Correspondence 0001104659-23-017659 from AEON Biopharma, Inc. (AEON) (CIK 0001837607) (AEON)
AEON Biopharma, Inc. (AEON) (CIK 0001837607)
Date: Feb. 9, 2023 · CIK: 0001837607 · Accession: 0001104659-23-017659
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-269006
Referenced dates: January 26, 2023
Letter
Division of Corporation Finance Office of Life Sciences 100 F Street, N.E. Washington, D.C. 20549 Attn: Tracie Mariner and Kevin Vaughn
Re: Priveterra Acquisition Corp.
Dear Ms. Mariner and Mr. Vaughn:
On behalf of our client, Priveterra Acquisition Corp. (the “Company”), this letter sets forth the Company’s response to the comments provided by the staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission in the Staff’s letter dated January 26, 2023 (the “Comment Letter”), relating to the Company’s registration statement on Form S-4 filed on December 27, 2022 (the “Registration Statement”).
The Company has updated the Registration Statement and is filing Amendment No. 1 to the Registration Statement on Form S-4 (the “Amended Registration Statement”) together with this response letter. The Amended Registration Statement also contains certain additional updates and revisions.
For the convenience of the Staff, each comment from the Comment Letter is restated in italics prior to the Company’s response to such comment. All references to page numbers and captions (other than those in the Staff’s comments) correspond to pages and captions in the Amended Registration Statement.
Registration Statement on Form S-4 Filed December 27, 2022
Market and Industry Data, page ii
1. We note your statements that (i) you have not independently verified the market and industry data contained in the proxy statement/prospectus or the underlying assumptions and (ii) your research has not been verified by any independent source. These statements may imply an inappropriate disclaimer of responsibility with respect to such information. Please either delete these statements or revise to specifically state that you are responsible for all disclosures presented in the prospectus.
Response: The Company respectfully acknowledges the Staff’s comment and has revised the disclosure on page iii of the Amended Registration Statement accordingly.
Q. What will AEON stockholders and holders of AEON options receive in the Business Combination, page x
U.S. Securities and Exchange Commission
2. Please revise this section to explain in greater detail how the Exchange Ratio is calculated. In this regard, please explain the Holdback Equity Pool, its impact on the consideration, and what assumptions are used to derive the 34.7% or 82.7% figures that are presented on the cover page.
Response: The Company respectfully acknowledges the Staff’s comment and has revised page xi of the Amended Registration Statement accordingly. Additionally, the term "Holdback Equity Pool" was inadvertently included in the Business Combination Agreement and will be revised in a future amendment.
Summary of the Proxy Statement/Prospectus, page 1
3. Please highlight the material risks to public warrant holders, including those arising from differences between public and private warrants. Additionally, please clarify whether recent common stock trading prices exceed the threshold that would allow the company to redeem public warrants.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages xi, xiii, 142 and 143 of the Amended Registration Statement accordingly.
Sources and Uses of Funds for the Business Combination, page 4
4. Please revise to present the full redemption scenario.
Response: The Company respectfully acknowledges the Staff’s comment and has revised the disclosure on pages 4-6 and 112-114 of the Amended Registration Statement accordingly.
Risk Factors, page 24
5. Please disclose the materials risks to unaffiliated investors presented by taking the company public through a merger rather than an underwritten offering. These risks could include the absence of due diligence conducted by an underwriter that would be subject to liability for any material misstatements or omissions in a registration statement.
Response: The Company respectfully acknowledges the Staff’s comment and has revised its disclosure on pages 18, 27 and 83 of the Amended Registration Statement accordingly by including an additional risk factor.
We may not be successful in obtaining an original BLA, page 34
6. Please revise to discuss here and/or in the Business section what standard FDA uses to determine whether to issue an original BLA as opposed to a BLA supplement. Explain why you believe that your candidates could be eligible for an original BLA. Explain when companies typically make this application (e.g., at same time the company seeks marketing approval). Explain briefly why the form of approval impacts reimbursement.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages 36, 37, and 237-239 of the Amended Registration Statement accordingly.
February 9, 2023 2
U.S. Securities and Exchange Commission
The issuances of additional shares of Class A Common Stock..., page 68
7. Please revise to specify the dollar amount of proceeds that New AEON believes will be sufficient to meet its immediate working capital needs.
