Item 1.01.
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement
On April 12, 2020, Entasis Therapeutics Holdings
Inc., a Delaware corporation (the “Company”), entered into a securities purchase agreement (the “Securities Purchase
Agreement”) with Innoviva, Inc. (“Innoviva”), pursuant to which the Company agreed to issue and sell to Innoviva,
in a private placement under the applicable Nasdaq Stock Market LLC rules (“Nasdaq”), up to 14,000,000 newly issued
shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) and warrants (the “Common
Warrants”) to purchase up to 14,000,000 shares of Common Stock, with an exercise price per share of $2.50 (the “Private
Placement”). The Common Warrants, at an exercise price per share of $2.50, will be exercisable immediately and will have
a five year term. Each share of Common Stock and Common Warrant (together, the “Common Unit”) will be issued and sold
together at price per Common Unit of $2.50.
The Private Placement is expected to occur in two
tranches. At the closing of the first tranche (the “First Closing”), subject to satisfaction or waiver of certain closing
conditions, including obtaining voting agreements (the “Voting Agreements”) from stockholders of the Company representing
at least 45% of the outstanding shares of Common Stock, Innoviva will purchase the maximum number of shares of Common Stock and
Common Warrants issuable to Innoviva in compliance with any and all applicable laws and without the requirement for the prior receipt
of the stockholders’ approval under the listing requirements of Nasdaq. At the First Closing, it is anticipated that Innoviva
will purchase approximately 1,322,510 shares of Common Stock and Common Warrants to purchase approximately 1,322,510 shares of
Common Stock for an aggregate purchase price of approximately $3.3 million. At the closing of the second tranche (the “Second
Closing”), subject to satisfaction of certain closing conditions, including the Company’s stockholders’ voting
in favor of the transaction, Innoviva will purchase the remaining shares of Common Stock and Common Warrants, which anticipated
to be approximately 12,677,490 shares of Common Stock and Common Warrants to purchase approximately 12,677,490 shares of Common
Stock for an aggregate purchase price of approximately $31.7 million.
The Company expects to receive aggregate gross proceeds
from the Private Placement of approximately $35 million, before deducting transaction expenses, and excluding proceeds (if any)
received in connection with the exercise of any Common Warrants. At the effective time of the Second Closing, assuming the exercise
of all of the Common Warrants, Innoviva will hold approximately 67.8% of the Company’s outstanding Common Stock.
The Securities Purchase Agreement contains customary
representations and warranties as well as certain operating covenants applicable to the Company until the Second Closing. The Securities
Purchase Agreement contains certain customary termination rights for both the Company and Innoviva at any time prior to the First
Closing, including, but not limited to, mutual written consent of the parties; by either party, if the First Closing has not closed
by April 30, 2020, subject to extension upon mutual agreement by the parties; by either party, if a governmental entity of competent
jurisdiction issues a final and non-appealable order; and by either party, upon the breach of any representation, warranty, covenant
or other agreement of the Securities Purchase Agreement by the other that is not cured before the earlier of the 10th day following
notice of such breach and the termination date. If either the First Closing or the Second Closing does not occur under specified
circumstances, the Company will be required to pay Innoviva a termination fee in an amount equal to $850,000, plus reimbursement
of expenses.
Both the First Closing and the Second Closing are
expected to close in the second quarter of 2020, subject to the satisfaction of certain closing conditions referenced above.
The description of the Securities
Purchase Agreement and Voting Agreements do not purport to be complete and are qualified in their entirety by the full text of
the Securities Purchase Agreement and form of Voting Agreement, copies of which are being filed as Exhibits 10.1 and 10.2 to this
Current Report on Form 8-K (the “Current Report”) and are incorporated by reference herein.
Investor Rights Agreement
At the First
Closing, Innoviva and the Company will enter into an investors rights agreement (the “Investor Rights Agreement”)
which will provide that for so long as Innoviva and its affiliates hold at least 15% of the outstanding shares of Common
Stock on a fully-diluted basis, Innoviva shall have the right to designate two directors to the board of directors of the
Company (the “Board”), and for so long as Innoviva and its affiliates hold at least 8% of the outstanding shares
of Common Stock on a fully-diluted basis, Innoviva shall have the right to designate one director to the Board, subject to
certain qualifications and conditions in the Investor Rights Agreement. The Investor Rights Agreement also will provide for
participation rights for Innoviva to participate pro rata in future offerings of equity securities by the Company.
The description of the Investor
Rights Agreement does not purport to be complete and is qualified in its entirety by the full text of the form of Investor Rights
Agreement, a copy of which is being filed as Exhibit 10.3 to this Current Report and is incorporated by reference herein.
Registration Rights
Agreements
Simultaneously with the First Closing,
the Company and Innoviva will enter into a registration rights agreement (the “Registration Rights Agreement”), pursuant
to which, among other things, the Company must prepare and file with the Securities and Exchange Commission (the “SEC”),
a registration statement with respect to resales of the shares of Common Stock and warrants purchased by Innoviva under the Securities
Purchase Agreement.
The description of the Registration
Rights Agreement does not purport to be complete and is qualified in its entirety by the full text of the Form of Registration
Rights Agreement, a copy of which is filed as Exhibit 4.2 to this Current Report and is incorporated by reference herein.