducting underwriting discounts and other offering expenses payable by Horizon.
Horizon Senior Unsecured Notes. On April 29, 2015, Horizon Pharma Financing Inc., a wholly-owned subsidiary of Horizon, completed a private placement of $475 million in aggregate principal amount of Horizon Senior Unsecured Notes to certain investment banks acting as initial purchasers who subsequently resold the Horizon Senior Unsecured Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act and in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act.
Horizon Senior Secured Term Loan. On May 7, 2015, HPI, Horizon and certain of its subsidiaries entered into a credit agreement, which we refer to as the Credit Agreement, with Citibank, N.A., as administrative and collateral agent, and the lenders from time to time party thereto providing for (i) the five-year $400 million Horizon Senior Secured Term Loan; (ii) an uncommitted accordion facility subject to the satisfaction of certain financial and other conditions; and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The initial borrower under the Horizon Senior Secured Term Loan is HPI. The Credit Agreement allows for Horizon and certain other subsidiaries of Horizon to become borrowers under the accordion or refinancing facilities. Loans under the Horizon Senior Secured Term Loan bear interest, at each borrowers option, at a rate equal to either the London Inter-Bank Offer Rate, which we refer to as LIBOR, plus an applicable margin of 3.5% per year (subject to a 1.0% LIBOR floor), or the adjusted base rate plus 2.5%. The adjusted base rate is defined as the greater of (a) LIBOR (using one-month interest period) plus 1%, (b) prime rate, (c) fed funds plus 1/2 of 1%, and (d) 2%. Horizon borrowed the full $400 million available under the Horizon Senior Secured Term Loan on May 7, 2015 as a LIBOR-based borrowing.
103
Vidara Merger. On September 19, 2014, Horizon acquired Vidara for $601.4 million, comprised of the $387.8 million market value of the 31,350,000 Horizon ordinary shares that were held by prior Vidara shareholders immediately following the closing of the Vidara Merger plus the cash consideration of $213.6 million.
2. | Basis of presentation |
The historical consolidated financial information of Horizon has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the pro forma transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the results of operations.
The Depomed Acquisition is being accounted for as a business combination using the acquisition method of accounting under the provisions of ASC 805. The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The adjustments to reflect the acquisition method of accounting are preliminary and are based upon the best available information and certain assumptions which management believes are reasonable under the circumstances.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, Fair Value Measurement (which we refer to as ASC 820), as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could result in different assumptions that would in turn result in a range of alternative estimates using the same facts and circumstances.
Cash and cash equivalents, investments, and other tangible assets and liabilities. The carrying amounts of tangible assets and liabilities were valued at their respective carrying amounts as management believes that these amounts approximate their current fair values.
Inventories. Inventories acquired included raw materials and finished goods. Inventories are recorded at their current fair values. Fair value of finished goods has been determined based on the estimated selling price, net of selling costs and a margin on the selling costs. Fair value of raw materials has been estimated to equal the replacement cost.
Developed technology. Developed technology intangible assets reflect the estimated value of Depomeds rights to its currently marketed products, CAMBIA, Gralise, Lazanda, NUCYNTA and Zipsor. The fair value of developed technology was determined using an income approach. The income approach explicitly recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for Hyperions product line. Indications of value are developed by discounting these benefits to their present worth at a discount rate that reflects the current return requirements of the market. The fair value of the CAMBIA, Gralise, Lazanda, NUCYNTA and Zipsor developed technologies will be capitalized as of the Depomed Acquisition date and subsequently amortized over 6-8 years, which are the periods in which over 90% of the estimated cash flows for each product are expected to be realized.
Goodwill. Goodwill represents the excess of the preliminary acquisition consideration over the estimated fair values of net assets acquired.
104
Deferred tax assets and liabilities. Deferred tax assets and liabilities arise from acquisition accounting adjustments where book values of certain assets and liabilities differ from their tax bases. Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. Horizon understands that Depomeds developed technology is currently located primarily in the United States where a U.S. tax rate of 39% is being utilized and a deferred tax liability is recorded. Upon consummation of the Depomed Acquisition, Depomed will become a member of Horizons U.S. tax consolidation group. As such, its tax assets and liabilities need to be considered in determining the appropriate amount (if any) of valuation allowance that should be recognized in assessing the realizability of the groups deferred tax assets. The Depomed Acquisition adjustments result in the recording of significant net deferred tax liabilities. Per ASC 740, Accounting for Uncertainty in Income Taxes, future reversals of existing taxable temporary differences must be considered in determining the amount of valuation allowance to record.
