ESSA Pharma Inc. announced it has entered into a definitive agreement to be acquired by XenoTherapeutics Inc., a non-profit biotechnology company, in an all-cash transaction valued at approximately $1.91 per share. The deal comes as ESSA proceeds with plans to discontinue operations and wind down its prostate cancer-focused drug development business.
Transaction Structure and Valuation
Under the Business Combination Agreement, ESSA shareholders will receive a cash payment per share determined by the company's cash balance at closing, after deducting transaction costs, liability reserves, legal expenses, and transaction fees. Additionally, each shareholder will receive one non-transferable contingent value right (CVR) for each share, entitling holders to a pro rata portion of up to $2.95 million (up to $0.06 per CVR) within 18 months following the transaction's close.
XOMA Royalty Corporation, a biotechnology royalty aggregator, is serving as the structuring agent and will provide financing to XenoTherapeutics for the acquisition. To expedite cash distribution, ESSA will apply to the Supreme Court of British Columbia for authorization to make an initial cash distribution to shareholders prior to closing.
Board Approval and Strategic Rationale
"After conducting a comprehensive review of the opportunities available to ESSA and considering the communications received from our shareholders, the ESSA Board of Directors has unanimously concluded that entering into this agreement with Xeno and XOMA Royalty is in the best interest of the Company and maximizes value for our shareholders as the Company proceeds with its plans to discontinue operations and wind-down its business," said David Parkinson, M.D., President and CEO of ESSA.
The board determined that the transaction delivers cash value to shareholders in an expedited timeframe with less complexity and value risk compared to liquidation, thus providing more certain value to shareholders.
Approval Requirements and Timeline
The transaction will be implemented through a court-approved plan of arrangement under the Business Corporations Act (British Columbia) and requires approval from at least 66⅔% of votes cast by ESSA shareholders, 66⅔% of votes cast by all securityholders (including option and warrant holders) voting as a single class, and a majority of votes from shareholders excluding certain "interested parties" as required by Multilateral Instrument 61-101.
Directors and senior officers of ESSA, owning approximately 2.23% of outstanding shares, have entered into voting and support agreements to vote in favor of the transaction. The deal is expected to close in the second half of 2025, subject to shareholder approval, court approval, and other customary conditions.
Deal Protection and Advisory Services
The Business Combination Agreement includes standard deal-protection provisions, including a non-solicitation covenant and XenoTherapeutics' right to match any superior proposal. A termination fee of $2.5 million is payable by ESSA under certain circumstances, including if the company enters into an agreement with a superior proposal.
Leerink Partners is serving as ESSA's exclusive financial advisor, while Blake, Cassels & Graydon LLP and Skadden, Arps, Slate, Meagher & Flom LLP are providing Canadian and U.S. legal counsel, respectively.
Company Background
ESSA Pharma was previously focused on developing novel and proprietary therapies for prostate cancer treatment. XenoTherapeutics Inc. is a Massachusetts-based 501(c)(3) research foundation focused on advancing xenotransplantation through scientific research, clinical development, and public education.
XOMA Royalty Corporation operates as a biotechnology royalty aggregator, acquiring potential future economics associated with pre-commercial and commercial therapeutic candidates licensed to pharmaceutical or biotechnology companies, providing non-dilutive, non-recourse funding to help biotech companies advance their drug development programs.