Response: The Company respectfully acknowledges the Staff’s comment and has revised page 70 of the Amended Registration Statement accordingly.
Background to the Business Combination, page 86
8. We refer to the October 3, 2022 entry. Please revise to explain Priveterra’s basis for proposing an initial pre-transaction equity value for AEON of $150 million and contingent consideration in the amount of $170 million. Revise the September 21 to September 27 entries to present and explain the information that AEON provided and Priveterra considered in developing this equity valuation. In particular, discuss whether Priveterra received financial forecasts from AEON.
Response: The Company respectfully acknowledges the Staff’s comment and has revised page 98 of the Amended Registration Statement accordingly.
9. Please revise the third and fifth paragraphs on page 90 to identify the specific due diligence issues addressed by the parties and their representatives. Also revise the disclosures on pages 94 and 95 to discuss the results of management’s due diligence review of AEON.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages 101 and 105 of the Amended Registration Statement accordingly.
10. Please revise the December 1 entry to explain why AEON sought additional flexibility for AEON to pursue alternative private financing opportunities following the execution of the Business Combination Agreement. Also revise the December 5 entry to explain why Priveterra agreed to provide AEON with this flexibility but only on the condition that AEON not enter into a definitive agreement with respect to any such financing prior to the termination of the Business Combination Agreement. With a view to disclosure, please tell us whether the negotiations concerning additional financings impacted negotiations concerning the $45 million minimum cash condition.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages 102 and 103 of the Amended Registration Statement accordingly.
11. We note the disclosure on page 68 indicating that New AEON and Priveterra expect to enter into Interim Financing Agreements. Please update the Background section and other sections, as applicable, to discuss the status of these prospective financings.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages iv-vi, viii, x, xiii, xiv, 4-8, 22, 73-74, 104, 107, 113-114, 132, 147-148, 150-151, 192 and 285 of the Amended Registration Statement accordingly.
February 9, 2023 3
U.S. Securities and Exchange Commission
Priveterra Board’s Reasons for the Approval of the Business Combination, page 93
12. Please revise the disclosure on pages 95-96 to identify each comparable company and show the metrics applicable to each one. Clarify whether any of the comparable companies were clinical stage companies as of November 2022.
Response: The Company respectfully acknowledges the Staff’s comment and has revised its disclosure on pages 107 and 108 of the Amended Registration Statement accordingly.
13. Please tell us whether the comparable company analysis presented here is the same or distinct from the valuations of precedent merger and acquisition targets in similar and adjacent sectors, which is referenced at the top of page 95.
Response: The Company respectfully acknowledges the Staff’s comment and has revised pages 107 and 108 of the Amended Registration Statement accordingly.
14. We note the disclosure on page 96 that Priveterra’s Board assumed that Priveterra’s shareholder would redeem 95% of outstanding common stock. In light of this assumption, please explain why Priveterra’s Board agreed to a closing condition that at least $45 million of aggregate cash proceeds would be available from the Trust Account, after giving effect to redemptions of Public Shares.
Response: The Company respectfully acknowledges the Staff’s comment and has revised page 109 of the Amended Registration Statement accordingly.
15. We note that the Board’s analysis reflected that AEON would have $76 million in cash at the closing of the initial business combination. Please explain the Board’s assumptions in deriving this figure.
Response: The Company respectfully acknowledges the Staff’s comment and has revised page 108 of the Amended Registration Statement accordingly.
Proposal 1: The Business Combination Proposal Prospective Financial Information, page 98
16. You disclose here that “AEON and Priveterra jointly prepared an illustrative forecast of revenue potential for ABP-450 in migraine (including both chronic and episodic) and cervical dystonia indications.” Please revise to show the annual revenues forecasted and discuss the material assumptions for the model, including the parties’ assumptions regarding the timing of commercialization for each indication. Clearly identify the markets in which it was assumed that ABP-450 received regulatory approval for sale for purposes of these projections. Revise to clearly identify the extent to which regulatory approval is outside of your control as a significant limitation on the usefulness of these projections.
