UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  ☒

Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

☐	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☒	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material Pursuant to §240.14a-12

Surface Oncology, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, If Other Than The Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☒	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Surface Oncology, Inc. Stockholders:

On June 15, 2023, Surface Oncology, Inc. (“Surface”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Coherus BioSciences, Inc. (“Coherus”), Crimson Merger Sub I, Inc., a direct, wholly owned subsidiary of Coherus (“Merger Sub I”), and Crimson Merger Sub II, LLC, a direct, wholly owned subsidiary of Coherus (“Merger Sub II,” and together with Merger Sub I, the “Merger Subs”), that provides for the acquisition of Surface by Coherus. Upon the terms and subject to the conditions in the Merger Agreement, Merger Sub I will merge with and into Surface, with Surface surviving such merger as a direct, wholly owned subsidiary of Coherus (the “First Merger”), and, as part of the same overall transaction, promptly after the First Merger, the surviving corporation of the First Merger will merge with and into Merger Sub II, with Merger Sub II surviving such merger (the “Second Merger,” and together with the First Merger, the “Mergers”).

At the effective time of the First Merger (the “Effective Time”), each share of Surface common stock (other than (i) shares held in treasury by Surface or held directly by Coherus, Merger Sub I or Merger Sub II, which shares will be cancelled or (ii) shares that are held by any holder who is entitled to demand and properly demands appraisal of such shares of Surface common stock pursuant to, and in compliance with, Section 262 of the General Corporation Law of the State of Delaware (“DGCL”)) that is issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive, without interest, (a) a number of shares of Coherus common stock equal to the exchange ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash (as defined in “The Merger Agreement—Surface Net Cash” of this proxy statement/prospectus), determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the volume weighted average trading price per share of Coherus common stock (“VWAP”) for the five trading days through and including June 15, 2023), by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement (the “Exchange Ratio”), and if applicable, cash in lieu of fractional shares (without interest and less any applicable withholding taxes), and (b) one CVR representing the right to receive the CVR Payment Amount.

The Exchange Ratio depends on the Surface Net Cash at the closing of the First Merger (the “Closing”) and will not be adjusted in the event of any change in the price of either Coherus common stock or Surface common stock. Therefore, the value of the Merger Consideration will depend on the market price of Coherus common stock at the Effective Time and the CVR Payment Amounts, if any, paid pursuant to the CVR Agreement. The market price of Coherus common stock has fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Surface special meeting, and through the date the First Merger is consummated. Given that the price per share of Coherus common stock used in the calculation of the Exchange Ratio was fixed upon the execution of the Merger Agreement, the Exchange Ratio will not be adjusted for changes in the market price of either Coherus or Surface common stock prior to the completion of the Mergers. Accordingly, you should obtain current market quotations for Coherus and Surface common stock before deciding how to vote on any of the proposals described in this proxy statement/prospectus. Coherus common stock is traded on the Nasdaq Global Market (“Nasdaq GM”) under the symbol “CHRS” and Surface common stock is traded on the Nasdaq Capital Market (“Nasdaq CM”) under the symbol “SURF.”

Surface will hold a special meeting of its stockholders to consider and vote to consider and vote upon the Surface merger proposal (as defined below) and related matters (the “Surface special meeting”). At the Surface special meeting, Surface stockholders will be asked to consider and vote on (i) a proposal to adopt the Merger Agreement (the “Surface merger proposal”), (ii) a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to Surface named executive officers that is based on or otherwise relates to the transactions contemplated by the Merger Agreement and (iii) a proposal to adjourn the Surface special meeting to solicit additional proxies, if necessary or appropriate, if there are insufficient votes to approve the Surface merger proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to Surface stockholders. The Surface board of directors recommends that Surface stockholders vote “FOR” each of the proposals to be considered at the Surface special meeting.

We cannot complete the Mergers unless the Surface merger proposal is approved by Surface stockholders. Your vote on these matters is very important, regardless of the number of shares you own. Whether or not you plan to virtually attend the Surface special meeting, please vote by proxy over the internet or telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to authorize the individuals named on your proxy card to vote your shares at the applicable special meeting.

 

 

This proxy statement/prospectus provides you with important information about the special meeting, the Mergers and each of the proposals. We encourage you to read the entire document carefully, in particular the information under “Risk Factors” beginning on page 30 for a discussion of risks relevant to the Mergers.

We look forward to the successful completion of the Mergers.

Sincerely,

Robert Ross

President and Chief Executive Officer

Surface Oncology, Inc.

* * * * *

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Mergers, the adoption of the Merger Agreement, the Coherus common stock and the CVRs to be issued in the Mergers or any of the other transactions described in this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated as of, and is first being mailed to Surface stockholders on or about, July 26, 2023.

Surface Oncology, Inc.

50 Hampshire Street, 8^th Floor

Cambridge, MA 02139

(617) 714-4096

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF SURFACE ONCOLOGY, INC.

To be held, September 7, 2023

Notice is hereby given that the special meeting of stockholders (the “Surface special meeting”) of Surface Oncology, Inc. (“Surface”) will be held virtually on September 7, 2023 at 10:00 a.m., Eastern Time at www.virtualshareholdermeeting.com/SURF2023SM. The Surface special meeting will be held for the following purposes:

1. Agreement and Plan of Merger.    To vote on a proposal to adopt the Agreement and Plan of Merger, dated June 15, 2023, by and among Coherus BioSciences, Inc. (“Coherus”), Crimson Merger Sub I, Inc., a direct, wholly owned subsidiary of Coherus, Crimson Merger Sub II, LLC, a direct, wholly owned subsidiary of Coherus, and Surface (as it may be amended from time to time, the “Merger Agreement”), a copy of which is attached as Annex A to the enclosed proxy statement/prospectus (the “Surface merger proposal”);

2. Advisory Vote on Compensation of Surface’s Named Executive Officers.    To vote on a proposal to approve, on an advisory (non-binding) basis, the compensation that will or may be paid to Surface’s named executive officers in connection with the Mergers (as defined in the section titled “About this Proxy Statement/Prospectus” of the enclosed proxy statement/prospectus) (the “Surface advisory compensation proposal”); and

3. Adjournment or Postponement.    To vote on a proposal to approve the adjournment or postponement of the Surface special meeting to solicit additional proxies if there are not sufficient votes cast at the Surface special meeting to approve the Surface merger proposal or to ensure that any supplemental or amended disclosure, including any supplement or amendment to the enclosed proxy statement/prospectus, is timely provided to Surface stockholders (the “Surface adjournment proposal”).

Surface will transact no other business at the Surface special meeting or any adjournment or postponement thereof, except such business as may properly be brought before the Surface special meeting or any adjournment or postponement thereof in accordance with the Amended and Restated Bylaws of Surface (the “Surface bylaws”). The enclosed proxy statement/prospectus, of which this notice is a part, describes the proposals listed above in more detail. Please refer to the attached documents, including the Merger Agreement and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the Surface special meeting. You are encouraged to read the entire document carefully before voting. In particular, please see the sections titled “The Mergers” beginning on page 62 of the enclosed proxy statement/prospectus for a description of the transactions contemplated by the Merger Agreement and “Risk Factors” beginning on page 30 of the enclosed proxy statement/prospectus for an explanation of the risks associated with the Mergers and the other transactions contemplated by the Merger Agreement.

The board of directors of Surface (the “Surface board of directors”) has fixed the close of business on July 21, 2023, as the record date (the “Surface record date”) for the determination of the Surface stockholders entitled to receive notice of, and to vote at, the Surface special meeting or any adjournment or postponement thereof. The Surface stockholders of record as of the close of business on the Surface record date are the only Surface stockholders who are entitled to receive notice of, and to vote at, the Surface special meeting and any adjournment or postponement thereof unless a new record date is fixed in connection with any adjournment or postponement of the Surface special meeting. Each Surface stockholder has one vote for each share of Surface common stock held as of the Surface record date. A list of Surface’s stockholders of record entitled to vote at the Surface special meeting will be available for examination by any Surface stockholder for any legally valid

purpose at Surface’s corporate headquarters, located at 50 Hampshire Street, 8th Floor, Cambridge, Massachusetts 02139, for a period of ten days prior to the Surface special meeting. The list of eligible Surface stockholders of record also will be available for inspection during the Surface special meeting at www.virtualshareholdermeeting.com/SURF2023SM by entering the 16-digit control number provided on your proxy card or voting instruction form and completing the required online attestation form. For additional information regarding the Surface special meeting, see the section titled “The Surface Special Meeting” beginning on page 51 of the enclosed proxy statement/prospectus.

The Surface board of directors, at a meeting duly called and held, has (i) determined that the terms of the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are fair to and in the best interest of Surface and the Surface stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, (iii) directed that the Merger Agreement be submitted to the Surface stockholders for adoption and (iv) resolved to recommend that the Surface stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the Mergers. The Surface board of directors recommends that Surface stockholders vote “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal.

Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal. Even if you plan to attend the Surface special meeting, Surface requests that you complete, sign, date and return the enclosed proxy card in the accompanying envelope prior to the Surface special meeting to ensure that your shares will be represented and voted at the Surface special meeting if you later decide not to or are unable to attend.

You may also submit a proxy over the Internet using the Internet address on the enclosed proxy card or by telephone using the toll-free number on the enclosed proxy card. If you submit your proxy through the Internet or by telephone, you will be asked to provide the control number from the enclosed proxy card. If you are not a stockholder of record, but instead hold your shares in “street name” through a broker, bank, trustee or other nominee, you must provide a proxy executed in your favor from your broker, bank, trustee or other nominee in order to be able to vote at the Surface special meeting.

Please vote as promptly as possible, whether or not you plan to attend the Surface special meeting. If your shares are held in the name of a broker, bank or other nominee, please vote by following the instructions on the voting instruction form furnished by the broker, bank or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the Internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the self-addressed, stamped envelope provided. Submitting a proxy will not prevent you from voting, but it will help to secure a quorum and avoid added solicitation costs. Any eligible Surface stockholder entitled to vote and who is virtually present at the Surface special meeting may vote, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the Surface special meeting in the manner described in the enclosed proxy statement/prospectus.

The enclosed proxy statement/prospectus provides a detailed description of the Mergers, the Merger Agreement and the other matters to be considered at the Surface special meeting. We urge you to read carefully the enclosed proxy statement/prospectus and the annexes in their entirety. If you have any questions concerning the Surface merger proposal, the Surface advisory compensation proposal, the Surface adjournment proposal, the Mergers or the enclosed proxy statement/prospectus, would like additional copies, or need help voting your shares of Surface common stock, please contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders May Call: (877) 717-3904 (toll-free from the U.S. and Canada)

Banks and Brokers May Call: (212) 750-5833

By Order of the Board of Directors

Chandra Adams

Deputy General Counsel and Corporate Secretary

July 26, 2023

WHETHER OR NOT YOU PLAN TO ATTEND THE SURFACE SPECIAL MEETING, YOU ARE URGED TO VOTE AS SOON AS POSSIBLE BY INTERNET, TELEPHONE OR MAIL SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. SUBMITTING A PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT YOU SHOULD ATTEND THE SURFACE SPECIAL MEETING.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Coherus and Surface from other documents that Coherus and Surface have filed with the U.S. Securities and Exchange Commission (“SEC”) and that are not contained in and are instead incorporated by reference in this proxy statement/prospectus.

