NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION1.
| Description of the Contributions and other related transactions |
Business Combination Agreement
On December 26, 2022, Catalyst, CPI,2021, BC paid GNI USA, GNI Japan, GNI Hong Kong, SG andTianjin Limited $2.6 million as part of the Minority Holders entered intoconsideration under the Business Combination Agreement. Under the Business Combination Agreement, Catalyst will acquire an indirect controlling interest in BC. Subjectagreement. Pursuant to the terms and conditions set forththereof, BC is obligated to pay (i) $4.8 million once the NDA for Hydronidone is submitted to the NMPA in China, (ii) $1.2 million once such NDA has passed the on-site inspection for drug registration by the NMPA and (iii) $7 million once such NDA is approved by the NMPA. Following the F351 Acquisition, BC continues to retain such exclusive right in mainland PRC and right of first offer related to Hydronidone. In connection with the F351 Acquisition, BC waived its right of first offer under such agreement. For details, see “Catalyst’s Business—Agreements Relating to the Hydronidone Program—F351 Asset Purchase Agreement.”
Research and Development Services
During the year ended December 31, 2022, BC received from SG operations, consulting, advisory and related services in connection with BC’s research and development efforts relating to Hydronidone and paid SG an aggregate amount of $170,367 for such services. These fees were paid to SG in amounts mutually agreed upon in advance by BC and SG in consideration of certain services and materials provided to BC on an as-needed basis, from time to time and at BC’s request. Such fees were paid pursuant to invoices submitted to BC by SG from time to time.
Equity Grants to Executive Officers and Directors
BC has granted stock options to its executive officers and certain directors, as more fully described in the Business Combination Agreement, atsections titled “BC Executive Compensation” and “Management Following the Effective TimeContributions—Non-Employee Director Compensation,” respectively, in this proxy statement.
Director and Executive Officer Compensation
Please see the sections titled “Management Following the Contributions—Non-Employee Director Compensation” and “BC Executive Compensation” in this proxy statement for information regarding the compensation of BC’s directors and executive officers.
Executive Compensation and Employment Arrangements
Catalyst has entered into employment agreements with certain of its executive officers. For more information regarding the agreements with Nassim Usman, Ph.D. and Seline Miller, see “Catalyst Executive and Director Compensation” in this proxy statement.
Thomas Eastling, who is a current director of Catalyst and will be a director of the Contributions,
a)
| GNI USA will contribute all of its CPI Ordinary Shares to Catalyst in exchange for 688,850,101 shares of Catalyst Common Stock (as previously defined in this proxy statement, the “CPI Contribution”), |
b)
| GNI USA will contribute its interest in Further Challenger to Catalyst in exchange for 264,971,695 shares of Catalyst Common Stock (as previously defined in this proxy statement, the “FC Contribution”), and |
c)
| each Minority Holder will contribute 100% of the interest he or she holds in his or her respective entity to Catalyst in exchange for an aggregate of 156,954,428 shares of Catalyst Common Stock (as previously defined in this proxy statement, the “Minority Holder Contributions”). |
As a resultcombined company, and Ruoyu Chen, who will be the Interim Chief Financial Officer of the CPI Contributioncombined company, are husband and the FC Contribution, Catalyst will directly and indirectly hold 100% of CPI’s shares. Through Catalyst’s ownership of CPI, Catalyst will hold a 55.97% indirect interest in BC. Further, after the CPI Contribution and the FC Contribution, CPI will hold no assets other than its 55.97% indirect ownership interest in BC. After the Minority Holder Contributions, Catalyst will obtain additional indirect interests in BC and hold, in aggregate, a 65.18% indirect interest in BC.
Immediately after the closing of the Contributions, assuming there are no conversions of Catalyst Convertible Preferred Stock, current holders of CPI’s capital stock arewife. Ms. Chen is expected to own approximately 83.59% ofreceive compensation comparable to similarly situated officers in accordance with the outstanding shares of Catalyst Common Stock, Catalyst’s current stockholders are expectedcombined company’s executive compensation policies, practices and committee approval procedures to own approximately 2.74% of the outstanding Catalyst Common Stock, and the Minority Holders are expected to own approximately 13.67% of the outstanding shares of Catalyst Common Stock.
At the Effective Time, BC will terminate the 2021 Plan and the BC Options outstanding under the 2021 Plan will be terminated and replaced with options granted under the 2023 Omnibus Incentive Plan that are substantially similar in all material respects to the BC Options previously outstanding under the 2021 Plan.