Response: In response to the Staff's comment, the Company respectfully advises the Staff that neither Priveterra nor AEON shared illustrative forecasts based on commercialization in the U.S. of revenue potential for ABP-450 in migraine and cervical dystonia indications with their respective Boards that provided for annual revenue forecasts. The Company did not prepare annual forecasts because they will depend on the timeline of commercialization, which is uncertain and will depend on a number of currently unknown factors, as is customary in U.S. biotechnology transactions similar to this Business Combination. The Company has revised page 111 of the Amended Registration Statement accordingly.
February 9, 2023 4
U.S. Securities and Exchange Commission
Unaudited Pro Forma Condensed Consolidated Combined Financial Information Description of the Business Combination
Scenario 2, page 134
17. Your disclosure indicates that in Scenario 1 you are accounting for the merger as a recapitalization but as a variable interest entity (VIE) and asset acquisition under Scenario 2. Please address the following:
• You disclose that “the expected cash on hand results in the equity at risk being considered insufficient for AEON to finance its activities without additional subordinated financial support under these assumed redemption scenarios.” Tell us how you determined that AEON would have sufficient equity at risk under Scenario 1.
Response: The Company respectfully acknowledges the Staff’s comment. In evaluating whether AEON has sufficient equity at risk, the Company first evaluated the purpose and design of the entity and determined that the key risks and intent of the entity is to reach its next major development milestone. Similar to other life science entities, there is significant uncertainty regarding its development plans and thereby the focus is to address the risks specific to the current development stage. In additional development stages, the risks of the entity will significantly change as it approaches commercialization, considers additional exit strategies and pursues additional forms of financing. Specifically, the Company determined that its next major development milestone is anticipated in the fourth quarter of 2023 when phase two episodic migraine data is available, determining that the entity is sufficiently capitalized.
Next, the Company considered whether it has sufficient equity at risk to finance its activities until the next development stage. Under Scenario 1, the Company believes that AEON demonstrates its ability to raise significant equity from investors at market terms at the time of the merger and therefore the trust proceeds should be considered in the evaluation of the equity at risk. In this scenario, AEON would have approximately $305.7 million in cash as part of its equity at risk, which would be sufficient to fund
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CORRESP
1
filename1.htm
W. Soren
Kreider IV
+1 212 450 4387
w.soren.kreider@davispolk.com
Davis Polk &
Wardwell llp
450 Lexington Avenue
New York, NY 10017
davispolk.com
February 9,
2023
Re: Priveterra Acquisition Corp.
Registration Statement on Form S-4
Filed December 27, 2022
File No. 333-269006
CONFIDENTIAL
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Life Sciences
100 F Street, N.E.
Washington, D.C. 20549
Attn: Tracie Mariner and Kevin Vaughn
Dear Ms. Mariner and Mr. Vaughn:
On behalf of our client, Priveterra Acquisition Corp. (the “Company”),
this letter sets forth the Company’s response to the comments provided by the staff (the “Staff”) of the Division
of Corporation Finance of the U.S. Securities and Exchange Commission in the Staff’s letter dated January 26, 2023 (the “Comment
Letter”), relating to the Company’s registration statement on Form S-4 filed on December 27, 2022 (the “Registration
Statement”).
The Company has updated the Registration Statement and is filing Amendment
No. 1 to the Registration Statement on Form S-4 (the “Amended Registration Statement”) together with this response
letter. The Amended Registration Statement also contains certain additional updates and revisions.
For the convenience of the Staff, each comment from the Comment Letter
is restated in italics prior to the Company’s response to such comment. All references to page numbers and captions (other than
those in the Staff’s comments) correspond to pages and captions in the Amended Registration Statement.
Registration Statement on Form S-4
Filed December 27, 2022
Market and Industry Data, page ii
1. We note your statements that (i) you have not independently
verified the market and industry data contained in the proxy statement/prospectus or the underlying assumptions and (ii) your research
has not been verified by any independent source. These statements may imply an inappropriate disclaimer of responsibility with respect
to such information. Please either delete these statements or revise to specifically state that you are responsible for all disclosures
presented in the prospectus.
Response: The Company respectfully acknowledges the
Staff’s comment and has revised the disclosure on page iii of the Amended Registration Statement accordingly.
