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December 19, 2019
Brad J. Powers, Esq.
General Counsel
NewLink Genetics Corporation
2503 South Loop Drive
Ames, IA 50010
Re: NewLink Genetics Corporation
Preliminary Proxy Statement on Schedule 14A
Filed November 20, 2019
File No. 001-35342
Dear Mr. Powers:
We have reviewed your filing and have the following comments. In some of
our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Preliminary Proxy Statement on Schedule 14A
Summary
The Companies, page 1
1. It appears from your disclosure on page 27 that Lumos has not submitted
an
investigational new drug application (IND) for its planned Phase 2b trial
of LUM-201 for
the treatment of Pediatric Growth Hormone Deficiency (PGHD). If true,
please revise
your summary disclosure to discuss this fact. Please also place your
discussion of LUM-
201 for the treatment of PGHD in appropriate context with reference to
the current clinical
development status, including the following, as referenced on pages 25
and 27:
Prior clinical trials were conducted by Merck in the 1990s;
Two of the Merck trials were discontinued prior to completion due
to lack of
efficacy;
The active pharmaceutical ingredient to be used in the Phase 2b
trial was
manufactured approximately 15 years prior to the planned start of the
trial and may not be
approved for use the by the U.S. Food and Drug Administration; and
Brad J. Powers, Esq.
FirstNameGenetics Corporation
NewLink LastNameBrad J. Powers, Esq.
Comapany19, 2019
December NameNewLink Genetics Corporation
December 19, 2019 Page 2
Page 2
FirstName LastName
Not all prior clinical data is available to Lumos for purposes of
designing the
planned Phase 2b clinical trial.
2. We note the disclosure on page 39 that Lumos does not have composition
of matter
protection in the United States or elsewhere covering LUM-201. If the
chemical structure
of LUM-201 is in the public domain and Lumos does not own or license,
and will not in
the future own or license, any composition of matter patents claiming
LUM-201, please
revise your summary to state that LUM-201 is in the public domain and
provide a
summary of the potential effects this could have on Lumos' business.
Please also include
related disclosure, as appropriate, under "Intellectual Property" on
page 115.
3. Based on your disclosure in the fifth bullet point on page 93, it
appears that the merger
could be conditioned upon approval of the reverse stock split. Please
revise your
summary section to clarify if the merger is conditioned upon approval
of the reverse stock
split proposal.
Background of the Merger, page 59
4. Please expand your discussion of the activities that took place during
the External
Opportunity Review to explain how you narrowed the field of strategic
partners from 30
companies to Lumos, Party B and Party C.
5. Expand your discussion of the negotiation of the proposed merger to
include disclosure of
the initial consideration offered, and by which party, and how the
parties negotiated and
determined the final form and amount of consideration agreed to in the
merger
agreement, and the amount of the termination fee. Clarify if Stifel
made any
recommendations regarding those terms.
6. We note your disclosure on page 1 that you entered into a license and
collaboration
agreement with Merck to develop and potentially commercialize your
Ebola vaccine V920
product candidate. Please expand your disclosure to discuss how any
future royalties you
might be entitled to receive factored into your negotiations of the
merger consideration
offered to Lumos and how the potential for such royalties factored
into the board's
determination that the merger is in the best interests of NewLink and
its stockholders.
Please also clarify how the Merck Agreement factored into the analyses
performed by
Stifel.
7. Please update your background discussion for any material developments
or activities
leading up to Evercel, Inc.'s filing of soliciting materials on
December 13, 2019 and
update your disclosure for further material developments as
appropriate.
Opinion of NewLink's Financial Advisor, page 69
8. Please provide us supplementally with copies of all materials prepared
by Stifel and
shared with the NewLink board, including copies of all board books and
all transcripts and
summaries, that were material to the board's decision to approve the
merger agreement
and the transactions contemplated thereby.
Brad J. Powers, Esq.
FirstNameGenetics Corporation
NewLink LastNameBrad J. Powers, Esq.
December NameNewLink Genetics Corporation
Comapany19, 2019
Page 3
December 19, 2019 Page 3
FirstName LastName
Discounted Cash Flow Analysis, page 76
9. In an appropriate place in the proxy statement, please disclose how
the
perpetuity growth rates used in the calculations presented in this
section were determined.
