SGYP
De hay, la subidita de ayer; La musica,,, suena bien ya veremos como acaba la pelicula.
Synergy Investment Group
January 17, 2019
Hi
I am very excited because I have great news! On January 5th, I sent a very complete email to all the parties involved in the case. Like always, I like thinking ahead of the game and what the possible outcomes can be. I had 3 very specific concerns.
- The involvement of just one investment bank in the marketing process. Since October I have been pressing the company and the Board of Directors to hire 3 investment banks to run the sale process. This helps maximize the sale value and reduce the conflict of interests. Though all banks charge a retention fee, they work harder to bring the best deal to the table.
- From the court readings, we can see that last June Centerview contacted 10 parties and asked them to submit an offer by June 21st. Though 3 parties expressed interest nobody made the June 21st timeline. In my opinion, Centerview didn't spread the net wide enough nor did they gave them enough time to submit an offer.
- We were running late to an Equity Committee appointment. If we were to be appointed, the possibility of hiring an investment banker to represent our interests was there. However, given the timeline, it would be almost impossible for an investment banker to create our own Dataroom, run an effective marketing process, dig into financials, etc. with only 6 weeks before the auction.
With these concerns in mind, I knew Jefferies had been hired in December to assist the Unsecured Creditors in the mining of financial data and as a financial advisor to their interests. They helped the UC go through 60,000 pages of documents provided by the company. Since they were already a step ahead of us in terms of data, depositions, financial analysis, recovery analysis, etc. I wanted them to participate as well in the marketing process. I also wanted to extend the reach of the pharmaceutical companies that were to be reached. As such, I asked that Jefferies be allowed to participate in the marketing process. The ideal situation was Centerview and Jefferies working as a team. Jefferies then could use the Dataroom setup by Centerview but still use its influence and contacts. With that in mind, I sent the following email to all the parties involved in the process. Though the first paragraph was erroneous and should just have said
(Ad-Hoc committee of equity holders which represents 7 shareholders who are the voice for the interests of approximately 40 million shares) it was indeed a very good email which got us most of what we wanted. Skadden Arps acknowledged receipt, has shared the list with Centerview, and they have been happy to add names to their list of outreach.
Furthermore, Jefferies has been added to the marketing process of the company and can now compete to bring the best offer to the table. Jefferies' fee is separate and apart from the fee Centerview is receiving. So to the best of my understanding, Centerview is getting a base commission for all the work they have already done. And the overbid commission will go to the investment banker with the best offer. So Centerview and Jefferies will be competing to bring the best offer to the table.
Here's the email. (Remember 1st paragraph was wrong as stated above)
Greetings Samuel Greene, John Thornton, Jeffrey Finger and fellow parties in interest:
On behalf of the Ad-Hoc committee of equity holders which represents approximately 40 million shares, we want to ask Centerview Partners to engage the following pharmaceutical companies as part of their marketing process and to provide them with immediate and unlimited access to the data room setup when the appropriate NDA’s have been signed. We will follow up on this request as part of our discovery process.
Natural Fit For Trulance and Dolcanatide
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Pfizer - After signing a co-promotion deal with Exact Sciences, they mentioned having spare capacity with their salesforce due to several drugs going off-patent.
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Johnson & Johnson - They have several GI products on their commercial infrastructure as well as on their pipeline.
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Astra Zeneca - They still continue to have a significant presence on the GI space and sufficient sales reps. They could potentially expand their GI division.
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Exact Sciences - They could be interested in Dolcanatide as part of their suite for screening colorectal cancer and perhaps preventing it with Dolcanatide. They also have a salesforce ready to promote Trulance. This could be similar to the effort made earlier to in-license products for the company to have.
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Ironwood - With patents for Linzess expiring on 2026, Ironwood would be a natural fit. They will increase their pricing power while ensuring a leadership position for another 6 years with a differentiated treatment. Not to mention, the possibility of their immunogenicity results being negative.
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Allergan - To the same extent, Allergan could choose to terminate its relationship with Ironwood and in turn choose Trulance as their primary asset for CIC/IBS-C.
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Celgene - Assuming that ozanimod gets approved for ulcerative colitis and Crohn’s disease, Celgene will need to build a GI-focused salesforce. Synergy has the sales reps that Celgene would need.
