Maxygen, the Redwood City biotech company that hired Lazard last October to help it explore “strategic options” about the same time it laid off 30 percent of its staff, announced plans today for a deal with Astellas Pharma of Japan that will transfer most of its research and development operations and personnel to the a new joint venture funded by $10 million co-payments by both companies.
Maxygen will contribute substantially all of its programs and technology assets in protein pharmaceuticals, including drug candidate treatments for autoimmune diseases and transplant rejection, giving it 83 percent of the joint venture. Astellas will be granted an option to acquire all of Maxygen’s ownership interest in the new company at specified exercise prices over the course of three years that will increase each quarter from $53 million to $123 million.
Astellas agreed to fund substantially all of the operating costs of the joint venture, estimated at up to $30 million, over the first three years. Maxygen Chief Business Officer Grant Yonehiro will is expected to serve as the joint venture’s chief executive.
Yonehiro has been offered a $600,000 “transaction bonus” payable by Maxygen when the deal closes, along with a bonus for 2009 “in an amount, if any, at the discretion of the board.” He will also be eligible to receive a retention bonus of $200,000 paid on each of the first three anniversaries of the deal, in addition to his $300,000 annual salary.
The deal, which is subject to approval by Maxygen’s shareholders, is expected to close in the current quarter or early in the fourth quarter of 2009.
Investors apparently gave a thumbs up to the deal, as shares of Maxygen rose 45 cents, or 6.7 percent, to close at $7.17.
Maxygen said it would “restructure and downsize” its corporate and administrative staff and expenses to “best align the company’s operations with its future business needs,” according to a statement by Maxygen Chairman Issac Stein, who said the company expects that its current top three executives will all be leaving the company.
Fortunately for them, the joint venture formation, should it be approved, will qualify as a “change in control” event, allowing the departing executives to have their outstanding equity awards become fully vested. They will also receive lump-sum cash payments equal to three times their 2009 base salary. For Chief Executive Russell Howard, who was granted a a $200,000 bonus last year little more than a month after the layoffs were announced, his lump sum will total $1,561,560.
As part of the deal, Maxygen modified the terms governing restricted stock granted to all of its employees so that accelerating their vesting to 90 days after the deal closes, including 45,000 belonging to its chairman.
The deal gives Astellas an option to obtain an exclusive license to any one product developed by the joint venture. Astellas lost an attempt earlier this year to acquire more drug products when its bid to purchase another Silicon Valley biotech, CV Therapeutics, was thwarted by a higher bid from drug giant Gilead Sciences.