For a list of documents incorporated by reference in this proxy statement/prospectus, see “Where You Can Find More Information.” This information is available for you, without charge, to review through the SEC’s website at www.sec.gov.

You may request a copy of this proxy statement/prospectus, any of the documents incorporated by reference in this proxy statement/prospectus or other information filed with the SEC by Coherus or Surface, without charge, by written or telephonic request directed to the appropriate company at the following contacts:

 

For Coherus stockholders:		For Surface stockholders:
Coherus BioSciences, Inc.		Surface Oncology, Inc.
Attention: Corporate Secretary		Attention: Corporate Secretary
333 Twin Dolphin Drive		50 Hampshire Street
Suite 600		8th Floor
Redwood City, CA 94065		Cambridge, MA 02139
(650) 649-3530		(617) 714-4096

In order for you to receive timely delivery of the documents in advance of the Surface special meeting, you must request the information no later than August 30, 2023.

If you have any questions about the Surface special meeting, or need to obtain proxy cards or other information, please contact Surface’s proxy solicitor at the following contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders May Call: (877) 717-3904 (toll-free from the U.S. and Canada)

Banks and Brokers May Call: (212) 750-5833

The contents of the websites of the SEC, Coherus, Surface or any other entity are not incorporated by reference in this proxy statement/prospectus. The information about how you can obtain certain documents that are incorporated by reference in this proxy statement/prospectus at these websites is being provided only for your convenience.

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Coherus (Registration No. 333-273179), constitutes a prospectus of Coherus under Section 5 of the Securities Act with respect to the shares of Coherus common stock to be issued to Surface stockholders pursuant to the Agreement and Plan of Merger, dated June 15, 2023, as it may be amended from time to time, by and among Coherus, Merger Sub I, Merger Sub II and Surface (the “Merger Agreement”). This document also constitutes a proxy statement of Surface under Section 14(a) of the Exchange Act. This proxy statement/prospectus also constitutes a notice of meeting with respect to the Surface special meeting.

Coherus has supplied all information contained or incorporated by reference in this proxy statement/ prospectus relating to Coherus and its Merger Subs, and Surface has supplied all such information relating to Surface. Coherus and Surface have both contributed to such information relating to the Mergers.

You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus. Coherus and Surface have not authorized anyone to provide you with information that is different from that contained or incorporated by reference in this proxy statement/prospectus. This proxy statement/prospectus is dated July 26, 2023, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein.

Further, you should not assume that the information incorporated by reference in this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Surface stockholders nor the issuance by Coherus of shares of Coherus common stock pursuant to the Merger Agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

Unless otherwise indicated or the context otherwise requires, when used in this proxy statement/ prospectus:

 

•

“Closing” refers to the closing of the First Merger;

 

•

“Closing Date” refers to the date on which the Closing occurs;

 

•

“Code” refers to the Internal Revenue Code of 1986, as amended;

 

•

“Coherus” refers to Coherus BioSciences, Inc., a Delaware corporation;

 

•

“Coherus board of directors” refers to the board of directors of Coherus;

 

•

“Coherus bylaws” refers to the Amended and Restated Bylaws of Coherus, effective November 12, 2020;

 

•

“Coherus charter” refers to the Amended and Restated Certificate of Incorporation of Coherus, dated November 12, 2014;

 

•

“Coherus common stock” refers to the common stock, par value $0.0001 per share, of Coherus;

 

•

“combined company” refers to Coherus immediately following the completion of the Mergers and the other transactions contemplated by the Merger Agreement;

 

•

“CVR” has the meaning ascribed thereto in the CVR Agreement;

 

•

“CVR Agreement” refers to the Contingent Value Rights Agreement to be entered into by and between Coherus and the Rights Agent upon the consummation of the Mergers and transactions contemplated thereby;

 

i

•

“CVR Payment Amount” has the meaning ascribed thereto in the CVR Agreement;

 

•

“DGCL” refers to the General Corporation Law of the State of Delaware;

 

•

“DLLCA” refers to the Delaware Limited Liability Company Act;

 

•

“Effective Time” refers to the effective time of the First Merger;

 

•

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

 

•

“Exchange Ratio” refers to the exchange ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash (as defined in “The Merger Agreement—Surface Net Cash”), determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the VWAP for the five trading days through and including June 15, 2023), by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement;

 

•

“FDA” refers to the U.S. Food and Drug Administration;

 

•

“First Merger” refers to the merger of Merger Sub I with and into Surface, with Surface surviving the merger and becoming a direct, wholly owned subsidiary of Coherus pursuant to the Merger Agreement;

 

•

“GAAP” refers to U.S. generally accepted accounting principles;

 

•

“IRS” refers to the U.S. Internal Revenue Service;

 

•

“Merger Agreement” refers to the Agreement and Plan of Merger, dated June 15, 2023, as it may be amended from time to time, by and among Coherus, Merger Sub I, Merger Sub II and Surface;

 

•

“Merger Consideration” refers to (a) the Upfront Consideration and (b) one CVR representing the right to receive the CVR Payment Amount, as provided for in the CVR Agreement;

 

•

“Merger Sub I” refers to Crimson Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Coherus;

 

•

“Merger Sub II” refers to Crimson Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Coherus;

 

•

“Merger Subs” refers to Merger Sub I and Merger Sub II, together;

 

•

“Mergers” refers to the First Merger and the Second Merger, together;

 

•

“Nasdaq” refers to The Nasdaq Stock Market LLC, Nasdaq GM and Nasdaq CM, together;

 

•

“Nasdaq CM” refers to the Nasdaq Capital Market;

 

•

“Nasdaq GM” refers to the Nasdaq Global Market;

 

•

“Rights Agent” refers to Computershare Inc. and its affiliate Computershare Trust Company, N.A., together, or such other nationally recognized rights agent agreed to between Coherus and Surface in accordance with the Merger Agreement;

 

•

“SEC” refers to the U.S. Securities and Exchange Commission;

 

•

“Second Effective Time” refers to the effective time of the Second Merger;

 

•

“Second Merger” refers to the merger of the Surviving Corporation with and into Merger Sub II, with Merger Sub II surviving such merger pursuant to the Merger Agreement;

 

•

“Securities Act” refers to the Securities Act of 1933, as amended;

 

•

“Surface” refers to Surface Oncology, Inc., a Delaware corporation;

 

•

“Surface adjournment proposal” refers to the proposal to approve the adjournment or postponement of the Surface special meeting to solicit additional proxies if there are not sufficient votes cast at the Surface special meeting to approve the Surface merger proposal or to ensure that any supplemental or amended disclosure, including any supplement or amendment to the enclosed proxy statement/prospectus, is timely provided to Surface stockholders;

 

ii

•

“Surface advisory compensation proposal” refers to the proposal approve, on an advisory (non-binding) basis, the compensation that will or may be paid to Surface’s named executive officers in connection with the Mergers;

 

•

“Surface board of directors” refers to the board of directors of Surface;

 

•

“Surface bylaws” refers to the Amended and Restated Bylaws of Surface, effective April 23, 2018;

 

•

“Surface charter” refers to the Amended and Restated Certificate of Incorporation of Surface, dated April 23, 2018;

 

•

“Surface common stock” refers to the common stock, par value $0.0001 per share, of Surface;

 

•

“Surface merger proposal” refers to the proposal to adopt the Merger Agreement;

 

•

“Surface record date” refers to July 21, 2023;

 

•

“Surface special meeting” refers to the special meeting of Surface stockholders to consider and vote upon the Surface merger proposal and related matters;

 

•

“Surviving Corporation” refers to Surface as the surviving entity following the First Merger;

 

•

“Surviving Entity” refers to the surviving entity in the Second Merger;

 

•

“Termination Date” refers to December 15, 2023, the date on which, subject to certain limitations in the Merger Agreement, the Merger Agreement may be terminated and the Mergers abandoned by either Coherus or Surface;

 

•

“Treasury Regulations” refers to U.S. Department of the Treasury regulations promulgated under the Code;

 

•

“Upfront Consideration” refers to the number of shares of Coherus common stock equal to the Exchange Ratio; and

 

•

“VWAP” refers to the volume weighted average trading price per share of Coherus common stock.

Capitalized terms used but not otherwise defined in this proxy statement/prospectus shall have the meanings ascribed to them in the Merger Agreement.

 

iii

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS			1
SUMMARY			13
COMPARISON OF COHERUS AND SURFACE MARKET PRICES AND IMPLIED VALUE OF MERGER CONSIDERATION			27
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			28
RISK FACTORS			30
THE PARTIES TO THE MERGERS			47
THE SURFACE SPECIAL MEETING			51
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT			59
PROPOSAL 2: ADVISORY VOTE WITH RESPECT TO CERTAIN COMPENSATION THAT MAY BE PAID OR BECOME PAYABLE TO SURFACE’S NAMED EXECUTIVE OFFICERS THAT IS BASED ON OR OTHERWISE RELATES TO THE MERGERS			60
PROPOSAL 3: ADJOURNMENT OR POSTPONEMENT OF THE SURFACE SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES			61
THE MERGERS			62
THE MERGER AGREEMENT			95
THE CONTINGENT VALUE RIGHTS AGREEMENT			122
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			127
MANAGEMENT OF SURFACE			140
RELATED PERSON TRANSACTIONS OF SURFACE			146
REGULATORY APPROVALS			148
INTERESTS OF COHERUS’ DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGERS			149
INTERESTS OF SURFACE’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGERS			150
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE MERGERS			152
COMPARISON OF STOCKHOLDERS’ RIGHTS			161
APPRAISAL RIGHTS			170
LEGAL MATTERS			175
EXPERTS			175
CERTAIN BENEFICIAL OWNERS OF COHERUS COMMON STOCK			176
CERTAIN BENEFICIAL OWNERS OF SURFACE COMMON STOCK			179
STOCKHOLDER PROPOSALS			181
HOUSEHOLDING OF PROXY MATERIALS			181
WHERE YOU CAN FIND MORE INFORMATION			182
ANNEX A            AGREEMENT AND PLAN OF MERGER
ANNEX B            CVR AGREEMENT
ANNEX C            OPINION OF WEDBUSH SECURITIES INC.

 

i

QUESTIONS AND ANSWERS

The following are brief answers to certain questions that you, as a Surface stockholder, may have regarding the Mergers and the other matters being considered at the Surface special meeting. You are urged to carefully read this proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus in their entirety because this section may not provide all the information that is important to you regarding these matters. See “Summary” for a summary of important information regarding the Merger Agreement, the Mergers and the related transactions. Additional important information is contained in the annexes to, and the documents incorporated by reference in, this proxy statement/prospectus. You may obtain the information incorporated by reference in this proxy statement/prospectus, without charge, by following the instructions under “Where You Can Find More Information.”

Why am I receiving this proxy statement/prospectus?

