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Chardan Healthcare Acquisition Corporation

Chardan Healthcare Acquisition Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: BiomX Ltd.

ESTIMATED CURRENT FUNDS in TRUST: $71.2 Million*
CURRENT PER SHARE REDEMPTION PRICE: $10.17*
EQUITY VALUE: $253.8 Million

*SPACInsider estimate a/o 10-22-19

Chardan Healthcare Acquisition Corp. proposes to combine with BiomX Ltd. (“BiomX”). BiomX is a preclinical stage microbiome company developing both natural and engineered phage cocktails designed to target and destroy bacteria that affect the appearance of skin, as well as harmful bacteria in chronic diseases, such as IBD, PSC, and cancer. BiomX discovers and validates proprietary bacterial targets and customizes phage compositions against these targets.

BiomX’s product for acne-prone skin is anticipated to begin clinical testing by the end of 2019. The combined company will continue to be led by BiomX’s experienced management team headed by Chief Executive Officer Jonathan Solomon.

Transaction Summary

CHAC will issue 16.625 million shares and vested securities to current security holders of BiomX. Certain BiomX shareholders may, subject to the terms of the investment agreements, receive up to an additional 6.0 million CHAC shares: 2.0 million shares if the share price exceeds $16.50 by fiscal year 2021, an additional 2.0 million shares if the share price exceeds $22.75 by fiscal year 2023, and an additional 2.0 million shares if the share price exceeds $29.00 by fiscal year 2025.

After giving effect to the investor transactions being undertaken in order to meet the minimum cash condition, and assuming no redemption from CHAC shareholders, it is estimated that the current securityholders of BiomX will own approximately 73% of the issued and outstanding vested securities in the combined company at closing.

Post-closing, Mr. Solomon and three current BiomX directors will join Mr. Grossman and Dr. Amusa from CHAC on the seven-person board of directors. An additional board member will be designated by BiomX.

Additional Agreements

In addition to the Merger Agreement:

  • CHAC’s sponsor, agreed that if the Aggregate Investment Amount, is less than $70,000,000, the sponsor will forfeit a number of founder shares equal to:
    • (a) 500,000 shares of CHAC common stock; multiplied by
    • (b) the quotient of: (i) the absolute value of the difference between $70,000,000 minus the Aggregate Investment Amount; divided by (ii) $20,000,000, rounded to the nearest whole share; provided, however, that in no event will the sponsor be required to forfeit more than 500,000 shares of CHAC common stock.
  • CHAC’s sponsor agreed to purchase up to $2.5 million of shares of CHAC’s common stock (either directly from CHAC (at a price of $10.00 per share) or from public stockholders (at prices no greater than the redemption amount per share) at the Closing in the event that the Aggregate Investment Amount would be less than $50 million but greater than $47,499,999.
  • CHAC entered into voting agreements with holders of 1,000,000 shares of its common stock pursuant to which such stockholders agreed to vote in favor of the transactions contemplated by the Merger Agreement and to not redeem or sell such shares.
  • CHAC and certain current CHAC public shareholders entered into agreements with certain of BiomX’s current shareholders pursuant to which such BiomX shareholders agreed to purchase an aggregate of 1,879,075 shares of CHAC’s common stock at Closing from such CHAC public stockholders at a price of $10.00 per share. In addition, CHAC agreed to pay such selling CHAC public shareholders an amount equal to the difference between the redemption price per share at the Closing minus $10.00 per share. The selling CHAC public shareholders agreed to vote in favor of the transactions contemplated by the Merger Agreement and not to redeem or sell to third parties such shares of CHAC common stock.
  • CHAC entered into a letter agreement with certain BiomX shareholders to sell additional CHAC Shares to them in the event that certain events occur.
  • CHAC entered into agreements with investors that agreed to purchase up to 810,000 of shares of CHAC common stock at CHAC’s request and not to redeem such shares of CHAC common stock in connection with the Closing.
  • Certain third parties entered into agreements to purchase 1,234,908 shares of CHAC’s common stock from certain of its current public stockholders at the Closing. The selling CHAC public stockholders agreed to vote in favor of the transactions contemplated by the Merger Agreement and not to redeem or sell to third parties such shares of CHAC common stock.
  • BiomX shareholders owning 86% of the voting power in BiomX entered into support agreements with CHAC pursuant to which such shareholders agreed to vote in favor of the transactions contemplated by the Merger Agreement at each meeting of the shareholders of BiomX.

AMENDMENT TO MERGER AGREEMENT – 10/11/19

On October 11, 2019, CHAC, Merger Sub and BiomX entered into an amendment to the Merger Agreement (the “Amended Merger Agreement”) to reflect the following:

  • Among other things, as a condition to the obligations of BiomX to consummate the transactions contemplated by the Merger Agreement, the Aggregate Investment Amount (as defined in the Merger Agreement) shall equal or exceed $55 million.
  • The agreement of Chardan Investment LLC to cancel up to 500,000 CHAC Shares in the event that the Aggregate Investment Amount (as defined in the Merger Agreement) is less than $70 million at the closing of the Business Combination (as defined in the Merger Agreement) was terminated.
  • CHAC and BiomX have agreed to extend the Outside Closing Date (as defined in the Merger Agreement) to November 30, 2019.

