Singular Genomics Systems (OMIC) ($60MM market cap) is an early stage medical device company, they have one commercial product (G4) and one in development (G4X) that is a promising next generation genome sequencer. The company burns quite a bit of cash, approximately $25MM a quarter, but with the commercial launch of G4X in Q2 2025, OMIC could be coming to an inflection point with revenues coming in 2025. Prior to bidders appearing, the stock traded at a massive discount to cash.
Recent Events:
- Back on 9/12, long time investor in OMIC and large health care fund, Deerfield Management, made a $10/share bid for OMIC. Shares traded for approximately $5.60/share before the offer.
- Following Deerfield's bid, on 9/19, our friend Kevin Tang lobbed in his own $12/share bid, he owns just under 15% of the company.
- Presumably there was a fairly competitive bidding process (and likely at least one additional bidder other than Deerfield or Tang, Tang doesn't really want the IP normally it seems which would cap him out here) following 9/14 because on 11/4, we found out that Deerfield's latest bid is a whooping $24/share and has entered into an exclusivity period with OMIC to finalize a definitive agreement.
As previously disclosed, on September 5, 2024, Deerfield Private Design Fund IV, Deerfield Mgmt IV and Deerfield Management (collectively, “Deerfield”) submitted a non-binding proposal (the “September 2024 Proposal”) to the special committee of independent directors of the Company (the “Special Committee”). The September 2024 Proposal related to a proposed acquisition through a special purpose vehicle to be established by Deerfield of all of the outstanding shares of Common Stock not already owned by Deerfield or any other stockholders or members of management that Deerfield invites to “rollover” their current equity shares. Following negotiations with the Special Committee in a competitive process, Deerfield proposed an increased purchase price of $24.00 per share (the Original Proposal, as so modified, the “Modified Proposal” and the transaction contemplated thereby, the “Modified Transaction”), and following such proposed increase, on October 31, 2024, the Company and Deerfield entered into an exclusivity agreement to facilitate completion of Deerfield’s due diligence and the preparation and negotiation of definitive agreements in respect of the Modified Transaction.
Downside could be pretty considerable here, but we do have a high quality counterparty in Deerfield, competitive process and despite the sharp increase in the bid, I still have Deerfield picking up OMIC below an estimated NCAV at deal close if you exclude the leases.
Disclosure: I own shares of OMIC
Also in this one. It ran up fast from Tangs initial $12 bid.
ReplyDeleteSmart, I only took notice after the big bump in the offer price. Congrats on this one.
DeleteCRCM Institutional Master Fund filed just filed a 13D w/ 5.6%. Fairly bland as far as 13D's go. The name doesn't ring a bell for me.
ReplyDeleteAny news today?
ReplyDeleteAny ideas why this continues to leak ?
ReplyDeleteanother one
ReplyDeleteYep, got it wrong! Deal for $20/share. It's been a tough year for me.
DeleteNote the following from the proxy:
Delete"In the afternoon of December 22, 2024, the Special Committee received a non-binding indication of interest from Company ZZZ setting forth a proposal to acquire the Company’s outstanding capital stock at a price of $20.00 per share in a transaction structured as an all-cash tender offer without any requirement of rollover from existing investors and without any financing condition"
"The Special Committee determined that it was in the best interests of the Company and its stockholders to proceed with the Special Committee meeting, scheduled for later in that evening, to consider its recommendation to the Company Board with respect to the proposed Deerfield transaction and not to delay the process to engage with Company ZZZ."
ZZZ was a private equity firm working together with the company CEO trying to take OMIC private. Current spread is smallish but I think there's a small (but non-zero!) chance the CEO is still trying to make this work. Also note that the special committee considered this one of the advantages of the deal:
"Ability to Respond to Certain Unsolicited Takeover Proposals. The Merger Agreement permits the Company Board or the Special Committee, subject to compliance with certain procedural requirements (including that the Company Board or Special Committee determine in good faith, after consultation with outside counsel and its financial advisor, that an unsolicited Acquisition Proposal constitutes, or is reasonably likely to lead to, a Superior Proposal), (i) to furnish information with respect to Singular to the person making such unsolicited Acquisition Proposal, and (ii) to participate in discussions or negotiations with the person making such unsolicited Acquisition Proposal."
And:
"The Special Committee was of the view that this termination fee was at the low end of the range for customary termination fees in transactions of a similar size, was reasonable in light of the bidding and negotiation process that led to the execution of the Merger Agreement, as well as of the terms of the Merger Agreement itself, and was necessary to induce Parent to enter into the Merger Agreement. The Special Committee believed that the termination fee would not likely deter or preclude another party with a strategic interest in Singular and financial resources sufficient to consummate an alternative acquisition transaction with Singular, were one to exist, from making a competing proposal for Singular and would likely only be required to be paid in the event that the Company Board entered into a transaction more financially favorable to Singular’s stockholders than the Merger."
Nice sleuthing writser!
DeleteAlso, the projections in the proxy are quite something! Management expects 240m in revenue and 42m in unlevered FCF in 5 years (page 77, proxy). Compared to TTM: about $2m in revenue ... Looks very optimistic to me but what do I know. You'd think a buyer could as well pay $100 / share if this outlook was realistic.
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