Timber Pharmaceuticals has exciting news to share—the company is set to be acquired by LEO US Holding, Inc., a wholly-owned subsidiary of LEO Pharma A/S, in a transformative deal valued at up to $36 million. This strategic move will see Timber joining forces with LEO Pharma to advance its mission in the pharmaceutical landscape.
The agreement entails a two-part financial arrangement. Initially, Timber will receive an upfront consideration of $14 million. But the collaboration doesn’t stop there—additional potential awaits. Up to $22 million in contingent value rights (CVRs) is in the cards, contingent upon the achievement of specific milestones, as outlined below. This unique structure aims to align success with rewards, driving both innovation and growth.
All shares of Timber’s stock will be converted into the right to receive the initial upfront consideration, with careful considerations for certain outstanding warrants. These warrants, which carry a Black Scholes cash payout value, are valued at approximately $5.1 million as per current estimates. This thoughtful calculation is based on several factors, including the Black Scholes option pricing model and the state of Timber’s equity as of August 20, 2023.
The potential value to Timber’s stockholders hinges on an implied assessment of those aforementioned warrants, calculated through the Black Scholes option pricing model. However, the final figure will only crystallize upon the merger’s completion, subject to variables such as Timber’s trading price and stock volatility leading up to the merger.
The deal’s centerpiece is the CVRs, a mechanism designed to fuel Timber’s growth trajectory. These CVRs open the door to an extra $22 million, linked to specific milestones for TMB-001. Notably, this includes up to $12 million tied to FDA approval of TMB-001 for treating congenital ichthyosis by October 1, 2025, and an additional $10 million linked to TMB-001’s net sales crossing $100 million within four consecutive calendar quarters by December 31, 2028.
As a strategic component of this partnership, LEO Pharma is committed to providing Timber with a bridge loan of up to $3.0 million, subject to defined conditions. Worth noting is that the CVR payments will be subject to certain deductions related to the repayment of 50% of the bridge loan extended by LEO Pharma to Timber in connection with the merger.
This groundbreaking deal has received the unanimous approval of both companies’ Boards of Directors and is projected to conclude in the fourth quarter of 2023, pending customary closing conditions and the green light from a majority of Timber’s common stockholders. Upon completion, Timber is set to transition into a privately held entity, with its common stock no longer trading on public markets.
Timber will be filing a comprehensive Current Report on Form 8-K with the Securities and Exchange Commission (SEC), shedding light on the merger agreement and the CVR agreement. This document will provide an in-depth glimpse into the merger’s intricacies, along with the multifaceted benefits Timber stockholders can anticipate.