This proxy statement/prospectus serves as a proxy statement for the Surface special meeting.

You are receiving this proxy statement/prospectus because Surface has agreed to be acquired by Coherus through a series of mergers whereby (i) Merger Sub I will merge with and into Surface, with Surface continuing as the Surviving Corporation in the First Merger and becoming a direct, wholly owned subsidiary of Coherus and (ii) immediately thereafter, the Surviving Corporation will merge with and into Merger Sub II, with Merger Sub II surviving. The Merger Agreement, which governs the terms and conditions of the Mergers, is attached as Annex A hereto.

Your vote is required in connection with the Mergers. Surface is sending these materials to its stockholders to help them decide how to vote their shares with respect to the adoption of the Merger Agreement and other important matters.

What matters am I being asked to vote on?

In order to complete the Mergers, among other things, Surface stockholders must approve the Surface merger proposal.

Surface is holding the Surface special meeting to obtain approval of the Surface merger proposal and the Surface advisory compensation proposal. Additionally, the Surface special meeting may be adjourned to another time and place if necessary or appropriate in order to permit the solicitation of additional proxies if there are insufficient votes to approve the merger proposal. Accordingly, Surface is asking Surface stockholders to authorize the holder of any proxy solicited by the Surface board of directors to vote in favor of the merger proposal and the adjournment proposal.

Your vote is very important, regardless of the number of shares that you own. The approval of the Surface merger proposal is a condition to the obligations of Coherus and Surface to complete the Mergers. The approval of the Surface advisory compensation proposal and the Surface adjournment proposal are not conditions to the obligations of Coherus or Surface to complete the Mergers.

When and where will the special meetings take place?

The Surface special meeting will be held solely virtually via live webcast on September 7, 2023, beginning at 10:00 a.m., Eastern Time. Surface stockholders will be able to virtually attend and vote at the Surface special meeting by visiting www.virtualshareholdermeeting.com/SURF2023SM (the “Surface special meeting website”). In order to virtually attend and vote at the Surface special meeting, you must first register at the Surface special meeting website in order to obtain a unique meeting invitation by electronic mail. Surface has retained Broadridge Financial Solutions, Inc. (“Broadridge”) to host the live webcast of the Surface special meeting. On the day of the Surface special meeting, Broadridge may be contacted at 1-800-353-0103 (US) or +44 20

 

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7551 3000 (EMEA) or +65 6438 1144 (APAC) to answer any questions regarding how to virtually attend the Surface special meeting or if you encounter any technical difficulty accessing or during the Surface special meeting. See “The Surface Special Meeting.”

Even if you plan to virtually attend Surface’s special meeting, Surface recommends that you vote by proxy in advance as described below so that your vote will be counted if you later decide not to or become unable to virtually attend the Surface special meeting.

If you hold your shares in “street name,” you may virtually attend and vote at the Surface special meeting only if you obtain a specific control number from your bank, broker or other nominee giving you the right to vote such shares.

Does my vote matter?

Yes, your vote is very important, regardless of the number of shares that you own. The Mergers cannot be completed unless the Surface merger proposal is approved by Surface stockholders.

What stockholder vote is required for the approval of each proposal at the Surface special meeting? What will happen if I fail to vote or abstain from voting on each proposal at the Surface special meeting?

Surface merger proposal. Assuming a quorum is present at the Surface special meeting, approval of the Surface merger proposal requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Surface common stock entitled to vote at the Surface special meeting on the Surface merger proposal. The failure to vote by proxy or to virtually attend and vote at the Surface special meeting, including an abstention, will have the same effect as a vote “AGAINST” the Surface merger proposal (assuming a quorum is present at the Surface special meeting).

Surface advisory compensation proposal. Assuming a quorum is present at the Surface special meeting, approval of the Surface advisory compensation proposal requires the affirmative vote of a majority of the votes properly cast at the Surface special meeting. The failure to vote by proxy and to virtually attend and vote at the Surface special meeting will have no effect on the Surface advisory compensation proposal (assuming a quorum is present at the Surface special meeting). Accordingly, assuming a quorum is present at the Surface special meeting, any shares not virtually present or represented by proxy (including due to the failure of a Surface stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions to such bank, broker or other nominee) will have no effect on the outcome of the Surface advisory compensation proposal. An abstention or other failure of any shares virtually present or represented by proxy and entitled to vote at the Surface special meeting to vote on the Surface advisory compensation proposal will have no effect on the Surface advisory compensation proposal. In addition, if a Surface stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Surface advisory compensation proposal, it will have no effect on the Surface advisory compensation proposal.

Surface adjournment proposal. Whether or not a quorum is present at the Surface special meeting, approval of the Surface adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Surface special meeting. Accordingly, any shares not virtually present or represented by proxy (including due to the failure of a Surface stockholder who holds shares in “street name” through a bank, broker or other nominee to provide voting instructions to such bank, broker or other nominee) will have no effect on the outcome of the Surface adjournment proposal. An abstention or other failure of any shares virtually present or represented by proxy and entitled to vote at the Surface special meeting on the Surface adjournment proposal to vote on the Surface adjournment proposal will have no effect on the Surface adjournment proposal. In addition, if a Surface stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Surface adjournment proposal, it will have no effect on the Surface adjournment proposal.

 

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What will Surface stockholders receive for their shares of Surface common stock if the Mergers are completed?

If the Mergers are completed, each share of Surface common stock outstanding as of immediately prior to the Effective Time will be converted into the right to receive (i) a number of shares of Coherus common stock equal to the Exchange Ratio and (ii) one CVR for each share of Surface common stock that you own. Each Surface stockholder will receive cash (without interest and less any applicable withholding taxes) in lieu of any fractional shares of Coherus common stock that such Surface stockholder would otherwise receive in the Mergers (the “fractional share cash consideration”). Any cash amounts to be received by a Surface stockholder in lieu of fractional shares of Coherus common stock will be rounded to the nearest whole cent. Each CVR will represent a contractual right to receive the CVR Payment Amounts that become payable under the CVR Agreement, settleable in cash, additional shares of Coherus common stock or a combination of cash and additional shares of Coherus common stock, at Coherus’ sole discretion.

Pursuant to the CVR Agreement, each CVR will entitle the holder thereof to receive future conditional payments under the agreements below (the “covered agreements”), less any permitted deductions provided for and calculated in accordance with the CVR Agreement:

 

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70% of all milestone- and royalty-based payments actually received by Coherus or its affiliates from GlaxoSmithKline Intellectual Property (No. 4) Limited (“GSK”) under the License Agreement, dated December 16, 2020, between Surface and GSK;

 

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70% of all milestone- and royalty-based payments actually received by Coherus and its affiliates from Novartis Institutes for Biomedical Research, Inc. (“Novartis”) under the Collaboration Agreement, dated January 9, 2016, between Surface and Novartis;

 

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25% of any upfront payments actually received by Coherus and its affiliates under an agreement entered into by Coherus, the Surviving Entity or their affiliates after the closing of the Mergers granting a third party development, manufacture or commercialization rights for Surface’s SRF114 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Coherus or its affiliates after the closing of the Mergers for the development of SRF114 (as determined and calculated in accordance with the CVR Agreement); and

 

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50% of any upfront payments actually received by Coherus and its affiliates under an agreement entered into by Coherus, the Surviving Entity or their affiliates after the Closing granting a third party development, manufacture or commercialization rights for Surface’s SRF388 proprietary drug product candidate in any market outside of the United States, less development costs and expenses incurred by Coherus or its affiliates after the closing of the Mergers for the development of SRF388 (as determined and calculated in accordance with the CVR Agreement).

If, in the good faith reasonable judgment of Coherus, the aggregate value of the consideration under the Merger Agreement paid in shares of Coherus common stock and amounts paid under the CVR Agreement in shares of Coherus common stock is not at least equal to the Reorg Threshold (as defined in “The Contingent Value Rights Agreement—Form of Payment; Certain Limitations”), then Coherus may not make further cash payments under the CVR Agreement, and the further cash payments will be reduced to the extent necessary to satisfy the Reorg Threshold. As a result, to satisfy the Reorg Threshold, the portion of the CVR Payment Amounts paid in Coherus common stock would increase.

Additionally, Coherus will not be required to pay any CVR Payment Amounts by the issuance of Coherus common stock, including as a result of the Reorg Threshold, if the stock issuance would be a Prohibited CVR Payment (as defined in “The Contingent Value Rights Agreement—Form of Payment; Certain Limitations”). If the payment of any CVR Payment Amounts in Coherus common stock would result in a Prohibited CVR Payment, the Acting Holders (as defined in “The Contingent Value Rights Agreement”) may request that Coherus seek to obtain the stockholder approval required to issue Coherus common stock necessary to make the

 

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Prohibited CVR Payment, in which case Coherus must use commercially reasonable efforts to obtain the required stockholder approval. However, Coherus is not required to obtain the required stockholder approval if the Coherus board of directors determines in good faith that taking such actions would be materially detrimental to Coherus. The Prohibited CVR Payment will not be payable under the CVR Agreement unless and until the Coherus stockholders approve the Prohibited CVR Payment. If the Acting Holders do not exercise their right to require Coherus to seek stockholder approval of a Prohibited CVR Payment, or if the Coherus stockholders reject or fail to approve the Prohibited CVR Payment, no portion of the related Prohibited CVR Payments shall be payable under the CVR Agreement. Consideration.

A form of the CVR Agreement is attached as Annex B to this proxy statement and is incorporated by reference herein.

Because the Merger Consideration includes CVRs and Coherus will issue a fixed number of shares of Coherus common stock in exchange for each share of Surface common stock, the value of the Merger Consideration that Surface stockholders will receive in the Mergers will depend on both the market price of shares of Coherus common stock at the time the Mergers are completed and the CVR Payments Amounts, if any, paid pursuant to the CVR Agreement. The market price of Coherus common stock has fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Surface special meeting, and through the date the First Merger is consummated. Given that the price per share of Coherus common stock used in the calculation of the Exchange Ratio was fixed upon execution of the Merger Agreement, the Exchange Ratio will not be adjusted for changes in the market price of either Coherus or Surface common stock prior to the completion of the Mergers. Accordingly, you should obtain current market quotations for Coherus common stock and Surface common stock before deciding how to vote on any of the proposals described in this proxy statement/prospectus. Coherus common stock is traded on the Nasdaq GM under the symbol “CHRS.” Surface common stock is traded on the Nasdaq CM, under the symbol “SURF.” Shares of common stock of the combined company will trade on the Nasdaq GM under the symbol “CHRS” after completion of the Mergers.

For more information regarding the Merger Consideration to be received by Surface stockholders if the Mergers are completed, see “The Merger Agreement—Merger Consideration.”

How does the Merger Consideration compare to the market price of Surface common stock prior to the public announcement of the Merger Agreement?

