8-K: XOMA Completes HilleVax Acquisition for Cash and CVRs

XOMA Royalty Corporation has successfully acquired HilleVax, Inc. through a tender offer and subsequent merger, providing HilleVax shareholders with $1.95 cash per share and a contingent value right.

Summary

• XOMA Royalty Corporation (XOMA) completed the acquisition of HilleVax, Inc. (HilleVax) on September 17, 2025, through a tender offer and subsequent merger.
• The tender offer, which expired on September 15, 2025, saw 39,214,689 HilleVax shares validly tendered, representing approximately 77.48% of outstanding shares.
• HilleVax shareholders received $1.95 in cash per share, plus one non-transferable contractual contingent value right (CVR) for each share.
• The merger was effected without a HilleVax stockholder vote, in accordance with Section 251(h) of the Delaware General Corporation Law, making HilleVax a wholly-owned subsidiary of XOMA.
• Outstanding 'In-the-Money Options' (exercise price less than $1.95) were fully vested and converted into cash (Cash Amount minus exercise price) plus one CVR per underlying share.
• Outstanding 'Out-of-the-Money Options' (exercise price equal to or greater than $1.95) were cancelled for no consideration.
• Restricted Stock Unit Awards were fully vested and converted into cash ($1.95 per underlying share) plus one CVR per underlying share.
• A Contingent Value Rights Agreement was executed on September 17, 2025, outlining the terms for potential future payments to CVR holders.
• The CVRs represent rights to contingent cash payments derived from 'Legacy Assets Transaction Proceeds,' 'Legacy Receivable Amount,' and 'Net Cash Excess,' minus any 'Net Cash Shortfall.'
• Legacy Assets include all Intellectual Property Rights and other assets related to HIL-216, including the Kangh License Agreement.
• A 'Legacy Assets and Expense Fund' of $250,000 from the Closing Net Cash was established, with $25,000 allocated to the Representative as compensation.
• The 'Legacy Receivable Amount' includes a security deposit return of $1,631,365.5 from the Harrison Lease, accrued interest, and savings from lease assignments/subleases.
• XOMA is obligated to use commercially reasonable efforts to pursue Legacy Assets Transactions during the 'Legacy Assets Transaction Period' (two years from closing date) and maintain Legacy Assets.
• HilleVax's 401(k) plans will be terminated effective the day before the merger's effective time.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The acquisition was successfully completed, providing HilleVax shareholders with immediate cash and potential future upside through CVRs. For XOMA, it represents a strategic asset acquisition. The CVRs, while speculative, offer a structured path for monetizing legacy assets. The termination of out-of-money options is a negative for those specific holders, but a standard outcome in such transactions.

Positives

• XOMA successfully completed the acquisition of HilleVax, expanding its portfolio.
• HilleVax shareholders received immediate cash consideration of $1.95 per share.
• HilleVax shareholders also received Contingent Value Rights (CVRs), offering potential future cash payments based on the performance of 'Legacy Assets' and other receivables.
• The acquisition was completed efficiently via a tender offer and short-form merger, indicating strong shareholder support (77.48% tendered shares).
• In-the-Money stock options and restricted stock units for HilleVax employees were fully vested and converted into cash and CVRs, providing a clear exit for these equity holders.

Negatives

• Out-of-the-Money stock options for HilleVax employees were cancelled for no consideration.
• The CVRs are non-transferable (except for limited permitted transfers), limiting liquidity for holders.
• The CVRs are highly speculative, and there is no assurance that holders will receive any payments, as explicitly stated in the CVR Agreement.
• The value of non-cash consideration for CVR Proceeds (e.g., securities) is subject to fair market value determination, which can introduce variability and potential disputes.

Risks

• CVRs are highly speculative, and there is no assurance that holders will receive any payments under the CVR Agreement.
• It is possible that no 'Legacy Assets Transaction' will occur during the 'Legacy Assets Transaction Period,' meaning no 'Gross Proceeds' would be generated for CVR payments.
• The value of any non-cash property constituting 'Gross Proceeds' is subject to fair market value determination, which may not align with holder expectations.
• Parent and its affiliates retain control over the 'Legacy Assets' and their disposition, with their primary interest being that of Parent and its stockholders, not necessarily the CVR holders.
• The 'Legacy Assets and Expense Fund' is limited to $250,000, and 'Permitted Deductions' (costs and expenses related to Legacy Assets) could reduce 'Net Proceeds' available for CVR payments.

Future Outlook

XOMA Royalty Corporation intends to use commercially reasonable efforts to maintain, advance, and maximize the value of HilleVax's 'Legacy Assets' (Intellectual Property Rights and assets related to HIL-216) during a two-year 'Legacy Assets Transaction Period' following the acquisition. This includes pursuing 'Legacy Assets Transactions' (financing, sale, transfer, license, or other disposition) and potentially forming a new special purpose vehicle (Parent NewCo) for these assets. The CVRs are tied to the proceeds from these future efforts, but their value is highly speculative.

Management Comments

• Owen Hughes, Chief Executive Officer of XOMA Royalty Corporation, signed the 8-K filing.
• Robert Hershberg, M.D., Ph.D., Chairman, President, and Chief Executive Officer of HilleVax, Inc., signed the Merger Agreement and the CVR Agreement as the initial representative of the CVR Holders.