Pre-existing contingencies. Horizon has identified contingent consideration for prior acquisitions of Depomed potentially payable under previously existing Depomed royalty and licensing agreements. The initial fair value of this liability was determined using a discounted cash flow analysis incorporating the estimated future cash flows of royalty payments based on future sales. The liability will be periodically assessed based on events and circumstances related to the underlying milestones, and any change will be recorded in Horizons consolidated statement of operations following the closing of the Depomed Acquisition.
Horizon has also identified contingent royalty liabilities potentially payable by Depomed under its previously existing royalty and licensing agreements. The initial fair value of this liability was determined using a discounted cash flow analysis incorporating the estimated future payment obligations. The liability will be periodically assessed based on events and circumstances, and any change will be recorded in Horizons consolidated statement of operations following the closing of the Depomed Acquisition.
The preliminary determination of the fair value of the acquired net assets, assuming the Depomed Acquisition had closed on January 1, 2014 is as follows (dollars in thousands):
Estimated value of Horizon shares to be issued in respect of Depomed shares |
$ | 2,548,796 | ||
Cash paid for Depomed shares purchased by Horizon |
71,813 | |||
Estimated cash paid to settle Depomeds outstanding senior notes |
693,109 | |||
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Total estimated value of cash and stock consideration paid by Horizon(2) |
$ | 3,313,718 | ||
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Book value of assets acquired and liabilities assumed(1) |
$ | 75,682 | ||
Valuation step-up adjustments: |
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Inventory step-up |
32,100 | |||
Developed technology |
3,350,000 | |||
Current deferred tax asset |
8,314 | |||
Current royalty liability |
(50,400 | ) | ||
Current contingent consideration liability |
(3,018 | ) | ||
Non-current royalty liability |
(569,600 | ) | ||
Non-current contingent consideration liability |
(10,262 | ) | ||
Non-current deferred tax liability |
(624,008 | ) | ||
Goodwill |
1,104,910 | |||
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|
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$ | 3,313,718 | |||
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|
(1) | Excludes Depomeds $798,831 of debt (net of unamortized discount), $6,668 deferred financing costs related to Depomeds outstanding senior notes and convertible notes and $1,062,579 of Depomeds historical intangible assets, which Horizon revalued at an estimated value of $3,350,000. |
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(2) | The unaudited pro forma condensed financial statements do not reflect as a component of the estimated purchase consideration the estimated fair value of the outstanding options to purchase shares of Depomed common stock, which we refer to as the Depomed options, and unvested restricted stock units of Depomed, which we refer to as the Depomed RSUs. In connection with the Depomed Acquisition, Horizon expects to assume all outstanding Depomed options and Depomed RSUs, which we refer to collectively as the Depomed share-based awards, and to convert such awards into options and restricted stock units, as applicable, exercisable into Horizon ordinary shares, which we refer to as Horizon replacement share-based awards, subject in each case to substantially the same terms and conditions as the underlying Depomed share-based awards (including with respect to vesting). |
Based on publicly available information, Horizon believes that vesting of the outstanding Depomed share-based awards will not be automatically accelerated as a result of the Depomed Acquisition under the terms of Depomeds existing employee stock plans and/or employee agreements; accordingly, it is assumed that vesting will not be accelerated for any Depomed share-based awards for purposes of these unaudited pro forma condensed combined financial statements.
Vested Options
The total estimated fair value of purchase consideration to be paid by Horizon in connection with the Depomed Acquisition will increase by the fair value of the vested Depomed share-based awards at the closing of the Depomed Acquisition. At this time, Horizon does not have sufficient information, such as the number of Depomed options and the vesting conditions and vesting schedule for each outstanding Depomed option, to accurately estimate the fair value of such options. However, in order to give effect to this estimated additional purchase consideration, Horizon has estimated the fair value of the vested Depomed options based on the estimated intrinsic value of Depomeds exercisable options outstanding as of December 31, 2014 disclosed in Depomeds Form 10-K, which is the most recent publicly available information as of the date of this offer to exchange.