The Upfront Consideration, assuming that the Surface Net Cash at Closing is approximately $20 million to $25 million, represents a premium of approximately 29.2% to 40.0% over the closing price of Surface common stock on June 14, 2023, the last trading day prior to the execution of the Merger Agreement. Under the terms of the Merger Agreement, Coherus will issue Coherus common stock at a price of $5.2831 per share to acquire all outstanding shares of Surface stock for a total transaction value equal to approximately $64.2 million, or $41.2 million in transaction enterprise value, based on the Company’s fully diluted shares outstanding and net cash at the time the Merger Agreement was signed. This estimated transaction value equates to an approximate three-fold premium over Surface’s anticipated net cash of $20 million to $25 million at Closing.

How does the Surface board of directors recommend that I vote at the Surface special meeting?

The Surface board of directors recommends that you vote “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal.

In considering the recommendations of the Surface board of directors, Surface stockholders should be aware that Surface directors and executive officers have interests in the Mergers that may be different from, or in addition to, their interests as Surface stockholders generally. These interests may include, among others, the

 

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payment of severance benefits and acceleration of outstanding Surface equity awards upon certain terminations of employment or service, the combined company’s agreement to indemnify Surface directors and executive officers against certain claims and liabilities, and certain interests arising from the employment and compensation arrangements of Surface’s executive officers and the manner in which they would be affected by the Mergers. For a more complete description of these interests, see “Interests of Surface’s Directors and Executive Officers in the Mergers.”

Who is entitled to vote at the Surface special meeting?

All holders of record of shares of Surface common stock who held shares at the close of business on July 21, 2023 are entitled to receive notice of, and to vote at, the Surface special meeting. Each such holder of Surface common stock is entitled to cast one vote on each matter properly brought before the Surface special meeting for each share of Surface common stock that such holder owned of record as of the Surface record date. Virtual attendance at the Surface special meeting via the Surface special meeting website is not required to vote. See below and “The Surface Special Meeting—Methods of Voting” for instructions on how to vote without virtually attending the Surface special meeting.

What is a proxy?

A proxy is a stockholder’s legal designation of another person to vote shares owned by such stockholder on their behalf. The document used to designate a proxy to vote your shares of Surface common stock is referred to as a “proxy card.”

How many votes do I have at the Surface special meeting?

Each Surface stockholder is entitled to one vote for each share of Surface common stock held of record as of the close of business on the Surface record date. As of the close of business on the Surface record date, there were 60,730,274 shares of Surface common stock outstanding.

What constitutes a quorum for the Surface special meeting?

A quorum is the minimum number of shares required to be represented, either through virtual attendance or through representation by proxy, to hold a valid meeting.

The holders of record of a majority of the issued and outstanding shares of Surface common stock as of the Surface record date entitled to vote at the Surface special meeting, present in person or represented by proxy, will constitute a quorum.

What will the holders of Surface stock options and restricted stock units receive in the Mergers?

At the Effective Time, each option to purchase Surface common stock granted under any of Surface’s equity incentive plans, whether vested or unvested, that is outstanding immediately prior to the Effective Time (each, a “Surface Stock Option”) shall be converted, assumed or cancelled as follows:

 

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with respect to each Surface Stock Option with an exercise price per share that is less than the value of the Upfront Consideration (each such Surface Stock Option, an “In-the-Money Option”), such In-the-Money Option shall be cancelled and converted into the right to receive: (x) a number of shares of Coherus common stock, subject to certain exceptions for fractional shares and any applicable withholdings, that is equal to the quotient of (A) the product of (1) the total number of shares of Surface common stock underlying the In-the-Money Option multiplied by (2) the excess, if any, of the value of the Upfront Consideration over the exercise price of such In-the-Money Option, divided by (B) $5.2831 (the VWAP for the five trading days through and including June 15, 2023); and (y) a

 

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number of CVRs equal to the number of shares of Surface common stock underlying such In-the-Money Option;

 

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with respect to each Surface Stock Option held by any employee who continues to be employed by Coherus and its affiliates after the Effective Time and with an exercise price that is equal to or greater than the value of the Upfront Consideration (each, an “Underwater Option”), such Underwater Option shall be assumed by Coherus and converted into an option to acquire shares of Coherus common stock (each such Surface Stock Option, an “Assumed Option”) in a manner consistent with applicable tax laws in accordance with the Merger Agreement. Each Assumed Option will continue to have, and be subject to, the same vesting schedule, term exercisability provisions and other terms and conditions set forth in the applicable Surface equity incentive plan and the applicable Surface Stock Option award agreement as in effect immediately prior to the Effective Time, except that (i) Coherus and its board of directors shall have any and all amendment and administrative authority with respect to such Assumed Options and Surface’s equity incentive plans, (ii) each Assumed Option will become exercisable for that number of whole shares of Coherus common stock equal to the product (rounded down to the next whole number of shares of Coherus common stock) of (A) the number of shares of Surface common stock that would have been issuable upon full exercise of such Assumed Option immediately prior to the Effective Time multiplied by (B) the Exchange Ratio, and (iii) the per share exercise price for the shares of Coherus common stock issuable upon exercise of such Assumed Option shall be equal to the quotient (rounded up to the next whole cent) obtained by dividing the exercise price per share of Surface common stock at which such Assumed Option was exercisable immediately prior to the Effective Time by the Exchange Ratio; and

 

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with respect to each Underwater Option held by an employee who is not continuing to be employed by Coherus and its affiliates after the Effective Time, such Underwater Option shall be cancelled, and the holder of such Underwater Option will receive no Merger Consideration (whether under the Merger Agreement or under the CVR Agreement or otherwise) and, effective as of immediately prior to the Effective Time, will have no further rights with respect to such Underwater Option.

At the Effective Time, each restricted stock unit award representing the right to receive shares of Surface common stock granted under any of Surface’s equity incentive plans, whether vested or unvested, that is outstanding immediately prior to the Effective Time (each, a “Surface RSU”) shall automatically be cancelled and converted into the right to receive the Merger Consideration in respect of each share of Surface common stock subject to such Surface RSU, subject to certain exceptions for fractional shares and applicable withholdings.

Where will the Coherus common stock that I receive in the Mergers be publicly traded?

The shares of Coherus common stock to be issued to Surface stockholders in the Mergers will be listed for trading on the Nasdaq GM under the symbol “CHRS.”

What happens if the Mergers are not completed?

If the Surface merger proposal is not approved by Surface stockholders or if the Mergers are not completed for any other reason, Surface stockholders will not receive the Merger Consideration or any other consideration in connection with the Mergers, and their shares of Surface common stock will remain outstanding.

If the Mergers are not completed, Surface will remain an independent public company, the Surface common stock will continue to be listed and traded on the Nasdaq CM under the symbol “SURF” and Coherus will not complete the share issuance contemplated by the Merger Agreement.

If the Merger Agreement is terminated under specified circumstances, including if the Surface board of directors changes its recommendation, Surface may be required to pay Coherus a termination fee of $2.0 million,

 

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less expenses previously paid by Surface to Coherus. If the Merger Agreement is terminated as a result of a failure of the Surface merger proposal, then Surface may be required to reimburse Coherus’ out-of-pocket expenses in connection with the proposed Mergers, up to a maximum amount of $500,000. See “The Merger Agreement—Termination Fees.”

How can I virtually vote my shares at the Surface special meeting?

Shares held directly in your name as a Surface stockholder of record may be virtually voted at the Surface special meeting via the Surface special meeting website. In order to virtually attend and vote at the Surface special meeting, you must first register at the Surface special meeting website in order to obtain a unique meeting invitation by electronic mail.

Shares held in “street name” may be virtually voted at the Surface special meeting via the Surface special meeting website only if you obtain a specific control number and follow the instructions provided by your, broker or other nominee. See “The Surface Special Meeting.”

Even if you plan to virtually attend the Surface special meeting via the special meeting website, Surface recommends that you vote by proxy in advance as described below so that your vote will be counted if you later decide not to or become unable to virtually attend the Surface special meeting.

For additional information on virtually attending the Surface special meeting, see “The Surface Special Meeting.”

How can I vote my shares without virtually attending the Surface special meeting?

Whether you hold your shares directly as a stockholder of record of Surface or beneficially in “street name,” you may direct your vote by proxy without virtually attending the Surface special meeting. If you are a stockholder of record, you can vote by proxy over the internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee.

For additional information on voting procedures, see “The Surface Special Meeting.”

What is a “broker non-vote”?

Under Nasdaq rules, banks, brokers and other nominees may use their discretion to vote “uninstructed” shares (i.e., shares of record held by banks, brokers or other nominees, but with respect to which the beneficial owner of such shares has not provided instructions on how to vote on a particular proposal) with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. All of the proposals currently expected to be brought before the Surface special meeting are “non-routine” matters under Nasdaq rules.

A “broker non-vote” occurs on an item when (i) a bank, broker or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders, but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares, and (ii) the beneficial owner fails to provide the bank, broker or other nominee with such instructions. Because all of the proposals currently expected to be voted on at the Surface special meeting are non-routine matters under Nasdaq rules for which brokers do not have discretionary authority to vote, Surface does not expect there to be any broker non-votes at the Surface special meetings.

 

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Why am I being asked to consider and vote on a proposal to approve, by non-binding advisory vote, the Merger-related compensation for Surface named executive officers (the Surface advisory compensation proposal)?

Under SEC rules, Surface is required to seek a non-binding advisory vote of its stockholders relating to the compensation that may be paid or become payable to Surface named executive officers that is based on or otherwise relates to the Mergers (also known as “golden parachute” compensation).

What happens if Surface stockholders do not approve, by non-binding advisory vote, the Merger-related compensation for Surface named executive officers (the Surface advisory compensation proposal)?

Because the vote on the proposal to approve the Surface advisory compensation proposal is advisory in nature, the outcome of the vote will not be binding upon Surface or the combined company. Accordingly, the Merger-related compensation, which is described under “Interests of Surface’s Directors and Executive Officers in the Mergers,” may be paid to Surface named executive officers even if Surface stockholders do not approve the Surface advisory compensation proposal.

What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in “street name”?

If your shares of Surface common stock are registered directly in your name with Surface’s transfer agent, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote directly at the Surface special meeting. You may also grant a proxy directly to Surface or to a third party to vote your shares at the Surface special meeting.

If your shares of Surface common stock are held by a bank, broker or other nominee, you are considered the beneficial owner of shares held in “street name.” Your bank, broker or other nominee will send you, as the beneficial owner, a package describing the procedures for voting your shares. You should follow the instructions provided by them to vote your shares. In order to virtually attend and vote at the Surface special meeting via the Surface special meeting website, you will need to obtain a specific control number and follow the other procedures provided by your bank, broker or other nominee.

If my shares of Surface common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote those shares for me?

No. Your bank, broker or other nominee will only be permitted to vote your shares of Surface common stock if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares. Under Nasdaq rules, banks, brokers and other nominees who hold shares of Surface common stock in “street name” for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are prohibited from exercising their voting discretion with respect to non-routine matters, which include all the proposals currently scheduled to be considered and voted on at the Surface special meetings. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokers and other nominees are not empowered to vote such shares.