Q. What will AEON stockholders and holders of AEON options receive
in the Business Combination, page x
U.S. Securities
and Exchange Commission
2. Please revise this section to explain in greater detail how the
Exchange Ratio is calculated. In this regard, please explain the Holdback Equity Pool, its
impact on the consideration, and what assumptions are used to derive the 34.7% or 82.7% figures
that are presented on the cover page.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised page xi of the Amended Registration Statement accordingly. Additionally, the term "Holdback Equity Pool" was inadvertently included in the Business Combination Agreement and will be revised in
a future amendment.
Summary of the Proxy Statement/Prospectus, page 1
3. Please
highlight the material risks to public warrant holders, including those arising from differences
between public and private warrants. Additionally, please clarify whether recent common stock
trading prices exceed the threshold that would allow the company to redeem public warrants.
Response: The Company respectfully acknowledges the Staff’s comment
and has revised pages xi, xiii, 142 and 143 of the Amended Registration Statement accordingly.
Sources and Uses of Funds for the Business Combination, page 4
4. Please revise to present the full redemption scenario.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised the disclosure on pages 4-6 and 112-114 of the Amended Registration Statement accordingly.
Risk Factors, page 24
5. Please disclose the materials risks to unaffiliated investors
presented by taking the company public through a merger rather than an underwritten offering.
These risks could include the absence of due diligence conducted by an underwriter that would
be subject to liability for any material misstatements or omissions in a registration statement.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised its disclosure on pages 18, 27 and 83 of the Amended Registration Statement accordingly by including an
additional risk factor.
We may not be successful in obtaining an original BLA, page 34
6. Please revise to discuss here and/or in the Business section
what standard FDA uses to determine whether to issue an original BLA as opposed to a BLA
supplement. Explain why you believe that your candidates could be eligible for an original
BLA. Explain when companies typically make this application (e.g., at same time the company
seeks marketing approval). Explain briefly why the form of approval impacts reimbursement.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised pages 36, 37, and 237-239 of the Amended Registration Statement accordingly.
February 9, 2023 2
U.S. Securities
and Exchange Commission
The issuances of additional shares of Class A Common Stock...,
page 68
7. Please revise to specify the dollar amount of proceeds that New
AEON believes will be sufficient to meet its immediate working capital needs.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised page 70 of the Amended Registration Statement accordingly.
Background to the Business Combination, page 86
8. We refer to the October 3, 2022 entry. Please revise to
explain Priveterra’s basis for proposing an initial pre-transaction equity value for
AEON of $150 million and contingent consideration in the amount of $170 million. Revise the
September 21 to September 27 entries to present and explain the information that
AEON provided and Priveterra considered in developing this equity valuation. In particular,
discuss whether Priveterra received financial forecasts from AEON.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised page 98 of the Amended Registration Statement accordingly.
9. Please revise the third and fifth paragraphs on page 90
to identify the specific due diligence issues addressed by the parties and their representatives.
Also revise the disclosures on pages 94 and 95 to discuss the results of management’s
due diligence review of AEON.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised pages 101 and 105 of the Amended Registration Statement accordingly.
10. Please revise the December 1 entry to explain why AEON
sought additional flexibility for AEON to pursue alternative private financing opportunities
following the execution of the Business Combination Agreement. Also revise the December 5
entry to explain why Priveterra agreed to provide AEON with this flexibility but only on
the condition that AEON not enter into a definitive agreement with respect to any such financing
prior to the termination of the Business Combination Agreement. With a view to disclosure,
please tell us whether the negotiations concerning additional financings impacted negotiations
concerning the $45 million minimum cash condition.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised pages 102 and 103 of the Amended Registration Statement accordingly.
11. We note the disclosure on page 68 indicating that New AEON
and Priveterra expect to enter into Interim Financing Agreements. Please update the Background
section and other sections, as applicable, to discuss the status of these prospective financings.
Response: The Company respectfully acknowledges
the Staff’s comment and has revised pages iv-vi, viii, x, xiii, xiv, 4-8, 22, 73-74, 104, 107, 113-114, 132, 147-148, 150-151,
192 and 285 of the Amended Registration Statement accordingly.
