ITEM 1.01. Entry into a Material Definitive Agreement
On May 6, 2021, Amphastar Pharmaceuticals, Inc. (the “Company”) and its Chinese subsidiary Amphastar Nanjing Pharmaceuticals, Inc. (“ANP”) entered into three agreements relating to the restructuring of the equity ownership of ANP and its subsidiaries and the spin-out of certain subsidiaries of ANP:
| ● | The Company entered into a Share Purchase Agreement (“SPA”) to acquire approximately 18% additional ownership interest in ANP from Nanjing Zhongpan Enterprise Management Consulting Center (LLP) (the “Zhongpan”), Nanjing Zhanrun Enterprise Management Consulting Center (LLP) (“Zhanrun”) and Listening Dragon Investment Company Limited (“LD”), which had initially acquired their equity interest in the previously disclosed July 2018 ANP private placement (the “2018 ANP Private Placement”). |
| ● | ANP entered into a Share Repurchase Agreement (“SRA”) with Zhongpan, Zhanrun, and Nanjing Qianqia Enterprise Management Consulting LLP (“Qianqia”) to exchange an approximate 80% ownership interest in Nanjing Hanxin Pharmaceutical Technology Co., Ltd. (“Hanxin”), for an approximate 9% ownership interest in ANP. Prior to this transaction, Hanxin was a wholly-owned subsidiary of ANP focused on research and development. Hanxin has two subsidiaries, Nanjing Baixin Trading Co., Ltd. (“Baixin”), Hanxin’s sales and marketing subsidiary, and Nanjing Letop Biological Technology Co., Ltd. (“Letop”), Hanxin’s chemical production subsidiary that are included as part of the transaction. Following completion of the SRA transaction, ANP will retain an approximately 20% ownership interest in Hanxin (the “Hanxin Share Sale”). |
| ● | To effectuate the spin-off of Hanxin, ANP entered into a Separation Agreement with Hanxin which sets forth certain assets to be held by each entity, as well as certain responsibilities and obligations of ANP and Hanxin following completion of the spin-off. |
The transactions noted above are subject to certain regulatory approvals. Following completion of the transactions contemplated by the SPA and SRA, the Company will own approximately 85% of ANP.
The parties to the SPA and SRA transactions noted above include all of the Company’s executive officers who participated in the 2018 ANP Private Placement, including current executive officers Dr. Mary Luo, Dr. Jack Zhang, William Peters, Rong Zhou, and Jacob Liawatidewi, as well as the Company’s directors Howard Lee and Richard Koo and former director Stephen Shohet. In addition, Henry Zhang, Qingqing Chen, Chongqing Zhang, Bill Zhang, Lu Zhang, and James Luo, who are immediate family members of Dr. Jack Zhang and Dr. Mary Luo also invested indirectly in the 2018 ANP Private Placement and are parties to the transactions noted above. Qianqia is controlled by Applied Physics & Chemistry Laboratories, Inc. (“APCL”), which in turn is controlled by Dr. Mary Luo, Chief Operating Officer, Chief Scientist, and Chairman of the Board of the Company, and Dr. Jack Zhang, Chief Executive Officer, President, and Chief Scientific Officer, and Director. For a description of the 2018 ANP Private Placement, please see the section titled “Related Person Transactions - ANP Private Placement” in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on April 14, 2021, which is incorporated by reference herein.
The Company engaged a financial advisor to conduct an independent third party valuation to determine the transaction price. The independent disinterested members of the Company’s Board of Directors engaged a separate independent financial service firm to evaluate the transaction and render an opinion as to the fairness of the transaction price as part of their evaluation and approval of these transactions.
The parties to the SPA include William J. Peters, Rong Zhou, Jacob Liawatidewi, Howard Lee, Richard Koo, Stephen Shohet, Henry Zhang, Qingqing Chen, Chongqing Zhang, Lu Zhang, and James Luo. Dr. Mary Luo, Dr. Jack Zhang, APCL, and Qianqia are not parties to the SPA and will retain their interest in ANP. The proceeds received in the SPA by each of such individuals is set forth below:
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Investor | Proceeds under Share Purchase Agreement |
William J. Peters | | $120,783 |
Rong Zhou | | $120,783 |
Jacob Liawatidewi | | $120,783 |
Howard Lee | | $1,207,829 |
Richard Koo | | $966,263 |
Henry Zhang and Qingqing Chen | | $7,860,907 |
Chongqing Zhang | | $157,902 |
Lu Zhang | | $1,974,114 |
James Luo | | $120,783 |
The parties to the SRA include Dr. Mary Luo, Dr. Jack Zhang (through their ownership interest in APCL and Qianqia), Henry Zhang, Qingqing Chen, Chongqing Zhang, Bill Zhang, and Lu Zhang.