The effect of not instructing your bank, broker or other nominee how you wish to vote your shares of Surface common stock will be the same as a vote “AGAINST” the Surface merger proposal, but will have no effect on the Surface advisory compensation proposal (assuming a quorum is present at the Surface special meeting) or the adjournment proposal. In addition, if a Surface stockholder who holds shares in “street name” through a bank, broker or other nominee provides voting instructions for one or more other proposals, but not for the Surface advisory compensation proposal or the Surface adjournment proposal, it will have no effect on such proposal.

 

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What should I do if I receive more than one set of voting materials for the same special meeting?

If you hold shares of Surface common stock in “street name” and also directly in your name as a stockholder of record or otherwise, or if you hold shares of Surface common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the Surface special meeting.

Record Holders. For shares held directly, please vote by proxy over the internet or telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, in order to ensure that all of your shares of Surface common stock are voted.

Shares in “street name.” For shares held in “street name” through a bank, broker or other nominee, you should follow the procedures provided by your bank, broker or other nominee to submit a proxy or vote your shares.

If a stockholder gives a proxy, how are the shares of Surface common stock voted?

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of Surface common stock in the way that you indicate. For each item before the Surface special meeting, you may specify whether your shares of Surface common stock should be voted for or against, or abstain from voting.

How will my shares of Surface common stock be voted if I return a blank proxy?

If you sign, date and return your proxy and do not indicate how you want your shares of Surface common stock to be voted, then your shares of Surface common stock will be voted in accordance with the recommendation of the Surface board of directors: “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal.

Can I change my vote after I have submitted my proxy?

Any Surface stockholder giving a proxy has the right to revoke the proxy and change their vote before the proxy is voted at the Surface special meeting by doing any of the following:

 

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subsequently submitting a new proxy (including over the internet or telephone) for the Surface special meeting that is received by the deadline specified on the accompanying proxy card;

 

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giving written notice of your revocation to Surface’s Corporate Secretary; or

 

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virtually attending and voting at the Surface special meeting via the Surface special meeting website.

Execution or revocation of a proxy will not in any way affect your right to virtually attend and vote at the applicable special meeting via the applicable special meeting website. Written notices of revocation and other communications relating to the revocation of proxies should be addressed:

Surface Oncology, Inc.

Attn: Corporate Secretary

cadams @surfaceoncology.com

50 Hampshire Street, 8th Floor

Cambridge, MA 02139

See “The Surface Special Meeting—Revocation of Proxies.”

 

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If I hold my shares in “street name,” can I change my voting instructions after I have submitted voting instructions to my bank, broker or other nominee?

If your shares are held in the name of a bank, broker or other nominee and you previously provided voting instructions to your bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee to revoke or change your voting instructions.

Where can I find the voting results of the Surface special meeting?

The preliminary voting results for the Surface special meeting are expected to be announced at the Surface special meeting. In addition, within four business days following certification of the final voting results, Surface will file the final voting results of its special meeting (or, if the final voting results have not yet been certified, the preliminary results) with the SEC on a Current Report on Form 8-K.

If I am a Surface stockholder and I oppose the Surface merger proposal or the Surface merger compensation advisory proposal, but all such proposals are approved, what are my rights?

Surface stockholders are entitled to appraisal rights under Section 262 of the DGCL, provided they satisfy the special criteria and conditions set forth in Section 262 of the DGCL. Surface common stock held by stockholders that do not vote for approval of the Mergers and make a demand for appraisal in accordance with the DGCL will not be converted into Coherus common stock, but will be converted into the right to receive from the combined company consideration determined in accordance with Delaware law.

For more information regarding dissenters’ or appraisal rights, please see “Appraisal Rights.”

Are there any risks that I should consider in deciding whether to vote for the approval of the Surface merger proposal?

Yes. You should read and carefully consider the risk factors set forth under “Risk Factors.” You also should read and carefully consider the risk factors relating to Coherus and Surface that are contained in the documents that are incorporated by reference in this proxy statement/prospectus.

What happens if I sell my shares of Surface common stock after the record date but before the Surface special meeting?

The Surface record date is earlier than the date of the Surface special meeting. If you sell or otherwise transfer your shares of Surface common stock after the record date but before the applicable special meeting, you will, unless special arrangements are made, retain your right to vote at the applicable special meeting.

Who will solicit and pay the cost of soliciting proxies?

Surface has engaged Innisfree M&A Incorporated (“Innisfree”) to assist in the solicitation of proxies for the Surface special meeting. Surface estimates that it will pay Innisfree a fee of approximately $60,000, plus reimbursement for certain out-of-pocket fees and expenses. Surface has agreed to indemnify Innisfree against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Surface also may be required to reimburse banks, brokers and other custodians, nominees and fiduciaries or their respective agents for their expenses in forwarding proxy materials to beneficial owners of Surface common stock. Surface directors, officers and employees also may solicit proxies by telephone, by electronic means or in person. They will not be paid any additional amounts for soliciting proxies.

When are the Mergers expected to be completed?

Subject to the satisfaction or waiver of the closing conditions described under “The Merger Agreement—Conditions to the Completion of the Mergers,” including approval of the Surface merger proposal

 

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by Surface stockholders, the Mergers are currently expected to be completed in the third quarter of the 2023 calendar year. However, neither Coherus nor Surface can predict the actual date on which the Mergers will be completed, or if the Mergers will be completed at all, because completion of the Mergers is subject to conditions and factors beyond the control of both companies. Coherus and Surface hope to complete the Mergers as soon as reasonably practicable.

What respective equity stakes will Coherus and Surface stockholders hold in the combined company immediately following the Mergers?

Based on the number of shares of Coherus and Surface common stock outstanding on July 21, 2023, the latest practicable date prior to the date of this proxy statement/prospectus, and assuming that the Surface Net Cash at Closing is approximately $20 million to $25 million, upon completion of the Mergers (without consideration of the shares of Coherus common stock underlying the CVRs), former Surface stockholders are expected to own approximately 11% to 12%, of the outstanding shares of Coherus common stock and Coherus stockholders immediately prior to the Mergers are expected to own approximately 88% to 89% of the outstanding shares of Coherus common stock. The relative ownership interests of Coherus stockholders and former Surface stockholders in the combined company immediately following the Mergers will depend on the number of shares of Coherus and Surface common stock issued and outstanding immediately prior to the Mergers.

How will I receive the Merger Consideration to which I am entitled?

If you hold your shares of Surface common stock in book-entry form, whether through The Depository Trust Company, or otherwise, you will not be required to take any specific actions to exchange your shares of Surface common stock for shares of Coherus common stock. Such shares will, following the Effective Time, be automatically exchanged for shares of Coherus common stock (in book-entry form) and cash in lieu of any fractional shares of Coherus common stock to which you are entitled. If you instead hold your shares of Surface common stock in certificated form, then, after receiving the proper documentation from you following the effective time, the Exchange Agent will deliver to you the shares of Coherus common stock (in book-entry form) and cash in lieu of any fractional shares of Coherus common stock to which you are entitled. See “The Merger Agreement—Exchange of Shares.”

What are the U.S. federal income tax consequences of the Mergers to holders of Surface common stock?

Coherus, the Merger Subs and Surface intend that the First Merger and the Second Merger be considered together as a single integrated transaction for U.S. federal income tax purposes, and will together constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”). Assuming the Mergers so qualify, U.S. holders will recognize no gain or loss with respect to the exchange of Surface common stock for Coherus common stock, although, as discussed more fully under “Certain U.S. Federal Income Tax Considerations Relating to the Mergers,” the U.S. federal income tax treatment of the CVRs and payments, if any, made under the CVRs is subject to substantial uncertainty. However, there are significant factual and legal uncertainties as to whether the Mergers qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Moreover, it is not a condition to Coherus’ or Surface’s obligations to complete the transactions that the Merger so qualify. None of the parties to the Merger Agreement have sought or intend to seek any ruling from the IRS regarding the qualification of the Mergers as a reorganization within the meaning of Section 368(a) of the Code. If the Mergers do not qualify for the U,S. federal income tax treatment described herein, the U.S. holders generally would recognize gain or loss for U.S. federal income tax purposes on each share of Surface common stock surrendered in the Mergers.

See “Certain U.S. Federal Income Tax Considerations Relating to the Mergers” for a more complete description of U.S. federal income tax considerations relating to the Mergers for holders of shares of Surface common stock. You are urged to consult your tax advisors with respect to such uncertainty and the specific consequences of the Mergers to you.

 

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What should I do now?

You should read this proxy statement/prospectus carefully and in its entirety, including the annexes. Then, you may vote by proxy over the internet or telephone using the instructions included with the accompanying proxy card, or promptly complete your proxy card and return it in the enclosed postage-paid envelope, so that your shares will be voted in accordance with your instructions.

How can I find more information about Coherus and Surface?

You can find more information about Coherus and Surface from various sources described under “Where You Can Find More Information.”

Whom do I call if I have questions about the Surface special meeting or the Mergers?

If you have questions about the Surface special meeting or the Mergers, or desire additional copies of this proxy statement/prospectus or additional proxies, you may contact your company’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders May Call: (877) 717-3904 (toll-free from the U.S. and Canada)

Banks and Brokers May Call: (212) 750-5833

 

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RISK FACTORS

In considering how to vote on the proposals to be considered and voted on at the Surface special meeting, you are urged to carefully consider all of the information contained or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.” You should also read and consider the risks associated with each of the businesses of Coherus and Surface because those risks will affect the combined company. The risks associated with the business of Coherus can be found in Coherus’ Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the risks associated with the business of Surface can be found in Surface’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Surface’s Amendment No. 1 to its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (excluding any information and exhibits furnished under Item 2.02 or 7.01 thereof), each of which is incorporated by reference in this proxy statement/prospectus. In addition, you are urged to carefully consider the following material risks relating to the Mergers and the businesses of Coherus, Surface and the combined company.

Risks Relating to the Mergers

Because the Exchange Ratio depends on Surface Net Cash at the Closing and will not be adjusted in the event of any change in the price of either Coherus common stock or Surface common stock, and because of the uncertainty of the value of, and the ultimate realization on, the CVRs, the value of the Merger Consideration that Surface stockholders will receive in the Mergers is uncertain.

Upon completion of the First Merger, each share of Surface common stock that is issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive, without interest, (a) a number of shares of Coherus common stock equal to the Exchange Ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash, determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the VWAP for the five trading days through and including June 15, 2023), by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement, and if applicable, cash in lieu of fractional shares (without interest and less any applicable withholding taxes), and (b) one CVR representing the right to receive the CVR Payment Amount, all as described in “The Merger Agreement—Merger Consideration.”

Pursuant to the Merger Agreement, the amount of Surface Net Cash used to calculate the Exchange Ratio is subject to certain adjustments and reductions, including, without limitation, with respect to short- and long-term liabilities, unpaid fees and expenses related to the Mergers, the cash cost of unpaid change of control payments, severance, termination or similar payments that become due in connection with the Mergers, the cash cost of unpaid time off, bonuses, deferred compensation and similar liabilities owed to Surface’s current and former officers, employees, independent contractors, consultants and directors, certain payroll and withholding taxes, unpaid retention amounts due under insurance policies, and notice and termination payments under specified contracts. The amount of Surface Net Cash will be increased by the expected cost of the D&O insurance policy, prepaid chemistry, manufacturing and controls (“CMC”), prepaid clinical and other receivables and certain other payment amounts as agreed between Surface and Coherus in the Merger Agreement. The calculation of Surface Net Cash is described in more detail in “The Merger Agreement—Surface Net Cash.”