In addition, the agreement pursuant to which Chardan Securities, LLC agreed to purchase up to $2.5 million of CHAC Shares at the closing of the Business Combination in the event that the Aggregate Investment Amount is less than $50 million has been amended such that Chardan Securities, LLC agrees to purchase up to $2.5 million of CHAC Shares (as defined in the Merger Agreement) at the closing of the Business Combination in the event that the Aggregate Investment Amount is less than $55 million, provided that CHAC shall not be obligated to make such purchases to the extent that the Aggregate Investment Amount is less than $55 million because of the failure of the BiomX shareholders to purchase $23 million of CHAC Shares.

Earnout

BiomX shareholders will be entitled to receive earn-out consideration of an additional six million CHAC shares.

  • 2.0 million shares if the share price exceeds $16.50 by fiscal year 2021
  • 2.0 million shares if the share price exceeds $22.75 by fiscal year 2023
  • 2.0 million shares if the share price exceeds $29.00 by fiscal year 2025

 

Board Composition

  • Post-closing, BiomX CEO, Mr. Joseph Solomon, and three current BiomX directors will join Mr. Grossman and Dr. Amusa, from CHAC, on the seven-person board of directors. An additional board member will be designated by BiomX.

Conditions to Closing

BiomX Conditions:

  • CHAC complying in all material respects with all of its obligations required to be performed pursuant to the covenants in the Merger Agreement.
  • The Aggregate Investment Amount shall equal or exceed $50,000,000.
  • The aggregate amount of indebtedness, expenses and other liabilities of CHAC that remain unpaid as of immediately prior to the Closing is less than $1,000,000.
  • The daily volume weighted average price of a share of CHAC common Stock for the 10 trading days immediately preceding the Closing date shall equal at least $9.50.
  • The immediately available funds deposited by certain BiomX shareholders into an escrow account established for the purposes of holding the cash proceeds paid by such BiomX shareholders to purchase shares of CHAC common stock from current CHAC public stockholders, shall equal or exceed $20,000,000.

CHAC Conditions:

  • There shall have been no continuing event, change or occurrence which individually or together with any other event, change or occurrence, would reasonably be expected to have a material adverse effect on BiomX.
  • The immediately available funds deposited by certain BiomX shareholders into an escrow account established for the purposes of holding the cash proceeds paid by such BiomX shareholders to purchase shares of CHAC common stock from current CHAC public stockholders, shall equal or exceed $20,000,000.

Termination

  • CHAC, if the closing has not occurred on or prior to October 31, 2019 (the “Outside Closing Date”); provided, that if the SEC has not declared CHAC’s proxy statement effective on or prior to September 30, 2019, the Outside Closing Date shall be automatically extended to November 30, 2019; provided, further, that CHAC is not in material breach of any of its obligations under the Merger Agreement

 

CHAC transaction summary 7-17-19

ADVISORS

  • Chardan is acting as CHAC’s M&A and capital markets advisor.
  • Cantor is acting as capital markets advisor to BiomX.
  • Loeb & Loeb LLP and Meitar Liquornik Geva Leshem Tal are representing CHAC.
  • Goodwin Procter LLP, Mayer Brown LLP and ZAG-S&W Zysman Aharoni Gayer & Co are representing BiomX.

 

CHARDAN HEALTHCARE ACQUISITION CORP. MANAGEMENT & BOARD

Executive Officers

Jonas Grossman, 44
President, CEO & Director

Mr. Grossman has served as Partner and Head of Capital Markets for Chardan Capital Markets, LLC, a New York headquartered broker/dealer, since December 2003.  Mr. Grossman has served as President of Chardan Capital Markets, LLC since September 2015.  Since 2003, Mr. Grossman has overseen the firm’s deal origination, syndication, secondary market sales and trading and corporate access initiatives.  He has extensive transactional experience having led or managed over 400 transactions during his tenure at Chardan.  Since December 2006, Mr. Grossman has served as a founding partner for Cornix Advisors, LLC, a New York based hedge fund.  From 2001 until 2003, Mr. Grossman worked at Ramius Capital Group, LLC, a global multi-strategy hedge fund where he served as Vice President and Head Trader.  Mr. Grossman has served as a director for China Broadband [NASDAQ: SSC] from January 2008 until November 2010.  He holds a B.A. in Economics from Cornell University and an M.B.A. from NYU’s Stern School of Business.