Horizon estimates a potential increase to the estimated purchase consideration of approximately $91.8 million related to vested Depomed options, calculated as follows:
Number of Depomed Options Vested at 12/31/14 |
Weighted- average Exercise Price |
Offer Price | Intrinsic Value(a) |
Estimated Additional Purchase Consideration (in thousands) |
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Options |
3,491,018 | $ | 6.76 | $ | 33.00 | $ | 26.24 | $ | 91,604 | |||||||||||
Options |
10,167 | $ | 11.80 | $ | 33.00 | $ | 21.20 | $ | 216 | |||||||||||
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Total |
3,501,185 | $ | 91,820 | |||||||||||||||||
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(a) | Intrinsic value used as an approximation of fair value. |
The estimated potential impact on the unaudited pro forma condensed combined balance sheet as of June 30, 2015 and the unaudited pro forma condensed combined basic and diluted earnings per share calculation for the six months ended June 30, 2015 and the fiscal year ended December 31, 2014 for additional purchase consideration would be as follows:
As of June 30, 2015 | ||||||||
As Reported in the Unaudited Pro Forma Condensed Combined Balance Sheet |
After Giving Effect to the Estimated Additional Purchase Consideration |
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Goodwill |
$ | 1,364,475 | $ | 1,456,295 | ||||
Horizon ordinary shares, par value(a) |
16 | 16 | ||||||
Additional paid-in capital |
4,518,096 | 4,609,916 |
(a) | The increase in par value ($0.0001 per share) from the assumed exercise of the Depomed vested options rounds to zero. |
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For the Six Months Ended June 30, 2015 |
For the Year Ended December 31, 2014 |
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As Reported in the Unaudited Pro Forma Condensed Combined Statement of Operations |
After Giving Effect to the Estimated Additional Purchase Consideration |
As Reported in the Unaudited Pro Forma Condensed Combined Statement of Operations |
After Giving Effect to the Estimated Additional Purchase Consideration |
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Loss per Horizon ordinary sharebasic and diluted |
$ | (0.41 | ) | $ | (0.40 | ) | $ | (2.50 | ) | $ | (2.46 | ) | ||||
Weighted-average Horizon ordinary shares outstandingbasic and diluted |
211,737,298 | 215,063,424 | 174,771,390 | 178,097,516 |
Unvested Options and RSUs
The total estimated fair value of purchase consideration to be paid by Horizon in connection with the Depomed Acquisition will increase by a portion of the fair value of the unvested Depomed share-based awards at the closing of the Depomed Acquisition. Horizon currently does not have the information necessary to appropriately determine the terms and conditions of the unvested Horizon replacement share-based awards in order to estimate the fair value of these awards. As a result, for purposes of these unaudited pro forma condensed combined financial statements, the fair value of the unvested Horizon replacement share-based awards has not been reflected as a component of the purchase consideration or post-combination compensation expense.
Following the completion of the Depomed Acquisition, Horizon will calculate the fair value of the Depomed share-based awards as of the actual acquisition date, in accordance with ASC 718, CompensationStock Compensation. Horizon expects that the increase to consideration paid at the time of acquisition resulting from this fair value calculation will be different than the amount calculated above for the vested Depomed options, as it will be determined using information on the outstanding Depomed share-based awards at the time of acquisition rather than information as of December 31, 2014 and will also include the unvested Depomed share-based awards, and these differences could be material. In addition, the calculation will be used to determine the fair value amounts related to unvested Horizon replacement share-based awards, if any, to be recorded as post-combination compensation expense.
3. | Accounting policies |
Following the Depomed Acquisition, Horizon will conduct a review of accounting policies of Depomed in an effort to determine if differences in accounting policies require restatement or reclassification of results of operations or reclassification of assets or liabilities to conform to Horizons accounting policies and classifications. As a result of that review, Horizon may identify differences among the accounting policies of Horizon and Depomed that, when conformed, could have a material impact on the unaudited pro forma condensed combined financial statements. During the preparation of the unaudited pro forma condensed combined financial statements, Horizon was not aware of any material differences between accounting policies of Horizon and Depomed, except for certain reclassifications necessary to conform to Horizons financial presentation, and accordingly, the unaudited pro forma condensed combined financial statements do not assume any material differences in accounting policies among Horizon and Depomed.
