United States securities and exchange commission logo
September 16, 2022
Reenie McCarthy
Chief Executive Officer
Stealth BioTherapeutics Corp
c/o Stealth BioTherapeutics Inc.
140 Kendrick Street
Needham, MA 02494 USA
Re: Stealth
BioTherapeutics Corp
Schedule 13E-3
filed August 19, 2022
File No. 005-90943
Dear Ms. McCarthy:
We have reviewed your filing 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 these comments by providing the requested
information or advise us as
soon as possible when you will respond. If you do not believe our
comments apply to your facts
and circumstances, please tell us why in your response.
After reviewing your
response to these comments, we may have additional comments.
Schedule 13E-3 filed August 19, 2022
Questions and Answers About the Merger, page 23
1. Refer to the first Q&A
on page 24. With a view towards disclosure, please advise how
"sufficient votes will
be cast to authorize and approve the Merger Agreement...and the
Transactions...without
any further vote of any other shareholder being required" given
that (i) Morningside
and its affiliates, as of the date of the Schedule 13E-3 owns in the
aggregate Ordinary
Shares representing approximately 65.1% of the issued and
outstanding Ordinary
Shares of the Company and (ii) the affirmative vote of shareholders
representing two-thirds
or more of the votes attaching to the Ordinary Share present and
voting in person or by
proxy as a single class at the extraordinary general meeting is
required to authorize
and approve the Plan of Merger and the Transactions.
Reenie McCarthy
FirstName LastNameReenie
Stealth BioTherapeutics CorpMcCarthy
Comapany 16,
September NameStealth
2022 BioTherapeutics Corp
September
Page 2 16, 2022 Page 2
FirstName LastName
Background of the Merger, page 30
2. Refer to the following disclosure:
the second paragraph on page 33 indicating that during the
meeting with the Special
Committee and representatives of Houlihan Lokey, Walkers and
WilmerHale on
July 14, 2022, Houlihan Lokey discussed with the Special
Committee its preliminary
financial analyses based on its review of information provided by
the Company to
date; and
the last pararaph on page 34 indicating that during the meeting
with the Special
Committee and representatives of Houlihan Lokey and WilmerHale on
July 25, 2022,
"representatives of Houlihan Lokey and WilmerHale provided
information regarding
precedent transactions treatment of ADS cancellation fees and
discussed the terms of
the Merger Agreement" and "Houlihan Lokey also discussed certain
of the
preliminary financial analyses previously reviewed with the
Special Committee."
Each presentation, discussion, or report held with or presented by the
financial advisor,
whether oral or written, is a separate report that requires a
reasonably detailed description
meeting the requirements of Item 1015 of Regulation M-A. This
requirement applies to
both preliminary and final reports. If the above statements reference
a presentation made
by Houlihan Lokey during the Special Committee s evaluation of the
transaction, please
supplement the disclosure to provide a reasonably detailed description
of such meeting
that satisfies the requirements of Item 1015 and file any written
materials, if applicable, as
exhibits to the Schedule 13E-3 pursuant to Item 9 of Schedule 13E-3
and Item 1016(c) of
Regulation M-A. We note that there does not appear to be any such
written report dated
July 14 or July 25, 2022 currently filed as an exhibit. Refer to
Meyers Parking, Rel. 34-
26069 (Sep. 12, 1980) and Charles Ephraim (Sep. 30, 1987).
Reasons for the Merger and Position of the Special Committee and the Stealth
Board, page 36
3. Disclosure throughout the Schedule 13E-3 indicates that the Stealth
Board, acting on the
unanimous recommendation of the Special Committee, determined that
Merger
Agreement and the Plan of Merger "are fair to and in the best
interests of the Company."
Please revise to provide the disclosure described in Item 8 of
Schedule 13E-3 and Item
1014(a) of Regulation M-A. In responding to this comment, refer to the
statement
provided by the Buyer Group in the last paragraph on page 41 preceding
the bullet points.
4. The factors listed in Instruction 2 to Item 1014 of Regulation M-A are
generally relevant
to each filing person s fairness determination and should be
discussed in reasonable detail.
See Question Nos. 20 and 21 of the Exchange Act Release No. 34-17719
(April 13, 1981).