Post-hoc analysis and using a predictive enrichment marker strategy to select
appropriate
patients, page 110
10. We note your disclosure in last paragraph on page 110 that when only
the PEM-Positive
children are considered, the growth in response to LUM-201 was
enhanced and growth
due to rhGH treatment was reduced, when compared to all children, and
your disclosure in
the paragraph after Figure 5 that in the PEM-Positive children, the
growth velocity was
not statistically different between rhGH and LUM-201. These
conclusions appear to be
based on a p-value of 0.082. Given the disclosed p-value, please
disclose the basis for
your statements. If your disclosed p-value does not meet the FDA's
specified threshold
for statistical significance for a clinical trial, please revise your
disclosure to clarify the p-
value that the FDA uses in evaluating the results of a clinical trial
and whether the results
of the post-hoc analysis would meet such threshold.
Prior clinical experience with LUM-201 in PGHD, page 110
11. We note your disclosure that the first study included a study of
biologic response. Please
disclose if this study was completed and the results of that study as
it related to biologic
response.
Expansion of LUM-201 into Additional Endocrine Indications, page 113
12. We note your disclosure on page 104 that you may study the effects of
LUM-201 for
Turner Syndrome and SGA in a certain subset of patients. Please
indicate what portions
of the Turner Syndrome and SGA patient populations LUM-201 could
address, if
approved.
Ammonett and Lumos Merck Agreements, page 115
13. We note your disclosure regarding the Lumos Merck Agreement. Please
disclose all
material terms of this agreement, including the aggregate amount of
each of the
development and sales milestone obligations.
Unaudited Pro Forma Condensed Combined Financial Information, page 144
14. We note in the third paragraph that you indicate Lumos was determined
to be the
accounting acquirer based upon the terms of the Merger Agreement and
other factors,
including Lumos stockholder's will own approximately 50% of the
outstanding common
stock of the combined company immediately following the closing of the
merger. You
also state on page 9 that based on the number of outstanding equity
awards and shares of
capital stock of each of NewLink and Lumos as of October 15, 2019
holders of NewLink
Brad J. Powers, Esq.
FirstNameGenetics Corporation
NewLink LastNameBrad J. Powers, Esq.
Comapany19, 2019
December NameNewLink Genetics Corporation
December 19, 2019 Page 4
Page 4
FirstName LastName
common stock and equity awards are expected to own approximately 52.8%
of the fully-
diluted common stock of the combined company. Please provide us with
your detailed
analysis of how you determined that the transaction qualifies as a
reverse merger with
Lumos being the accounting acquirer. Refer to the guidance in ASC
805-10-55-10 to 55-
15.
15. We also note your disclosure that the Merger is to be accounted for as
an asset acquisition
rather than a business combination because the assets acquired and
liabilities assumed
from NewLink do not meet the definition of a business. Please provide
us your analysis
of how you determined that substantially all the fair value of the
assets acquired is
concentrated in a single identifiable asset or group of similar
identifiable assets. Your
analysis should also address how the assets and liabilities included
in the purchase price
allocation on page 150 and in the separate financial statements of
NewLink included in
the filing represent a single identifiable asset or group of similar
assets. Refer to the
guidance in ASC 805-10-55-5.
Unaudited Pro Forma Condensed Combined Balance Sheet, page 145
16. We reference the $36.5 million economic interest in PRV asset included
in the purchase
price allocation on page 150. Please disclose the nature of this asset
and how the fair
value was determined. Also, explain to us how you determined the total
amount of the
purchase price of $121,448. We note the discussion of the PRV on page
2 that you are
entitled to receive a substantial portion of the value of the priority
review voucher if it is
granted. Explain to us how this was considered in the valuation of the
asset.
17. We note that the other intangible assets amount of $2,978 in the pro
forma combined
column of the unaudited pro forma condensed balance sheet does not add
across. The
amount also does not appear to be included in pro forma total assets.
Please revise
accordingly.
18. Please revise to include an explanation for pro forma adjustment L.
Unaudited Pro Forma Condensed Combined Statement of Operations, page 147
19. Please revise Note I to explain how you determined the pro forma
adjustments to basic
and diluted weighted shares outstanding.
Principal Stockholders of NewLink, page 155
20. Please identify the natural persons who are the beneficial owners of
the shares held by
Stine Seed Farm, Inc.
Form of Proxy Card, page II-1
21. Please mark the form of proxy card as "preliminary" pursuant to
Exchange Act Rule 14a-
6(e)(1).
Brad J. Powers, Esq.
NewLink Genetics Corporation
December 19, 2019
Page 5
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact David Burton at (202) 551-3626 or Brian Cascio at (202)
551-3676 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Tim Buchmiller at (202) 551-3635 or Christine Westbrook at (202)
551-5019 with any
other questions.
Sincerely,
FirstName LastNameBrad J. Powers, Esq.
Division of
Corporation Finance
Comapany NameNewLink Genetics Corporation
Office of Life
Sciences
December 19, 2019 Page 5
cc: James C.T. Linfield, Esq.
FirstName LastName