Each share of Catalyst Common Stock and option to purchase Catalyst Common Stock that is issued and outstanding at the Effective Time will remain issued and outstanding and such shares and options will be unaffected byestablished following the Contributions.
To complete the Contributions, Catalyst stockholders must approve Proposals No. 1, 2, 3, 4 and 6. Additionally, each of the other closing conditions set forth in the Business Combination Agreement must be satisfied or waived.
Contingent Value Rights Agreement
Concurrent with the signing of the Business Combination Agreement, Catalyst entered into the CVR Agreement, pursuant to which each CVR Holder, excluding the Sellers, received one contractual CVR issued by Catalyst, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of Catalyst Common Stock held by such holder at the CVR Record Date. Each CVR entitles the holder thereof to receive (i) certain cash payments from the net proceeds, if any, related to (a) the disposition of Catalyst’s legacy assets within 90 calendar days after the remainder of the Holdback Amount (as defined in the CVR Agreement) is finally determined and received by Catalyst or (b) the resolution of certain legal claims; provided, however, such period will be automatically extended for any Claim (as defined in the CVR Agreement) for an additional one-year period to the extent any Claim is appealed during the initial term, (ii) 100% of the excess cash (net of all current or contingent liabilities, including transaction-related expenses) retained by Catalyst in excess of $1.0 million as of the closing date of the transactions under the Business Combination Agreement, and (iii) 100% of the amount actually received (net of indemnity claims, if any) by Catalyst pursuant to the Asset Purchase Agreement, dated as of May 19, 2022, by and between Catalyst and Vertex.
The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent (as defined in the CVR Agreement) for subsequent distribution to the CVR Holders. In the event that no such proceeds are received, or the permitted deductions under the CVR Agreement are greater than any such proceeds, CVR Holders will not receive any payment pursuant to the CVR Agreement. There can be no assurance that CVR Holders will receive any amounts. The CVRs are not transferable, except in certain limited circumstances as provided for in the CVR Agreement, will not be certificated or evidenced by any instrument, and will not be registered with the SEC or listed for trading on any exchange.
Prior to the F351 Acquisition, Catalyst was engaged in the research and development of product candidates from Catalyst’s protease engineering platform. In February 2022, Catalyst announced that it engaged Perella Weinberg Partners as a financial advisor to assist Catalyst in exploring strategic alternatives to monetize its assets. In March 2022, Catalyst ceased research and development activities and in May 2022, Catalyst entered into an asset purchase agreement with Vertex, pursuant to which Vertex purchased Catalyst’s complement portfolio, including CB 2782-PEG and CB 4332, as well as its complement-related intellectual property, including the ProTUNE™ and ImmunoTUNE™ platforms, for $60.0 million in cash consideration. $55.0 million was received upfront and the remaining $5.0 million was retained by Vertex as a hold-back until one year after the closing date to satisfy certain post-closing indemnification obligations. Any amounts received from Vertex with respect to this hold-back, net of expenses, are being distributed to the CVR Holders. On February 27, 2023, Catalyst signed an asset purchase agreement with GCBP pursuant to which GCBP acquired Catalyst’s legacy rare bleeding disorders programs including MarzAA, DalcA and CB-2679d-GT for a total of $6.0 million in cash consideration, $1.0 million payable on signing and $5.0 million payable on February 28, 2025, subject to satisfaction of post-closing indemnification obligations. In March 2023, Catalyst distributed net proceeds of approximately $0.2 million to the CVR Holders. Once received, any additional net proceeds from the transaction will be distributed to the CVR Holders. Catalyst is also pursuing certain legal claims against a third party related to payments under a 2016 asset purchase agreement, and any net recoveries related to these claims will be distributed to the CVR Holders.
Financial Operations Overview
Catalyst has no drug products approved for commercial sale and has not generated any revenue from drug product sales.
With the exception of the three months ended March 31, 2023 and June 30, 2022, Catalyst has never been profitable and has incurred significant operating losses in each year since inception. Catalyst had net income of $0.3 million and net losses of $14.5 million for the three months ended March 31, 2023 and 2022, respectively, and net losses of $8.2 million and $87.9 million for the years ended December 31, 2022 and 2021, respectively. As of March 31, 2023, Catalyst had an accumulated deficit of $410.7 million and cash and cash equivalents of $8.1 million. Substantially all its operating losses were incurred in its research and development programs and in its general and administrative operations.
Collaboration Revenue
Collaboration revenue consists of revenue earned for performance obligations satisfied pursuant to the License and Collaboration Agreement with Biogen entered into in December 2019 and terminated in May 2022 (the “Biogen