February 9, 2023 3
U.S. Securities
and Exchange Commission
Priveterra Board’s Reasons for the Approval of the Business
Combination, page 93
12. Please revise the disclosure on pages 95-96 to identify
each comparable company and show the metrics applicable to each one. Clarify whether any
of the comparable companies were clinical stage companies as of November 2022.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised its disclosure on pages 107 and 108 of the Amended Registration Statement accordingly.
13. Please tell us whether the comparable company analysis presented
here is the same or distinct from the valuations of precedent merger and acquisition targets
in similar and adjacent sectors, which is referenced at the top of page 95.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised pages 107 and 108 of the Amended Registration Statement accordingly.
14. We note the disclosure on page 96 that Priveterra’s
Board assumed that Priveterra’s shareholder would redeem 95% of outstanding common
stock. In light of this assumption, please explain why Priveterra’s Board agreed to
a closing condition that at least $45 million of aggregate cash proceeds would be available
from the Trust Account, after giving effect to redemptions of Public Shares.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised page 109 of the Amended Registration Statement accordingly.
15. We note that the Board’s analysis reflected that AEON
would have $76 million in cash at the closing of the initial business combination. Please
explain the Board’s assumptions in deriving this figure.
Response: The Company respectfully acknowledges the Staff’s
comment and has revised page 108 of the Amended Registration Statement accordingly.
Proposal 1: The Business Combination Proposal Prospective Financial
Information, page 98
16. You disclose here that “AEON and Priveterra jointly prepared
an illustrative forecast of revenue potential for ABP-450 in migraine (including both chronic
and episodic) and cervical dystonia indications.” Please revise to show the annual
revenues forecasted and discuss the material assumptions for the model, including the parties’
assumptions regarding the timing of commercialization for each indication. Clearly identify
the markets in which it was assumed that ABP-450 received regulatory approval for sale for
purposes of these projections. Revise to clearly identify the extent to which regulatory
approval is outside of your control as a significant limitation on the usefulness of these
projections.
Response: In response to the Staff's comment, the Company
respectfully advises the Staff that neither Priveterra nor AEON shared illustrative forecasts based on commercialization in the U.S.
of revenue potential for ABP-450 in migraine and cervical dystonia indications with their respective Boards that provided for annual
revenue forecasts. The Company did not prepare annual forecasts because they will depend on the timeline of commercialization, which
is uncertain and will depend on a number of currently unknown factors, as is customary in U.S. biotechnology transactions similar to
this Business Combination. The Company has revised page 111 of the Amended Registration Statement accordingly.
February 9, 2023 4
U.S. Securities
and Exchange Commission
Unaudited Pro Forma Condensed Consolidated Combined Financial
Information Description of the Business Combination
Scenario 2, page 134
17. Your disclosure indicates that in Scenario 1 you are accounting
for the merger as a recapitalization but as a variable interest entity (VIE) and asset acquisition
under Scenario 2. Please address the following:
• You disclose that “the expected cash on hand results
in the equity at risk being considered insufficient for AEON to finance its activities without
additional subordinated financial support under these assumed redemption scenarios.”
Tell us how you determined that AEON would have sufficient equity at risk under Scenario
1.
Response: The Company respectfully acknowledges the Staff’s
comment. In evaluating whether AEON has sufficient equity at risk, the Company first evaluated the purpose and design of the entity and determined
that the key risks and intent of the entity is to reach its next major development milestone. Similar to other life science entities,
there is significant uncertainty regarding its development plans and thereby the focus is to address the risks specific to the current
development stage. In additional development stages, the risks of the entity will significantly change as it approaches commercialization,
considers additional exit strategies and pursues additional forms of financing. Specifically, the Company determined that its next major
development milestone is anticipated in the fourth quarter of 2023 when phase two episodic migraine data is available, determining that
the entity is sufficiently capitalized.
Next, the Company considered whether it has sufficient equity at risk to finance its activities
until the next development stage. Under Scenario 1, the Company believes that AEON demonstrates its ability to raise significant equity
from investors at market terms at the time of the merger and therefore the trust proceeds should be considered in the evaluation of the
equity at risk. In this scenario, AEON would have approximately $305.7 million in cash as part of its equity at risk, which would be sufficient
to fund