Coherus and Surface will calculate Surface Net Cash as of the Anticipated Closing Date (as defined in “The Merger Agreement—Calculation of Surface Net Cash”), or the other applicable dates of determination set forth in the Merger Agreement. In the event that the amount of Surface Net Cash is less than anticipated, the Exchange Ratio will be reduced and Surface’s stockholders will receive fewer shares of Coherus common stock. Further, the Merger Agreement includes a closing condition that requires Surface to deliver a minimum net cash of $19,600,000 at Closing. If the amount of Surface Net Cash falls below this threshold, Coherus would not be

 

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obligated to, but may in its sole discretion elect to, complete the Mergers, which would further reduce the number of shares of Coherus common stock issued in connection with the Mergers.

The market prices of Coherus common stock and Surface common stock have fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Surface special meeting, and through the date the First Merger is consummated. Given that the price per share of Coherus common stock used in the calculation of the Exchange Ratio was fixed upon the execution of the Merger Agreement, the Exchange Ratio will not be adjusted for changes in the market price of either Coherus common stock or Surface common stock prior to the completion of the Mergers.

Moreover, the CVRs are non-transferable and there is uncertainty regarding the value of the CVRs and whether any payment will ultimately be realized on the CVRs, as further described in more detail in the “Contingent Value Rights Agreement.”

Because the value of the Merger Consideration will depend on the market price of Coherus common stock at the time the First Merger is completed and the ultimate realization of the CVRs, Surface stockholders will not know or be able to determine at the time of the Surface special meeting the market value of the Merger Consideration they will receive upon completion of the Mergers.

Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Coherus’ or Surface’s respective businesses, operations and prospects, the uncertainty as to the extent of the duration, scope and impact of the COVID-19 pandemic, market assessments of the likelihood that the Mergers will be completed, interest rates, general market, industry and economic conditions and other factors generally affecting the respective prices of Coherus common stock and Surface common stock, federal, state and local legislation, governmental regulation and legal developments in the industry segments in which Coherus and Surface operate, and the timing of the Mergers. Many of these factors are beyond the control of Coherus and Surface, and neither Coherus nor Surface is permitted to terminate the Merger Agreement solely due to a decline in the market price of the common stock of the other party. You are urged to obtain current market quotations for Coherus common stock and Surface common stock in determining whether to vote in favor of the Surface merger proposal.

The market price of Coherus common stock will continue to fluctuate after the Mergers.

Upon completion of the Mergers, Surface stockholders will become holders of Coherus common stock. The market price of the common stock of the combined company will continue to fluctuate, potentially significantly, following completion of the Mergers, including for the reasons described above. As a result, former Surface stockholders could lose some or all of the value of their investment in Coherus common stock. In addition, any significant price or volume fluctuations in the stock market generally could have a material adverse effect on the market for, or liquidity of, the Coherus common stock received in the Mergers, regardless of the combined company’s actual operating performance.

The Mergers may not be completed and the Merger Agreement may be terminated in accordance with its terms.

The Mergers are subject to a number of conditions that must be satisfied, including the approval by Surface stockholders of the Surface merger proposal, or waived (to the extent permitted), in each case prior to the completion of the First Merger. These conditions are described under “The Merger Agreement—Conditions to the Completion of the Mergers.” These conditions to the completion of the Mergers, some of which are beyond the control of Coherus and Surface, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Mergers may be delayed or not completed.

 

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Additionally, either Coherus or Surface may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Mergers are not completed by the Termination Date. In addition, if the Merger Agreement is terminated under specified circumstances, including if the Surface board of directors authorizes entry into a definitive agreement relating to a superior proposal, Surface will be required to pay a termination fee to Coherus equal to $2.0 million, less the amount of previously paid Coherus transaction expenses up to $500,000, if any. See “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Termination Fees” for a more complete discussion of the circumstances under which the Merger Agreement could be terminated and when a termination fee may be payable by Surface.

The Mergers may be completed even if certain events occur prior to the Closing that materially and adversely affect Coherus and Surface.

In general, either party can refuse to complete the Mergers if there is a material adverse change affecting the other party between the signing date of the Merger Agreement and the Closing. However, certain types of changes do not permit either party to refuse to complete the Mergers, even if such change could have a material adverse effect on Coherus or Surface, including, subject to certain exceptions, among others:

 

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changes in general economic or business conditions or in the financial, debt, banking, capital, credit or securities markets, or in interest or exchange rates;

 

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changes or conditions generally affecting the industries in which either company and its subsidiaries operate;

 

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changes in the price or trading volume of Coherus’ or Surface’s stock;

 

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political, geopolitical, social or regulatory conditions;

 

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any natural disasters or calamities, weather conditions including hurricanes, floods, tornados, tsunamis, earthquakes and wildfires, epidemics, pandemics or public health emergencies or other force majeure events, or any escalation or worsening of such conditions;

 

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changes in law or GAAP;

 

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any failure by either company to meet any internal or published projections, forecasts, estimates or predictions in respect of the revenues, earnings or other financial or operating metrics for any period;

 

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any action taken (or omitted to be taken) by either company, or which the companies cause to be taken by any of their subsidiaries, in each case which is expressly required by the Merger Agreement or at the express written request of Coherus;

 

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the announcement or pendency of the Merger Agreement and the Mergers, including the initiation of litigation by any person with respect to the Merger Agreement, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, partners or employees of the parties and their subsidiaries due to the announcement or consummation of the Mergers; or

 

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changes in regulatory, preclinical or clinical, competitive, pricing, reimbursement or manufacturing events, or any effects relating to or affecting any products or product candidates of the companies or any product or product candidate competitive with or related to any products or products candidates of the companies, including any results, outcomes, data, adverse events, side effects (including toxicity) or safety observations related to or arising from any preclinical or clinical studies, trials or tests with respect to any products or product candidates of the companies or any product or product candidate competitive with or related to any products or product candidates of the companies, or announcements of any of the foregoing (provided, that in the case of Surface, if any of the foregoing effects result in or are related to the FDA revoking the investigational new drug application for any product or product candidate of a party, then such changes, effects, and revocation shall be taken into account when determining whether there has been a material adverse effect with respect to such party).

 

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If one or more material adverse changes occur and Coherus and Surface still complete the Mergers, the stock price of the combined company following the Closing may suffer. This in turn may reduce the value of the shares of Coherus common stock to the stockholders of the combined company.

The termination of the Merger Agreement could negatively impact Coherus or Surface and the trading prices of Coherus common stock or Surface common stock.

If the Mergers are not completed for any reason, including because Surface stockholders fail to approve the Surface merger proposal, the ongoing businesses of Coherus and Surface may be adversely affected and, without realizing any of the expected benefits of having completed the Mergers, Coherus and Surface would be subject to a number of risks, including the following:

 

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each company may experience negative reactions from the financial markets, including negative impacts on its stock price;

 

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each company may experience negative reactions from its customers, suppliers, distributors and employees;

 

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each company will be required to pay its respective costs relating to the Mergers, such as financial advisory, legal, financing and accounting costs and associated fees and expenses, whether or not the Mergers are completed;

 

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the possibility that Surface will be unable to fund another potential strategic partner and, as a result, elects to liquidate and dissolve its business;

 

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the Merger Agreement places certain restrictions on the conduct of each company’s business prior to completion of the Mergers and such restrictions, the waiver of which is subject to the consent of the other company (not to be unreasonably withheld, conditioned or delayed), which may have prevented Coherus and Surface from taking actions during the pendency of the Mergers that would have been beneficial (see “The Merger Agreement—Conduct of Business Prior to the Mergers’ Completion” for a description of the restrictive covenants applicable to Coherus and Surface); and

 

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matters relating to the Mergers (including integration planning) will require substantial commitments of time and resources by Coherus and Surface management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to Coherus or Surface, as applicable, as an independent company.

In addition, if the Mergers are not completed, Coherus or Surface could be subject to litigation related to any failure to complete the Mergers or to perform their respective obligations under the Merger Agreement. If the Mergers are not completed, Coherus and Surface cannot assure their stockholders that these risks will not materialize and will not materially affect the business, financial results and stock prices of Coherus or Surface.

The market price for shares of Coherus common stock may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of Coherus common stock or Surface common stock.

Upon consummation of the Mergers, holders of Surface common stock will become holders of Coherus common stock. Coherus’ business differs from that of Surface in certain respects, and, accordingly, the financial position and results of operations of Coherus after the Mergers, as well as the market price of shares of Coherus common stock, may be affected by factors that are different from those currently or historically affecting the financial position and results of operations of Surface. The results of operations of the combined company may also be affected by factors different from those that currently affect or have historically affected either Coherus or Surface. In addition, the stock market has experienced significant price and volume fluctuations in recent times, which, if they continue to occur, could have a material adverse effect on the market for, or liquidity of, Coherus common stock, regardless of Coherus’ actual operating performance. For a discussion of the businesses

 

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of each of Coherus and Surface and some important factors to consider in connection with those businesses, see “The Parties to the Mergers” and the other information contained or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”

The shares of common stock of the combined company to be received by Surface stockholders as a result of the Mergers will have rights different from the shares of Surface common stock.

Upon completion of the Mergers, Surface stockholders will no longer be stockholders of Surface, but will instead become stockholders of Coherus. As Coherus and Surface are both Delaware corporations, the rights of Coherus and Surface stockholders are not materially different. However, there are certain differences in the rights of Coherus stockholders under the Coherus charter and Coherus bylaws, and of Surface stockholders under the Surface charter and Surface bylaws. See “Comparison of Stockholders’ Rights” for a discussion of these rights.

After the Mergers, Surface stockholders will have a significantly lower ownership and voting interest in Coherus than they currently have in Surface and will exercise less influence over management and policies of the combined company.

After completion of the Mergers, the current securityholders of Surface will own a smaller percentage of the combined company than their ownership of Surface prior to the Mergers. Based on the number of shares of Coherus and Surface common stock outstanding on July 21, 2023, the latest practicable date prior to the date of this proxy statement/prospectus, and assuming that the Surface Net Cash at Closing is approximately $20 million to $25 million, upon completion of the Mergers (without consideration of the shares of Coherus common stock underlying the CVRs), former Surface stockholders are expected to own approximately 11% to 12%, of the outstanding shares of Coherus common stock (without consideration of any potential shares of Coherus common stock underlying the CVRs) and Coherus stockholders immediately prior to the Mergers are expected to own approximately 88% to 89%, of the outstanding shares of Coherus common stock. Consequently, former Surface stockholders will have less influence over the management and policies of the combined company than they currently have over the management and policies of Surface.

Until the completion of the Mergers or the termination of the Merger Agreement in accordance with its terms, Coherus and Surface are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Coherus, Surface and/or their respective stockholders.