George Kaufman, 42
CFO, Head of Strategy & Director

Mr. Kaufman has served as Managing Director and Head of Investment Banking for Chardan Capital Markets, LLC since January 2006.  Mr. Kaufman established the investment banking, brokerage and marketing protocols and standards at Chardan since joining the firm in 2004. Mr. Kaufman has extensive experience with SPACs, M&A transactions and financings especially in association with emerging growth companies.  Mr. Kaufman founded Detroit Coffee Company, LLC, a national roaster, wholesaler and retail distributor of high-end specialty coffees in January 2002 and currently serves as its chief executive officer and has been a director of Prime Acquisition Corp. a European real estate company, since May 2014. Mr. Kaufman received a Bachelor of Arts degree in Economics from the University of Vermont in 1999.

 

Board of Directors

Gbola Amusa, 44
Chairman of the Board

Dr. Amusa has served as Partner, Director of Research, and Head of Healthcare Equity Research at Chardan Capital Markets since December 2014. At Chardan, he has established the healthcare vision by focusing on disruptive healthcare segments, such as gene therapy/genetic medicines, that have the highest potential for significant investment returns. Dr. Amusa was previously Managing Director, Head of European Pharma Research, and Global Pharma & Biotech Coordinator at UBS (from 2007 to 2013), where he oversaw 25 analysts. Prior to UBS, Dr. Amusa was a Senior Research Analyst and Head of European Pharma research at Sanford Bernstein. He started his career in finance at Goldman Sachs as an Associate in the Healthcare Investment Banking Group, where he worked on large transactions including the Amgen/Immunex merger. Additionally, Dr. Amusa was previously a Healthcare Finance & Strategy Consultant working with governments, companies, leading foundations and think tanks. He holds an M.D. from Washington University Medical School, an M.B.A. with High Honors (GPA 4.0/4.0) from the University of Chicago Booth School of Business, and a B.S.E. with Honors from Duke University.

Michael Rice, 53
Director

Mr. Rice has experience in portfolio management, corporate management, investment banking and capital markets. Mr. Rice has been the co-founder of LifeSci Advisors and LifeSci Capital since March 2010. From April 2007 to November 2008 Mr. Rice was the co-head of health care investment banking at Canaccord Adams, where he was involved in debt and equity financing. Mr. Rice was also was a Managing Director at Think Equity Partners from April 2005 to April 2007, where he was responsible for managing Healthcare Capital Markets. Prior to that, from August 2003 to March 2005 Mr. Rice served as a Managing Director at Banc of America serving large hedge funds and private equity healthcare funds. Previously, he was a Managing Director at JPMorgan/Hambrecht & Quist. Mr. Rice has been a Director of RDD Pharma Ltd. since January 2016 and Navidea Biopharmaceuticals Inc. since May 2016. Mr. Rice received his BA from the University of Maryland.

Richard Giroux, 46
Director

Mr. Giroux is a Founder and has been the Chief Operating Officer of MeiraGTx (NASDAQ:MGTX) since the company’s formation in 2015. He brings more than 20 years of leadership and capital markets experience in finance and healthcare to his position. Prior to joining MeiraGTx, Rich was a partner at Sarissa Capital Management LP, an activist healthcare hedge fund, from 2014 to 2015. In 2010, Mr. Giroux helped launch and operate Meadowvale Partners, a multi-strategy hedge fund, where he was a founding partner and healthcare portfolio manager from 2009 to 2013. Prior to Meadowvale, he was a partner at Sivik Global Healthcare (formerly Argus Partners) from 2001-2008, a long/short global equity healthcare fund. From 1996 to 2001, he worked in the equity derivative divisions of Goldman Sachs and Salomon Smith Barney where he structured, marketed and traded derivative and cash products for domestic and international hedge funds and asset allocators. Mr. Giroux received his BA in Economics from Yale University in 1995.

Matthew Rossen, 41
Director

Mr. Rossen has 20 years’ experience in the pharmaceutical and biotech arena, working across multiple therapeutic categories including Anti-Infectives, Alzheimer’s, Cardiovascular, Hematology, Pain and Sleep Science. Since January 2018, Mr. Rossen has been a Senior Director of Business Development for Jazz Pharmaceuticals. Prior to working in business development, from 2012 to 2017, Mr. Rossen had been leading the commercial efforts of the Hematology Oncology division at Jazz Pharmaceuticals.  Prior thereto, from 2001 to 2010 Mr. Rossen worked at Pfizer Inc., where spent 10 years in positions of increasing responsibility across a number of functions including Operations and Manufacturing, US and WW Marketing and Commercial Development. He holds a B.S. in Kinesiology and Applied Human Physiology from the University of Colorado and received his MBA from NYU’s Stern School of Business.

Dr. Eric Kusseluk, 43
Director

Dr. Kusseluk is a Dermatologist who has been in private practice at NYU Langone Medical center since 2007. In addition to seeing patients, he has been associate professor at NYU since 2014, where he teaches the physicians, residents and medical students about practicing medicine and running a private practice. He has also done multiple clinical studies ranging from testing medical products to analyzing data on sentinel node biopsies. Before his medical career, he also worked in finance at Cantor Fitzgerald from 1997 to 1998. Dr. Kusseluk received an M.D. from Jefferson Medical College of Thomas Jefferson University and a B.A in economics from Cornell University.

ByRoman Developer