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4. | Historical Vidara |
Financial information presented in the Historical Vidara (after conforming reclassifications) column in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014 represents Vidaras results of operations as a stand-alone entity for the period from January 1, 2014 to September 18, 2014, which were derived from its unaudited combined financial statements included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 and the stub period from July 1, 2014 to September 18, 2014. Financial information of Vidara subsequent to September 18, 2014 is included in the statement of operations of Horizon for the year ended December 31, 2014. Reclassifications and classifications in Vidaras unaudited pro forma condensed combined statement of operations for the period ended September 18, 2014 are as follows (in thousands):
Historical Vidara (for the six months ended June 30, 2014) |
Historical Vidara Stub Period (July 1, 2014 to September 18, 2014) |
Historical Vidara (January 1, 2014 to September 18, 2014) |
Reclassifications | Historical Vidara (after conforming reclassifications) |
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Net sales |
$ | 35,746 | $ | 14,819 | $ | 50,565 | $ | | $ | 50,565 | ||||||||||||||
Cost of goods sold |
1,660 | 630 | 2,290 | 2,497 | 4 | (A) | 11,290 | |||||||||||||||||
6,503 | 4 | (B) | ||||||||||||||||||||||
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Gross profit |
34,086 | 14,189 | 48,275 | (9,000 | ) | 39,275 | ||||||||||||||||||
Operating expenses: |
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Research and development |
| | | 2,799 | 4 | (C) | 2,799 | |||||||||||||||||
Sales and marketing |
| | | 17,664 | 4 | (D) | 17,664 | |||||||||||||||||
General and administrative |
6,134 | 4,760 | 10,894 | (2,799 | ) | 4 | (C) | 8,253 | ||||||||||||||||
158 | 4 | (E) | ||||||||||||||||||||||
Selling expenses |
3,792 | 13,872 | 17,664 | (17,664 | ) | 4 | (D) | | ||||||||||||||||
Depreciation and amortization |
2,272 | 870 | 3,142 | (2,497 | ) | 4 | (A) | 487 | ||||||||||||||||
(158 | ) | 4 | (E) | |||||||||||||||||||||
Royalty expense |
4,935 | 1,568 | 6,503 | (6,503 | ) | 4 | (B) | | ||||||||||||||||
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Total operating expenses |
17,133 | 21,070 | 38,203 | (9,000 | ) | 29,203 | ||||||||||||||||||
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Operating income (loss) |
16,953 | (6,881 | ) | 10,072 | | 10,072 | ||||||||||||||||||
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Other (expense), income, net: |
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Interest expense, net |
(516 | ) | (89 | ) | (605 | ) | | (605 | ) | |||||||||||||||
Foreign exchange gain |
| 11 | 11 | | 11 | |||||||||||||||||||
Other (expense) income |
(22 | ) | (276 | ) | (298 | ) | | (298 | ) | |||||||||||||||
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Total other expense, net |
(538 | ) | (354 | ) | (892 | ) | | (892 | ) | |||||||||||||||
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Income (loss) before income tax (benefit) expense |
16,415 | (7,235 | ) | 9,180 | | 9,180 | ||||||||||||||||||
Income tax expense |
724 | 157 | 881 | | 881 | |||||||||||||||||||
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Net income (loss) |
$ | 15,691 | $ | (7,392 | ) | $ | 8,299 | $ | | $ | 8,299 | |||||||||||||
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(A) | Intangible amortization expense of $2,497 in Vidaras historical statement of operations has been reclassified to cost of goods sold to conform to Horizons presentation. |
(B) | Royalty expense of $6,503 in Vidaras historical statement of operations has been reclassified from operating expenses to cost of goods sold to conform to Horizons presentation. |
(C) | Represents $2,799 of general and administrative expenses in Vidaras historical statement of operations that has been reclassified to research and development expenses to conform to Horizons presentation. |
(D) | Represents $17,664 of selling expenses in Vidaras historical statement of operations that has been reclassified to sales and marketing to conform to Horizons presentation |
(E) | Depreciation expense of $158 in Vidaras historical statement of operations has been reclassified to general and administrative expense to conform to Horizons presentation. |
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5. | Historical Hyperion |
Financial information presented in the Historical Hyperion (after conforming reclassifications) column in the unaudited pro forma condensed combined statement of operations represents Hyperion results of operations as a stand-alone entity for the period from January 1, 2015 to May 6, 2015, the date of Horizons acquisition of Hyperion, and the year ended December 31, 2014, which includes the operations from Andromeda Biotech Ltd., which we refer to as Andromeda, since June 12, 2014, the date of Hyperions acquisition of Andromeda. Horizon does not believe that the operating results for Andromeda prior to its acquisition by Hyperion are material to the combined entity and as such have not been included in the unaudited pro forma condensed combined statement of operations. Such financial information has been reclassified or classified to conform to the historical presentation in Horizons consolidated financial statements as set forth below. Unless otherwise indicated, defined line items included in the footnotes have the meanings given to them in the historical financial statements of Hyperion.
Reclassifications in Hyperions unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2015 are as follows (in thousands):
Historical Hyperion for the period January 1, 2015 to March 31, 2015 |
Reclassifications | Historical Hyperion for the period January 1, 2015 to March 31, 2015 (after conforming reclassifications) |
Historical Hyperion for the period April 1, 2015 to May 6, 2015 |
Historical Hyperion for the period ended May 6, 2015 (after conforming reclassifications) |
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Net sales |
$ | 31,193 | $ | | $ | 31,193 | $ | 8,280 | $ | 39,473 | ||||||||||||||
Cost of goods sold |
3,833 | 893 | 5 | (A) | 4,726 | 910 | 5,636 | |||||||||||||||||
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Gross profit |
27,360 | (893 | ) | 26,467 |