From and after the date of the Merger Agreement and prior to completion of the Mergers, the Merger Agreement restricts Coherus and Surface from taking specified actions without the consent of the other party and requires that the business of each company and its respective subsidiaries be conducted in the ordinary course in all material respects. These restrictions may prevent Coherus or Surface, as applicable, from taking actions during the pendency of the Mergers that would have been beneficial. Adverse effects arising from these restrictions during the pendency of the Mergers could be exacerbated by any delays in consummation of the Mergers or termination of the Merger Agreement. See “The Merger Agreement—Conduct of Business Prior to Completion of the Mergers.”

Obtaining required approvals and satisfying Closing conditions may prevent or delay completion of the Mergers.

The Mergers are subject to a number of Closing conditions as specified in the Merger Agreement. These Closing conditions include, among others:

 

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approval by Surface stockholders of the Surface merger proposal;

 

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the absence of restraining orders, injunctions or other judgments, orders or decrees issued by any court of competent jurisdiction or other legal restraint or prohibition remaining in effect, and no law having been enacted, entered, promulgated or enforced by any governmental entity that, in any case, prohibits or makes illegal the consummation of the Mergers or the other transactions contemplated by the Merger Agreement;

 

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the effectiveness of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, under the Securities Act and the absence of any stop order suspending the effectiveness of the Form S-4 that has not been withdrawn; and

 

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the execution by Coherus and the Rights Agent of the CVR Agreement, which shall be in full force and effect.

The obligation of each of Coherus and Surface to consummate the Mergers is also conditioned on, among other things, the truth and accuracy of the representations and warranties made by the other party on the date of the Merger Agreement and on the Closing Date (subject to certain materiality and material adverse effect qualifiers), the performance by the other party in all material respects of its obligations under the Merger Agreement, and there having been no effect that, individually or in the aggregate, may result in, together with all other effects, has constituted or resulted in, or would reasonably be expected to constitute or result in, a material adverse effect. No assurance can be given that the required Surface stockholder approval will be obtained or that the required conditions to Closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Mergers could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that Coherus and Surface expect to achieve if the Mergers are successfully completed within the parties’ expected time frame. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Mergers, see “The Merger Agreement—Conditions to the Completion of the Mergers.”

The Mergers, and uncertainty regarding the Mergers, may cause customers, suppliers, distributors or strategic partners to delay or defer decisions concerning Coherus or Surface and adversely affect each company’s ability to effectively manage its respective business.

The Mergers will happen only if the stated Closing conditions are met, including the approval of the Surface merger proposal, among other conditions. Many of the conditions are beyond the control of Coherus and Surface, and both parties also have certain rights to terminate the Merger Agreement. Accordingly, there may be uncertainty regarding the completion of the Mergers. This uncertainty may cause customers, suppliers, distributors, vendors, strategic partners or others that deal with Coherus or Surface to delay or defer entering into contracts with Coherus or Surface or making other decisions concerning Coherus or Surface or seek to change or cancel existing business relationships with Coherus or Surface, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have an adverse impact on the respective businesses of Coherus and Surface, regardless of whether the Mergers are ultimately completed.

In addition, the Merger Agreement restricts Coherus, Surface and each company’s respective subsidiaries from taking certain actions during the pendency of the Mergers without the consent of the other party. These restrictions may prevent Coherus and Surface from pursuing attractive business opportunities or strategic transactions that may arise prior to the completion of the Mergers. See “The Merger Agreement—Conduct of Business Prior to the Completion of the Mergers” for a description of the restrictive covenants to which each of Coherus and Surface is subject.

The Merger Agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with Surface.

The Merger Agreement contains “no solicitation” provisions that restrict the ability of Surface to, among other things (each as described under “The Merger Agreement—No Solicitation of Acquisition Proposals”):

 

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initiate, solicit, endorse, assist, induce, facilitate or encourage (including by providing information) any inquiries, proposals or offers with respect to, or the making, submission, announcement or completion of, any inquiry, proposal or offer that constitutes, or would be reasonably expected to lead to, an acquisition proposal;

 

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enter into, continue or otherwise engage or participate in any negotiations or discussions with any person other than Coherus, the Merger Subs and their respective affiliates and representatives concerning any acquisition proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any acquisition proposal;

 

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furnish, provide or cause to be furnished or provided any non-public information or data relating to Surface or any of its subsidiaries in connection with, or for the purpose of soliciting, initiating, encouraging or facilitating, or in response to, any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to, an acquisition proposal;

 

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execute or enter into any letter of intent or any other contract contemplating an acquisition proposal (other than a confidentiality agreement to the extent permitted under the Merger Agreement); or

 

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resolve or agree or propose to do any of the foregoing.

Furthermore, there are only limited exceptions to the requirement under the Merger Agreement that the Surface board of directors not withdraw, change, qualify, withhold, amend or modify in any way adverse to Coherus the Surface recommendation (as defined under “The Merger Agreement—No Change of Recommendation”). Although the Surface board of directors is permitted to effect a change of recommendation, after complying with certain procedures set forth in the Merger Agreement, in response to a superior proposal or to an intervening event (if the Surface board of directors determines in good faith, after consultation with its outside legal counsel and financial advisor, that, in light of such superior proposal or intervening event, a failure to effect a change of recommendation would reasonably be expected to be inconsistent with the Surface board of directors’ fiduciary duties to its stockholders under applicable law), such change of recommendation would entitle Coherus to terminate the Merger Agreement and collect a termination fee from Surface. See “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Termination Fees.”

These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the Exchange Ratio, or might result in a potential competing acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the Mergers.

The success of the Mergers will depend, in part, on the combined company’s ability to retain the talents and dedication of the professionals currently employed by Coherus and Surface. It is possible that these employees may decide not to remain with Coherus or Surface, as applicable, while the Mergers are pending, or with the combined company. If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Coherus and Surface to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, Coherus and Surface may not be able to locate suitable replacements for any key employees that leave either company or offer employment to potential replacements on reasonable terms. In addition, there could be disruptions to or distractions for the workforce and management, including disruptions associated with integrating employees into the combined company. No assurance can be given that the combined company will be able to attract or retain key employees of Coherus and Surface to the same extent that those companies have been able to attract or retain their own employees in the past.

Surface directors and executive officers have interests and arrangements that may be different from, or in addition to, those of Surface stockholders generally.

When considering the recommendations of the Surface board of directors on how to vote on the proposals described in this proxy statement/prospectus, Surface stockholders should be aware that Surface directors and

 

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executive officers have interests in the Mergers that are different from, or in addition to, those of Surface stockholders generally. These interests include the treatment in the Mergers of outstanding equity, equity-based and incentive awards, severance arrangements, change of control benefits, other compensation and benefit arrangements, and the right to continued indemnification of former Surface directors and officers by the combined company.

Surface stockholders should be aware of these interests when they consider the recommendation of the Surface board of directors that they vote to approve the Surface merger proposal. The Surface board of directors was aware of and considered these interests when it determined that the Mergers were fair to and in the best interests of Surface and its stockholders, approved and declared advisable the Merger Agreement, and recommended that Surface stockholders adopt the Merger Agreement. The interests of Surface directors and executive officers are described in more detail under “Interests of Surface’s Directors and Executive Officers in the Mergers.”

The opinion rendered to Surface from its financial advisor will not reflect changes in circumstances between the date of such opinion and the completion of the Mergers.

Wedbush Securities Inc. (“Wedbush”) delivered its oral opinion to the Surface board of directors on June 15, 2023, which opinion was subsequently confirmed in a written opinion dated as of June 15, 2023, that as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of review undertaken as set forth in the written opinion, the Exchange Ratio and CVRs pursuant to the Merger Agreement was fair, from a financial point of view, to the holders of Surface common stock.

Surface has not obtained and will not obtain an updated opinion from Wedbush regarding the fairness, from a financial point of view, of the Merger Consideration, Exchange Ratio or CVRs, including as of the date of this proxy statement/prospectus or of the Surface special meeting, or prior to the completion of the Mergers. The opinion of Wedbush was necessarily based on general financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to Wedbush only as of the date of the opinion of Wedbush, and such opinion does not address the fairness of the Merger Consideration, Exchange Ratio or CVRs, from a financial point of view, at the time the Mergers are completed. Changes in the operations and prospects of Coherus or Surface, general financial, economic, monetary, market and other conditions, circumstances and factors that may be beyond the control of Coherus and Surface, and on which the opinion of Wedbush was based, may alter the value of Coherus or Surface or the prices of shares of Coherus or Surface common stock by the time the Mergers are completed and therefore, material differences could result between the estimated fair values of what Coherus acquires in the Mergers, compared to the purchase consideration actually paid. See “Unaudited Pro Forma Condensed Combined Financial Information.” The opinion of Wedbush does not speak as of any date other than the date of such opinion. The recommendation of the Surface board of directors that Surface stockholders vote “FOR” the Surface merger proposal and “FOR” the Surface adjournment proposal are each made as of the date of this proxy statement/prospectus. For a description of the opinion that Surface received from its financial advisors, see “The Mergers—Opinion of Surface’s Financial Advisor.”

Whether or not the Mergers are completed, the announcement and pendency of the Mergers could cause disruptions in the businesses of Coherus and Surface, which could have an adverse effect on each company’s respective businesses and financial results.

Whether or not the Mergers are completed, the announcement and pendency of the Mergers could cause disruptions in the businesses of Coherus and Surface, including by diverting the attention of Coherus and Surface management toward the completion of the Mergers. In addition, Coherus and Surface have each diverted significant management resources in an effort to complete the Mergers and are each subject to restrictions contained in the Merger Agreement on the conduct of their respective businesses. If the Mergers are not

 

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completed, Coherus and Surface will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.

Coherus or Surface may waive one or more of the closing conditions without re-soliciting Surface stockholder approval.

To the extent permitted by law, Coherus or Surface may determine to waive, in whole or part, one or more of the conditions to their respective obligations to consummate the Mergers. Surface currently expects to evaluate the materiality of any waiver and its effect on Surface stockholders in light of the facts and circumstances at the time to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination as to whether to waive any condition to the Mergers, and as to whether to re-solicit Surface stockholder approval and/or amend this proxy statement/prospectus as a result of such waiver, will be made by Surface at the time of such waiver based on the facts and circumstances as they exist at that time.

The Mergers will involve substantial costs.

Coherus and Surface have incurred and expect to incur non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the Mergers. As of the date of this proxy statement/prospectus, Coherus and Surface estimate that their aggregate costs associated with the Mergers and related transactions will be approximately $5.4 million and $5.4 million, respectively. These costs include filing and registration fees with the SEC, printing and mailing costs associated with this proxy/registration statement, and legal, accounting, investment banking, consulting, public relations and proxy solicitation fees. These costs do not include severance and retention payments that may be made to certain Surface employees and costs that will be incurred in connection with the integration of Coherus’ and Surface’s businesses. Some of these costs are payable by Coherus or Surface regardless of whether the Mergers are completed.

