United States securities and exchange commission logo
January 19, 2021
Dane Saglio
Chief Financial Officer
Seneca Biopharma, Inc.
20271 Goldenrod Lane
Germantown, MD 20876
Re: Seneca Biopharma,
Inc.
Registration
Statement on Form S-4
Filed December 23,
2020
File No. 333-251659
Dear Mr. Saglio:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4
Questions and Answers About the Merger
What is the Merger?, page 1
1. Please revise and
continue to update your disclosure here and in the Exchange Ratio
discussion on pages
122-23 to disclose the current and/or anticipated status of the Seneca
net cash calculation.
Please also provide examples of estimated percentage ownership
based on Seneca's level
of net cash at the Effective Time.
2. Please explain to us
why you have included two separate calculations of the post-merger
combined company
ownership at the bottom of page 1. In particular, please explain why
you have only included
50% of the shares subject to the Equity Warrants in the first
calculation as well as
in other calculations throughout the document, which state that pre-
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 2 19, 2021 Page 2
FirstName LastName
Merger Seneca equity holders will hold approximately 26.2% of the
combined company
(assuming Seneca net cash between $4.5 million and $5.0 million).
Please also update this section to include a cross-reference to the
Pre-Merger Financing
discussion that appears later in the document.
3. Please revise your disclosure here and in the preceding letter to
stockholders of Seneca
Biopharma, Inc. and Leading BioSciences, Inc. to disclose the identity
of the Investor.
4. Per your description of the CVR Agreement on page 146, please update
your disclosure
here and on page 18 to clarify, if true, that holders of Seneca common
stock immediately
prior to the effective time will only receive proceeds from Legacy
Monetization Events to
the extent that such proceeds exceed $300,000 in the aggregate. Please
also revise to
confirm whether the up-front payment of $100,000 received by Seneca
for the license
NSI-189, as well as any additional proceeds received by Seneca prior
to the Effective
Time, will be treated as a Legacy Monetization.
Prospectus Summary
Leading BioSciences , Inc., page 13
5. Please provide a more detailed, balanced summary of LBS's business
including a
description of its lead product candidates and the status of its
current clinical programs.
Refer to Item 3 of Form S-4.
6. Given that LBS has not yet initiated a Phase 2/3 or Phase 3 clinical
trial for any of its
product candidates, please revise your statement that LBS is a "late"
clinical stage
biopharmaceutical company here and on pages 185 and 231.
Nasdaq Capital Market Listing , page 24
7. Please revise your disclosure here and on the cover page to indicate
whether the Nasdaq's
determination regarding the initial listing application will be known
at the time
stockholders are asked to vote on the merger agreement and whether you
have had any
discussions with Nasdaq concerning the initial listing application.
Please also revise
to include a discussion of the potential consequences to investors,
including the ability of
investors to buy and sell shares of common stock, if Nasdaq does not
approve the listing
application of the combined company, but Seneca and LBS proceed with
the merger.
Finally, please revise your disclosure to indicate whether you expect
Seneca's current
failure to comply with Nasdaq's minimum bid price requirement to have
any impact on the
initial listing application of the combined company.
The Merger
Background of the Merger, page 79
8. To the extent material, please identify the individuals who
participated in the meetings
and discussions described in this section. For instance, please
identify the representatives
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 3 19, 2021 Page 3
FirstName LastName
of Seneca and LBS who participated negotiation calls on September 25,
2020, October 6,
2020 and October 7, 2020 as well as the representatives who negotiated
on calls between
November 6, 2020 and December 15, 2020.
9. We note your disclosure that you selected Solebury and Hibiscus as
your financial
advisors. Please provide more details regarding the selection process
for financial
advisors, including the qualifications considered.
Seneca Reasons for the Merger, page 93
10. We note your disclosure throughout the document that the Exchange
Ratio formula is
based upon an LBS valuation of $97.85 million. However, your
disclosure on page 103
indicates that Cassel Salpeter's analysis of comparable public
companies indicated an
implied equity value reference range for LBS of $58.4-87.6 million and
that Cassel
Salpeter's analysis of comparable IPOs indicated an implied equity
value reference range
for LBS of $58.1-82.9 million.
Please revise your disclosure to discuss the reasons why Seneca's
board determined that a
higher LBS valuation is fair to, advisable and in the best interests
of Seneca and its
stockholders.
Opinion of the Financial Advisor to the Seneca Transaction Committee
Financial Analysis of Seneca, page 102
11. Please revise your disclosure to provide the implied equity value
reference range for
Seneca on an aggregate basis.
Interests of the Seneca Directors and Executive Officers in the Merger, page
105
12. Please update your disclosure to discuss whether the report
commissioned from Radford -
Aon Rewards Consulting, Inc. included a discussion or recommendation
with respect to
the compensation payable to the executive officers discussed in this
section, including the
compensation that may be paid to executive officers in exchange for
the cancellation of
their options.