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Takeda - Now that their merger will be completed in January, they can be back on the table for negotiations. With Amitza being the first drug in the category losing patent, we can definitely see Takeda being a bidder for the asset.
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Mallinckrodt - By the same token, Mallinckrodt is the partner of Takeda in Amitza, while their debt leverage has increased since their transaction of Sucampo, a stock deal should certainly be a possibility for them.
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Alfasigma - This company licensed Xifaxan to Bausch Health. Xifaxan is the #1 IBS-D drug. They will certainly understand the potential of Trulance and Dolcanatide plus they have significant experience in GI.
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Abbvie - They have shown interest in developing drugs that help treat/prevent Colorectal cancer. As well, they have several treatments on Ulcerative Colitis and Crohn’s disease on their pipeline. They will need a salesforce as well and they might be interested in acquiring the whole company.
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Cosmo Pharmaceuticals - The developers of Uceris and a player who wants to gain leadership on GI treatments.
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Evoke Pharma - A small player worth contacting.
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EndoGastric Solutions - A smaller player in the industry, hence it’s in the last place.
Any large pharma with a sales force in place can benefit from Trulance. Trulance is manufactured by a third party so any salesforce with primary care access can promote the product without an additional added cost. Here are other players which are worth contacting.
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Cardinal Health - Being one of 3 distributors for Trulance, they are definitely a natural acquirer for Trulance.
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Cogentix Medical - They specialize in urology, GI, otolaryngology and pulmonology assets.
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SanPower Group - Buyers of pharmaceutical assets
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Astellas Pharma - Based in Japan
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Merck - Infrastructure to promote
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GlaxoSmithKline - Infrastructure to promote
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Novartis - Infrastructure to promote
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Sanofi - Infrastructure to promote
Finally, contact the players who have already been involved with the company.
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Luoxin Pharma - With up to $56 million still due in commercialization milestones, they are a natural buyer of the whole asset.
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Cipher Pharma
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QOL Medical - They have shown interest in buying 20% of the shares of the company
These are a total of 25 players who should be allowed access to the data room. This number is in line with the 30 pharmaceutical companies who were allegedly contacted in the past 3 years. We believe a thorough outreach would maximize the value for all parties involved. Finally, allowing companies to offer stock at fair market value should help maximize the sale price of the company/assets.
Finally, we believe Jefferies should be allowed to present offers to the auction and act as a co-lead investment banker. Perhaps, Centerview and Jefferies can come to an agreement in this regard? Share a percentage of the proceedings should the winning offer come from Jefferies? This would mitigate concerns presented by the US Trustee in regards to the conflict of interests of Centerview in regards to Ironwood and Bausch Health.
Best regards,
Jose Solorio
Chair Ad-Hoc Committee
Refinement of the list
If someone thinks that another pharmaceutical should be added there please let me know. Don't just throw out names for the sake of adding more. We want surgeon precision as casting the net too wide can also prove against our interests given the timeframe that we have.
From that list, I was advised that Ironwood, Allergan and Cardinal Health won't be able to have unlimited access to the Data Room due to conflicts of interest. That won't prevent them from bidding but they will have to do so with their eyes covered.
For more info read the document from the court:
Reply to Motion /Reply in Support of Debtors' Application for Entry of an Order (I) Authorizing the Employment and Retention of Centerview Partners LLC as Investment Banker and Financial Advisor to the Debtors Effective Nunc Pro Tunc to the Petition Date, (II) Approving the Terms of the Centerview Engagement Letter, (III) Waiving Certain Time-Keeping Requirements, and (IV) Granting Related Relief (related document(s)135) filed by Albert Togut on behalf of Synergy Pharmaceuticals Inc.. (Attachments: # 1 Exhibit 1: Supplemental Greene Declaration # 2 Exhibit 2: Revised Proposed Order # 3 Exhibit 3: Proposed Order Comparison)
Fundraising for Lawyers
I have created two separate funds with extremely clear purposes going forward. Furthermore, the lawyers have their eyes on the big prize: "
To be the Official Law Firm of the Equity Committee." That's where the
real money is for Cole Schotz and anybody who says otherwise is wrong, ignorant and doesn't understand the bankruptcy process. If you get to be on the official equity committee please remember the good faith Cole Schotz has shown to us.