Industry Context

This acquisition represents a strategic move for XOMA Royalty Corporation, a company focused on acquiring and managing royalty streams, to integrate HilleVax's assets, particularly the HIL-216 intellectual property. For the biotechnology industry, this transaction highlights the ongoing trend of consolidation and the monetization of specific drug candidates or intellectual property portfolios, especially for companies that may not pursue full-scale development themselves. The use of Contingent Value Rights (CVRs) is a common mechanism in biotech M&A to bridge valuation gaps and provide former shareholders with exposure to future upside from specific assets without requiring the acquirer to pay a higher upfront cash price.

Comparison to Industry Standards

• The use of Contingent Value Rights (CVRs) in this acquisition aligns with common practices in the biotechnology and pharmaceutical M&A landscape, where CVRs are frequently employed to provide additional, performance-based consideration to selling shareholders, particularly for assets with uncertain future clinical or commercial success. Companies like Sanofi (acquiring Principia Biopharma) and Bristol-Myers Squibb (acquiring Celgene) have utilized CVRs in their transactions.
• The structure of the CVRs, tied to 'Legacy Assets' and 'Legacy Receivable Amounts,' is typical for deals involving specific, often non-core, assets of the acquired company, allowing the acquirer to focus on its primary business while providing a mechanism for the former shareholders to benefit from the long-term value of these assets.
• The 'commercially reasonable efforts' standard for XOMA in pursuing 'Legacy Assets Transactions' is a standard contractual obligation in such agreements, though its interpretation can sometimes lead to disputes if CVR payments are not realized.

Management Changes

Corporate Governance

Legal Proceedings

• The filing mentions that XOMA and the Surviving Corporation will indemnify and hold harmless HilleVax's directors, officers, employees, and agents for acts or omissions occurring at or prior to the Effective Time, including those related to the merger, for a period of six years. This implies potential for legal proceedings related to past actions or the transaction itself, for which indemnification is provided.

Related Party Transactions

• Dr. Robert Hershberg, in his capacity as the initial representative, agent, and attorney-in-fact of the CVR Holders, will receive $25,000 as compensation from the 'Legacy Assets and Expense Fund' at closing. This represents a payment to a key individual involved in the transaction and representing the interests of former HilleVax shareholders.

Stakeholder Impact

• **Shareholders (HilleVax)**: Received $1.95 cash per share and one non-transferable CVR, offering immediate liquidity and potential future upside from legacy assets. Those with out-of-the-money options received no consideration.
• **Shareholders (XOMA)**: XOMA acquired HilleVax, expanding its royalty asset portfolio and potentially gaining new revenue streams from the 'Legacy Assets'.
• **Employees (HilleVax)**: In-the-money stock options and restricted stock units were fully vested and converted to cash and CVRs. 401(k) plans will be terminated, and COBRA continuation coverage will be provided for 18 months, or equivalent payments if COBRA is not feasible. New consulting arrangements for some employees/consultants are also mentioned.
• **Management (HilleVax)**: Key management, such as Dr. Robert Hershberg, will serve as the Representative for CVR holders, indicating continued involvement in monetizing legacy assets and receiving compensation for this role.
• **Customers/Suppliers (HilleVax)**: The filing indicates a 'Wind-Down Process' for HilleVax's operations, which may impact existing contracts and relationships, though XOMA is committed to commercially reasonable efforts for Legacy Assets.

Next Steps

• XOMA Royalty Corporation will file an amendment to this Form 8-K to include the financial statements of HilleVax and unaudited pro forma condensed combined financial information.
• HilleVax's securities will be delisted from Nasdaq and deregistered under the Exchange Act as promptly as practicable following the Effective Time, and in any event no more than ten days after the Merger Closing Date.
• XOMA will continue to use commercially reasonable efforts to maintain, advance, and maximize the value of HilleVax's 'Legacy Assets' and pursue 'Legacy Assets Transactions' during the two-year 'Legacy Assets Transaction Period'.
• The 'Final Net Cash' will be recalculated by XOMA within 90 days following the Merger Closing Date, which may result in a 'Net Cash Excess' or 'Net Cash Shortfall' affecting CVR payments.
• CVR Payment Amounts will be distributed to holders on specified 'CVR Payment Dates' based on the realization of 'CVR Proceeds' from Legacy Assets Transactions, Legacy Receivable Amounts, and Net Cash Excess.

Key Dates

Recommendation

The acquisition of HilleVax by XOMA Royalty Corporation is a completed strategic transaction. For former HilleVax shareholders, the immediate cash component provides certainty, while the CVRs offer speculative upside. For XOMA, this represents an expansion of its royalty portfolio. The CVRs are non-transferable and highly speculative, making them difficult to value and trade. Investors in XOMA should 'hold' to assess the integration of HilleVax's 'Legacy Assets' and the potential for future CVR payments, as the long-term value creation from these assets is yet to be realized and is subject to significant uncertainty and XOMA's efforts.

Keywords

Acquisition, Merger, Tender Offer, Contingent Value Rights, CVR, XOMA Royalty Corporation, HilleVax Inc., Biotechnology, Pharmaceutical, HIL-216, Legacy Assets, SEC Filing, Corporate Action