13. Please define the term "Accrued Obligations."
Material U.S. Federal Income Tax Consequences of the Merger, page 113
14. Please revise your prospectus disclosure to provide a firm conclusion
regarding treatment
of the transaction under Section 368(a) and remove language stating
that it is intended
that, or generally, certain material tax consequences will apply. In
addition, please clearly
state that the conclusion is the opinion of counsel. Please also
remove any statement that
assumes the material tax consequences at issue (e.g., "If the Merger
qualifies as a
reorganization within the meaning of Section 368(a) of the Code").
Refer to Section III of
Staff Legal Bulletin No. 19 for guidance.
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 4 19, 2021 Page 4
FirstName LastName
Agreements Related to the Merger
Pre-Merger Financing, page 142
15. Please revise your disclosure in the "Securities Purchase Agreement
(Equity Financing)"
subsection to describe the circumstances under which the Converted
Additional Shares
would not be delivered to the Investor by the 136th day following the
Effective Time.
Please also update your disclosure to clarify, if true, that any
Converted Additional Shares
not delivered to the Investor from escrow will be distributed to the
holders of LBS capital
stock at the Effective Time.
Contingent Value Rights Agreement, page 144
16. Please revise your disclosure to (i) explain the role of the CVR Agent
and (ii) discuss how
the CVR Holders' Representative will be selected. Please also revise
to clarify whether
Seneca's obligations pursuant to the CVR Agreement will become the
obligations of the
combined company following the Effective Time.
17. We note your disclosure that (i) Seneca will be entitled to use all or
a portion of the
Ongoing Support Funding ($500,000) for expenses related to a Legacy
Monetization, (ii)
that Seneca will pay $500,000 (i.e. the entire amount of the Ongoing
Support Funding) to
the CVR Holders' Representative at the Effective Time and that (iii)
the CVR Holders'
Representative will be entitled to be reimbursed from a segregated
escrow account for
costs related to any Legacy Monetization.
Please update your disclosure to clarify (A) whether the intent of the
arrangement is that
the CVR Holders' Representative's fee will be reduced by amounts used
by Seneca for
expenses related to a Legacy Monetization and (B) the amount of funds
that will be placed
in the segregated escrow account and the identity of the escrow agent.
18. We note your disclosure that each CVR will entitle its holder to
receive a pro rata portion
of 80% of the net proceeds from any Legacy Monetization. We further
note that "net
proceeds" is defined as gross proceeds less deductions. Please revise
your disclosure to
explain how the remaining 20% of net proceeds from any Legacy
Monetization will be
allocated.
We further note your disclosure on page 146 that the gross proceeds of
any monetization
will be reduced by the amount of the Ongoing Support Funding. Please
update your
disclosure here and in the Q&A in your document to clarify, if true,
that the $500,000 of
Ongoing Support Funding must be repaid before the net proceeds of any
Legacy
Monetization are distributed to legacy Seneca stockholders.
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 5 19, 2021 Page 5
FirstName LastName
Description of Seneca's Business
Employees, page 183
19. Please revise your disclosure here and on page 221 to provide a
description of your human
capital resources as required by Item 101(c)(2)(ii) of Regulation S-K.
Description of LBS's Business
Overview, page 186
20. Please update LBS's pipeline chart to clarify whether each of the
product candidates in the
chart is wholly-owned or licensed from a third party.
In addition, we note the inclusion of an oral protease inhibitor for
glucose control and
autoimmune disease in LBS's pipeline table. Given the status of
development and the
limited disclosure in the prospectus regarding these programs it seems
premature to
highlight theses program prominently in LBS's pipeline table.
Accordingly, please revise
to remove these programs from the pipeline table or advise.
21. We note the disclosure throughout this section stating that "evidence
suggests that
digestive enzyme leakage...", "genetic evidence supporting the
association of proteases...",
"there is building evidence that...", "multiple lines of evidence
implicate aberrant protease
activity", etc. Please revise these and similar statements to clearly
described where this
evidence was observed and whether it was based on studies or trials
conducted by LBS or
by a third party.
Our Strategy, page 187
22. Please update this section, or another part of the Description of
LBS's Business as
appropriate, to discuss whether you have identified the first
indication(s) for which you
anticipate seeking marketing approval for LB1148 and the clinical
trials that you will be
required to conduct to support your initial application(s) for
marketing approval.
23. Please remove the statement that LBS intends to "rapidly" develop
LB1148 as well as any
other statements that state or imply that you will be successful in
developing and
progressing your product candidates in a rapid or accelerated manner
as these statements
are inherently speculative.
24. Please remove here and throughout to remove any statements that LBS's
product
candidates are "best-in-class" or "first-in-class" because the term
suggests that the product
candidates are effective and likely to be approved by the FDA. If your
use of the term
was designed to convey your belief that your product candidates are
based on a
differentiated technology or approach, you may further discuss how
your technology or
approach differs from those of your competitors.