"They are fighting for the meat, not for the bones."
As such, now that they know there's a solicitation for a committee they won't sit still and not fight for shareholders. Now they will double down to fight for shareholders. As further explained below it's on their best interest to show
they have added significant value to the case.
Going forward for
transparency issues here's what going to happen in regards to fundraising.
GoFundMe 100% for Lawyers (Our priority)
https://www.gofundme.com/cole-schotz-legal-fund-sgyp
GoFundMe 100% for Jose as a gift
https://www.gofundme.com/7gthgj-thanks-jose
If you want to participate i
n
the Equity Committee Fill out the following forms. Please only fill out the form if you have significant experience in the background of the company, dealing with other parties and deal-making. We want our best people to serve there. The Trustee will make the ultimate decision for every one of who will serve in the Committee. People from overseas should probably pass on serving.
https://drive.google.com/file/d/1YjE5iWEo4e0i0J3-RVpKXpcJ1t0-CZlu/view?usp=sharing
https://drive.google.com/file/d/1Akp7HiI4Dd6K2m5wy4lYycxZUwhSNVc3/view?usp=sharing
Last Objections.
Objection to Motion /Objection of the Ad Hoc Committee of Equity Holders to Debtors' DIP Financing Motion (related document(s)15) filed by Ryan T. Jareck on behalf of Ad Hoc Committee of Equity Holders.
Objection to Motion /Objection of the Ad Hoc Committee of Equity Holders to Debtors' Motion for Approval of a Key Employee Incentive Plan (related document(s)144) filed by Ryan T. Jareck on behalf of Ad Hoc Committee of Equity Holders.
Centerview Engagement Figures
As I mentioned, the best way to maximize our value was to align the interests of Centerview along with the interest of Equity Holders as such the following was negotiated. Again limited defense with very good results.
- The Restructuring Fee is reduced to $4.375mm (from $5.2 million)
- Centerview agrees (and explicitly states that it is solely for purposes of their engagement letter) that the aggregate consideration under the current stalking horse bid is no more than $200mm
- For the Sale Fee
Existing Fee Construct:
$2mm, plus
3.16% of any amounts of Aggregate Consideration (“AC”) in excess of $100mm up to $195mm, plus
2.00% of any amounts of AC in excess of $195mm
New Fee Construct
$2mm, plus
2.375% of any amounts of AC in excess of $100mm up to $200mm, plus
3.50% of any amounts of AC in excess of $200mm up to $350mm, plus
4.00% of any amounts of AC in excess of $350mm
The fee has been flipped to a fee that increases as opposed to decreases as the aggregate consideration goes up. This maximizes our value as equity holders
Cole Schotz fighting for official Equity Committee Representation
Our lawyers probably already have billed in excess of 100k in hours. They recently have worked
mostly on contingency with the hope of getting to be the official equity committee law firm. Their good faith won't be forgotten and plays a key role in the selection of the law firm by the official committee of equity holders. Cole Schotz is first in line to be appointed and once they do they can bill a couple of hundred thousand dollars for their very hard work.
Cole Schotz can also, to the extent that they bring significant value to this case, ask for a reimbursement of their unpaid work realized up to the time of their appointment. That's why they are working very hard to bring a new lender to the bankruptcy case which could save Synergy in excess of $7 million in additional fees and interest (depending on final terms.) Such significant recovery repayment for unpaid legal work can be partial or full at the discretion of the court. This is a very important provision since it gives them "skin in the game."
Never in a million years, the company saw us coming with the speed that we did. They messed up with the wrong group of people! - Jose
Jose Solorio
Synergy Investment Group
If you want to see some of the previous campaigns since Synergy filed bankruptcy please go to the following:
Facebook Group "Synergy Investment Group"
I have decided to open a private Facebook Group for those of you who wish to join and interact with each other.
You can find it here.
Ps. If anyone has changed the number of shares they own please reply. This email is just an opinion email and it's your own responsibility to consult a registered financial advisor before placing any trades.
Investing in securities could lead to a total loss of capital invested. I am not a registered financial advisor and not responsible in any way for the financial outcome of SGYP. None of the information in this email should be considered as investment advice. By participating in this group you waive the right to personally sue Jose Solorio for any matter related to SGYP.
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