On December 19, 2024, Personalis, Inc. (the "Company") reported to have entered into an investment agreement (the "Investment Agreement") with Merck Sharp & Dohme LLC ("Merck") pursuant to which Merck has agreed to purchase from the Company 14,044,943 shares (the "Shares") of the Company’s common stock, par value $0.0001 per share (the "Common Stock"), at a price per share of $3.56, representing the last reported closing price of the Common Stock on The Nasdaq Global Market on December 18, 2024, for gross proceeds to the Company of approximately $50.0 million (Filing, 8-K, Personalis, DEC 19, 2024, View Source [SID1234649218]). The closing is expected to occur on or about December 19, 2024 (the "Closing Date"). Pursuant to the terms of the Investment Agreement, the Company agreed to reserve $10.0 million of the proceeds to open an ISO-certified laboratory in a region outside of the United States, with such region mutually agreed upon by the Company and Merck.
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Pursuant to the terms of the Investment Agreement, Merck agreed to certain customary standstill restrictions that apply from the Closing Date until the earlier of (a) the second anniversary of the Closing Date and (b) the first time that Merck and its affiliates no longer own at least 50% of the Company’s shares owned by Merck immediately following the Closing Date (this clause (b), the "Investor Rights Period," and the earlier of clause (a) and (b), the "Standstill Period"). These standstill restrictions will lapse prior to the end of the Standstill Period if the Company publicly announces the entry into a definitive agreement providing for a change of control transaction. In addition, during the Investor Rights Period, the Company has agreed to provide Merck with certain information and strategic transaction notification rights, including to notify Merck in certain circumstances and subject to certain specified exceptions if (a) the Company receives a bona fide offer, indication of interest or proposal from a third party for a change of control transaction (a "Proposal") or (b) the Company’s board of directors commences a process for solicitation of offers or indications of interest for a change of control transaction (a "Sale Process"). Subject to specific exceptions, the Company agreed to provide Merck with a reasonable opportunity to respond to a Proposal or participate in a Sale Process in a similar manner to other participants. In addition, during the Investor Rights Period the Company agreed to provide Merck with the opportunity to participate pro rata in future equity or equity-linked offerings of the Company, subject to specified exceptions.
Merck also agreed to certain voting commitments under the Investment Agreement that, during the Standstill Period, require Merck to vote, subject to specified exceptions, any shares of Common Stock that Merck owns in accordance with the recommendations of the Company’s board of directors. Such voting commitments generally apply to director nominations for any meeting of the Company’s stockholders, amendments to the Company’s charter to increase the authorized shares of Common Stock, various compensation-related matters, and ratification of the Company’s auditors. Merck also agreed not to transfer (a) any Shares to any third party, subject to certain specified exceptions, for 90 days following the Closing Date or (b) at any time any Shares or other securities acquired under the Investment Agreement to certain restricted parties and activist investors specified in the Investment Agreement.
Pursuant to the terms of the Investment Agreement, the Company agreed to file a registration statement with the U.S. Securities and Exchange Commission within 30 calendar days of the date of sale of the Shares to register the Shares for resale.
The Investment Agreement contains customary representations, warranties and covenants that were made solely for the benefit of the parties to the Investment Agreement. Such representations, warranties and covenants (a) are intended as a way of allocating risk between the parties to the Investment Agreement and not as statements of fact, and (b) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. Accordingly, the Investment Agreement is included with this filing only to provide investors with information regarding the terms of the transaction and not to provide investors with any other factual information regarding the Company. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Investment Agreement, which subsequent information may or may not be fully reflected in public disclosures.
The foregoing summary of the Investment Agreement is qualified in its entirety by reference to the full text of the Investment Agreement, a copy of which is attached to this report as Exhibit 4.1, which is incorporated herein by reference.