25. We note your statements that a "similarly designed" open-label
clinical trial provide
evidence that LB1148 can reduce the time to return to bowel function
in GI surgery and
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 6 19, 2021 Page 6
FirstName LastName
that three patients treated with LB1148 who were assessed for
postoperative adhesions did
not develop postoperative adhesions.
Please balance your disclosure to disclose the stage of these trials,
whether the trials were
powered for efficacy, and any relevant limitations. We further note
that your disclosure on
page 194 regarding the postoperative adhesions assessment states that
the surgeon for one
of the three patients was not an investigator and that postoperative
adhesions were not
formally assessed. Please revise your statements on page 187 to
reflect the discussion on
page 194.
Unmet Needs in Intestinal Barrier Dysfunction and the Opportunity for LB1148,
page 187
26. We note your statement here that LB1148 "is expected to confer
multiple benefits" as well
as your statement elsewhere that LB1148 "is expected to improve
patient outcomes." We
similarly note your statements that data suggest that LB1148 may
prevent postoperative
adhesions in surgical patients, that LB1148 may offer distinguishing
benefits for patients
providers and that LB1148 may reduce overall length of stay in both
the hospital and ICU
settings. These are just examples.
Please revise your disclosure throughout your prospectus to revise
these and similar
statements to eliminate conclusions or predictions that LB1148 is or
will be effective as
determinations of efficacy are solely within the authority of the FDA.
You may provide a
summary of the objective data from your preclinical studies and
clinical trials without
including conclusions related to efficacy.
Clinical Development of LB1148, page 192
27. Please update your disclosure to include a explanation of statistical
significance.
CV Surgery Phase 1, LBS-IST-CVS-101, page 192
28. Please update your disclosure to discuss whether the clinical trial of
LB1148-Z can be
used to support an eventual NDA filing with the FDA.
PB101, page 200
29. Please revise your disclosure to state whether PB101 is wholly-owned
by LBS or in-
licensed. Please also revise your disclosure to clarify whether you
conducted the studies
referenced later in this section or if they were conducted by a
third-party. Further, please
present more detailed information regarding the studies in animal
models that indicate that
PB101 can preserve intestinal issue following intestinal injury.
Alternatively, explain to us
why this disclosure would not be material.
Finally, please revise your disclosure to indicate the status of a
potential IND filing for
PB101 or explain to us why this would not be practicable.
Dane Saglio
FirstName LastNameDane
Seneca Biopharma, Inc. Saglio
Comapany
January 19,NameSeneca
2021 Biopharma, Inc.
January
Page 7 19, 2021 Page 7
FirstName LastName
Protease Activity and IBD, page 201
30. Please revise and simplify your disclosure in the first seven
sentences of this paragraph.
Your disclosure should clearly explain the role of proteases and
should clearly convey the
potential relationship between protease activity and GI diseases.
Intellectual Property, page 206
31. Please update this section to discuss your IP coverage for PB101.
Co-Development Agreement with Newsoara, page 209
32. Please update your disclosure in this section to clarify if LB1148 and
PB101 are subject to
the agreement.
Government Regulation and Product Approval, page 210
33. Please update your disclosure in this section to include a discussion
of the regulation of
polyethylene glycol 3350 ("PEG") referenced on page 47 of your
registration statement. In
your revisions, please disclose whether you have discussed the
classification of PEG in
LB1148 with the FDA or other regulatory agencies. Please also explain
why an FDA
decision that LB1148 is a combination product would require additional
clinical trials "for
which there is not currently a feasible clinical trial design."
Description of Seneca Capital Stock
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, page
272
34. We note that Section 27 of the Exchange Act creates exclusive federal
jurisdiction over
all suits brought to enforce any duty or liability created by the
Exchange Act or the rules
and regulations thereunder, and Section 22 of the Securities Act
creates concurrent
jurisdiction for federal and state courts over all suits brought to
enforce any duty or
liability created by the Securities Act or the rules and regulations
thereunder. We further
note your disclosure on page 280 that your exclusive forum provision
does not apply to
Securities Act or Exchange Act claims. Please revise your disclosure
here to clarify, if
true, that the exclusive forum provision described here does not apply
to Securities Act or
Exchange Act claims.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Dane Saglio
Seneca Biopharma, Inc.
January 19, 2021
Page 8
You may contact Christine Torney at 202-551-3652 or Kevin Kuhar at
202-551-3662 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Alan Campbell at 202-551-4224 or Celeste Murphy at 202-551-3257 with
any other
questions.
Sincerely,
FirstName LastNameDane Saglio
Division of
Corporation Finance
Comapany NameSeneca Biopharma, Inc.
Office of Life
Sciences
January 19, 2021 Page 8
cc: Raul Silvestre
FirstName LastName