Please revise this section to either include the factors described in
Item 1014(c) and
clause (iii) of Instruction 2 to Item 1014 or explain why such factors
were not deemed
material or relevant to the Board's fairness determination. If the
procedural safeguard in
Item 1014(c) was not considered, please explain why the Board believes
the Rule 13e-3
Reenie McCarthy
FirstName LastNameReenie
Stealth BioTherapeutics CorpMcCarthy
Comapany 16,
September NameStealth
2022 BioTherapeutics Corp
September
Page 3 16, 2022 Page 3
FirstName LastName
transaction is fair in the absence of such safeguard. While we
acknowledge the disclosure
contained in the second to last bullet point on page 38, we note that
it refers to "holders of
a majority of the Company s outstanding Ordinary Shares unaffiliated
with the Buyer
Group" as opposed to "Unaffiliated Security Holders defined on page
2 of the Schedule
13E-3. The staff considers officers and directors of the Company to be
affiliates when
considering whether such reference is sufficiently specific to satisfy
Item 1014(c) of
Regulation M-A. Please refer to the definition of affiliate in
Exchange Act Rule 13e-
3(a)(1).
Position of the Buyer Group as to the Fairness of the Merger, page 41
5. Refer to the preceding comment. Please revise this section to either
include the factors
described in clauses (iii) and (vi) of Instruction 2 to Item 1014 or
explain why such factors
were not deemed material or relevant to the Buyer Group's fairness
determination.
Certain Financial Projections , page 44
6. Refer to the the assumptions on page 44 marked with bullet points and
included in clauses
(i) and (ii), including without limitation, references to:
the probability of achieving U.S. and ex-U.S. sales and
establishing licensing
arrangements for each indication and compound,
market size,
royalty rates and launch dates for U.S. and ex-U.S. sales,
cost of goods sold,
commercial expense and
research and development expenses.
Please revise to the disclosure to quantify all assumptions, where
practicable.
7. With a view towards revised disclosure, please advise us of the
difference between the
"Management Projections" and the "Probability-Adjusted Projections"
referenced on page
45. Please revise the disclosure to include the Probability-Adjusted
Projections in the
Schedule 13E-3 and describe the assumptions related thereto,
quantifying where
practicable, including the probabilities alluded to on page 45.
Opinion of the Special Committee's Financial Advisor, page 44
8. Disclosure in Exhibit (c)(1) (Houlihan Lokey's opinion) indicates that
"[t]his Opinion is
furnished for the use of the Committee (in its capacity as such) in
connection with its
evaluation of the Merger and may not be used for any other purpose
without our prior
written consent." Please disclose in the Schedule 13E-3, if true, that
Houlihan Lokey has
consented to use of its materials in the filing.
9. Please confirm that the Liquidation Analysis referenced on the top of
page 45 is the
analysis identified on pages 12 through 16 of Exhibit (c)(2) to the
Schedule 13E-
Reenie McCarthy
Stealth BioTherapeutics Corp
September 16, 2022
Page 4
3 ("Discussion Materials prepared by Houlihan Lokey for discussion with
the Special
Committee of the Stealth Board, dated July 31, 2022"). If true, please
either include such
disclosure within the Schedule 13E-3, similar to the Management
Projections, or include a
specific reference in the disclosure alerting readers to the location of
the Liquidation
Analysis and confirm that such materials will be included in the package
of Rule 13e-3
materials sent or given to security holders.
10. The last sentence of this section indicates that "...in connection with
bankruptcies,
restructurings, distressed situations and similar matters, Houlihan
Lokey and certain of its
affiliates may have in the past acted, may currently be acting...as
financial advisor to
debtors, creditors...that may have included or represented and may
include or
represent...the Company, Parent, Morningside, members of the Morningside
Group, other
participants in the Merger or certain of their respective affiliates or
security holders, for
which advice and services Houlihan Lokey and its affiliates have
received and may
receive compensation." Please revise the disclosure to quantify any such
compensation
received during the time frame and from the parties identified in Item
1015(b)(4) of
Regulation M-A.
We remind you that the filing persons are responsible for the accuracy
and adequacy of
their disclosures, notwithstanding any review, comments, action or absence of
action by the staff.
Please direct any questions to Perry Hindin at 202-551-3444.
Sincerely,
FirstName LastNameReenie McCarthy
Division of
Corporation Finance
Comapany NameStealth BioTherapeutics Corp
Office of Mergers
& Acquisitions
September 16, 2022 Page 4
cc: Rosemary G. Reilly, Esq.
FirstName LastName