The combined company will also incur restructuring and integration costs in connection with the Mergers. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either Coherus or the combined company. There are processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Mergers and the integration of Surface’s business. Although Coherus expects that the elimination of duplicative costs, strategic benefits and additional income, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and restructuring costs related to the Mergers over time, any net benefit may not be achieved in the near term or at all. Many of these costs will be borne by Coherus even if the Mergers are not completed. While Coherus has assumed that certain expenses would be incurred in connection with the Mergers and the other transactions contemplated by the Merger Agreement, there are many factors beyond Coherus’ control that could affect the total amount or the timing of the integration and implementation expenses.

Due to the Mergers, the ability of Coherus to use Surface’s net operating losses to offset future taxable income may be restricted and these net operating losses could expire or otherwise be unavailable.

As of December 31, 2022, Surface had federal and state net operating loss carryforwards (“NOLs”) of $93.8 million and $155.9 million, respectively. In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-ownership change NOLs to offset future taxable income. As of December 31, 2022, Surface had not completed a Section 382 limitation study. In the absence of a Section 382 limitation study, there is uncertainty as to whether Surface’s existing NOLs are subject to limitations, and, if the Mergers are completed, Surface’s existing NOLs may be subject to additional limitations. In addition, if Coherus undergoes any subsequent ownership change, its ability to utilize NOLs would be limited.

 

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If the Mergers do not qualify as a reorganization under the Code, the holders of Surface common stock may be taxed on the full amount of the Merger Consideration.

As discussed more fully under “Certain U.S. Federal Income Tax Considerations Relating to the Mergers,” the Mergers are intended to be considered together as a single integrated transaction for U.S. federal income tax purposes that qualifies for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Mergers so qualify, U.S. holders will recognize no gain or loss with respect to the exchange of Surface common stock for Coherus common stock, although, as discussed more fully under “Certain U.S. Federal Income Tax Considerations Relating to the Mergers,” the U.S. federal income tax treatment of the CVRs and payments, if any, made under the CVRs is subject to substantial uncertainty. However, there are significant factual and legal uncertainties as to whether the Mergers qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Moreover, it is not, a condition to Coherus’ or Surface’s obligation to complete the transactions that the Mergers so qualify. None of the parties to the Merger Agreement have sought or intend to seek any ruling from the IRS regarding the qualification of the Mergers as a reorganization within the meaning of Section 368(a) of the Code. If the Mergers do not qualify for the U.S. federal income tax treatment described herein, the U.S. holders generally would recognize gain or loss for U.S. federal income tax purposes on each share of Surface common stock surrendered in the Mergers.

If Surface does not successfully consummate the Mergers or another strategic transaction, the Surface board of directors may decide to pursue a dissolution and liquidation of Surface. In such an event, the amount of cash available for distribution to Surface’s stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which Surface can give you no assurance.

There can be no assurance that the Mergers will be completed. If the Mergers are not completed, the Surface board of directors may decide to pursue a dissolution and liquidation of Surface. In such an event, the amount of cash available for distribution to Surface’s stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Surface funds its operations while pursuing the Mergers. In addition, if the Surface board of directors were to approve and recommend, and Surface’s stockholders were to approve, a dissolution and liquidation of the company, Surface would be required under Delaware corporate law to pay Surface’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Surface’s commitments and contingent liabilities may include obligations under Surface’s employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the company, litigation against Surface, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of Surface’s assets would need to be reserved pending the resolution of such obligations.

In addition, Surface may be subject to litigation or other claims related to a dissolution and liquidation of Surface. If a dissolution and liquidation were to be pursued, the Surface board of directors, in consultation with Surface’s advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Surface common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up of the company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Surface’s stockholders.

Surface’s management has expressed substantial doubt about its ability to continue as a going concern.

Surface’s management has expressed substantial doubt about its ability to continue as a going concern, and Surface’s auditors’ report to its December 31, 2022 financial statements includes an explanatory paragraph that expressed substantial doubt about Surface’s ability to continue as a going concern. Surface’s current cash level raises substantial doubt about its ability to continue as a going concern. Additionally, Surface’s management has

 

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independently determined that there is substantial doubt about Surface’s ability to continue as a going concern because its cash flows generated from operations may not be sufficient to meet its current operating costs. In addition, Surface’s future financial statements may include similar qualifications about its ability to continue as a going concern. Surface’s financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. If Surface is unable to meet its current operating costs, Surface would need to seek additional financing or modify or cease its operational plans. If Surface seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to Surface on commercially reasonable terms or at all.

Surface is substantially dependent on Surface’s remaining employees to facilitate the consummation of the Mergers.

Surface’s ability to consummate a strategic transaction depends upon its ability to retain its employees required to consummate such a transaction, the loss of whose services may adversely impact the ability to consummate such transaction. In June 2023, Surface undertook an organizational restructuring that significantly reduced its workforce in order to conserve its capital resources. As of July 1, 2023, Surface had only 35 full-time employees. Surface’s ability to successfully complete the Mergers depends in large part on Surface’s ability to retain certain remaining personnel. Despite Surface’s efforts to retain these employees, one or more may terminate their employment with Surface on short notice. Surface’s cash conservation activities may yield other unintended consequences, such as attrition beyond its planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment. The loss of the services of certain employees could potentially harm Surface’s ability to consummate the Mergers and to run Surface’s day-to-day business operations, as well as to fulfill Surface’s reporting obligations as a public company.

Risks Relating to the CVRs

You may not receive any payment on the CVRs.

Coherus will not make any payments in respect of the CVRs if the Net CVR Payments during the applicable payment period are less than $0.00. The amount of Net CVR Payments for a fiscal quarter depends on the receipt by Coherus or its affiliates following Closing of milestone- and royalty-based payments under the covered agreements. There can be no assurance that any payments will be received under the existing covered agreements with GSK or Novartis, or that Coherus or any of its affiliates will enter into covered agreements for the development, manufacture or commercialization of SRF114 or SRF388 in any market outside of the United States. Further, in the calculation of the Net CVR Payment amount for any applicable payment period, any payments received by Coherus or its affiliates under any of the covered agreements will be offset by the amount of any permitted deductions applicable to the fiscal quarter during which the payments were received. For a description of the calculation of the Net CVR Payments under the CVRs, see “The Contingent Value Rights Agreement—CVR Payment Amount and Net CVR Payment.”

Accordingly, if during the CVR Term no payments are received under the covered agreements, or if the permitted deductions exceed the amount of any payments under the covered agreements, no payment will be made under the CVRs, and the CVRs will expire valueless. Accordingly, the value, if any, of the CVRs is speculative, and the CVRs may ultimately have no value.

Coherus and its affiliates may exercise discretion with respect to the research, development and commercialization of the SRF114 and SRF388 programs, which could have an adverse effect on the value, if any, of the CVRs.

During the CVR Term, Coherus and its affiliates will have the right, in their sole and absolute discretion, to direct and control the research, development and commercialization of the SRF114 program and SRF388

 

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program following the Closing. Coherus and its affiliates are not required to continue or institute any clinical trials or seek regulatory approval for either SRF114 or SRF388, or commence any sales of either product, all in Coherus’ sole discretion. Coherus and its affiliates will not have any liability to any CVR holder if Coherus or its affiliates do not execute and enter into any covered agreements for SRF114 or SRF388. Further, following a determination by the Coherus board of directors (exercising its business judgment in good faith), Coherus may terminate the SRF114 and SRF388 programs, in whole or in part. If Coherus and its affiliates are not able to develop and commercialize SRF114 or SRF388, or if Coherus does not commence sales of the related products or terminates the related programs, in whole or in part, the value of the CVRs would be adversely affected.

A portion of the value of the CVRs depends on the performance by GSK and Novartis under the applicable covered agreements, and their failure to develop and commercialize the products contemplated by the applicable covered agreements would have an adverse effect on the value, if any, of the CVRs.

Following the Mergers, Coherus and its affiliates will continue to be entitled to milestone- and royalty-based payments, if any, from GSK and Novartis under the applicable covered agreements. Through December 31, 2022, Surface had received an aggregate of $150.0 million from Novartis in upfront payments, milestone payments, and option purchase payments, and in March 2022, GSK initiated a Phase 1 clinical trial of GSK4381562, triggering a $30.0 million milestone payment, in addition to the one-time upfront payment from GSK of $85.0 million. However, there can be no assurance that GSK or Novartis will successfully complete the development and commercialization of the related products and that any future milestone- or royalty-based payments will be received under these covered agreements. See “The Contingent Value Rights Agreement.”

The CVRs are non-transferable and, therefore, the value of the CVRs is only realizable to the extent that the Net CVR Payments during the CVR Term are greater than $0.00.

Holders of the CVRs are not permitted to sell, assign, transfer, pledge, encumber or in any other manner dispose of the CVRs, in whole or in part, other than in certain highly limited circumstances specified in the CVR Agreement. As a result of this non-transferability, holders of the CVRs will realize value from the CVRs only if the amount of Net CVR Payments during the CVR Term is greater than $0.00. See “The Contingent Value Rights Agreement.”

Coherus may elect the form of CVR Payment, cash and stock payments under the CVRs may be limited, and certain CVR payments may not actually be payable, even if the Net CVR Payments are realized by Coherus.

Coherus may pay the CVR Payment Amounts, if any, in cash, by the issuance of additional shares of Coherus common stock or by a combination of cash and the issuance of additional shares of Coherus common stock. Coherus may determine the method of payment in its sole discretion. See “The Contingent Value Rights Agreement—Form of Payment; Certain Limitations.”

If, in the good faith reasonable judgment of Coherus, the aggregate value of the consideration under the Merger Agreement paid in shares of Coherus common stock and amounts paid under the CVR Agreement in shares of Coherus common stock is not at least equal to the Reorg Threshold, then Coherus may not make further cash payments under the CVR Agreement. As a result, to satisfy the Reorg Threshold, the portion of the CVR Payment Amounts paid in Coherus common stock would increase, and the cash payments would be decreased.

Additionally, Coherus will not be required to pay any CVR Payment Amounts by the issuance of Coherus common stock, including if cash payments are prohibited as a result of the Reorg Threshold, if the stock issuance would be a Prohibited CVR Payment. If the payment of any CVR Payment Amounts in Coherus common stock would result in a Prohibited CVR Payment, the Acting Holders may request that Coherus seek to obtain the stockholder approval required to issue Coherus common stock necessary for the Prohibited CVR Payment, in which case Coherus must use commercially reasonable efforts to obtain the required stockholder approval. However, Coherus is not required to obtain the required stockholder approval if the Coherus board of directors

 

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determines in good faith that taking such actions would be materially detrimental to Coherus. The Prohibited CVR Payment will not be payable under the CVR Agreement unless and until the Coherus stockholders approve the Prohibited CVR Payment. If the Acting Holders do not exercise their right to require Coherus to seek stockholder approval of a Prohibited CVR Payment, or if the Coherus stockholders reject or fail to approve the Prohibited CVR Payment, no portion of the related Prohibited CVR Payments will be payable under the CVR Agreement, which would have an adverse effect on the value of the CVRs.

The U.S. federal income tax treatment of the CVRs is subject to substantial uncertainty.

The treatment of the CVRs and payments, if any, made under the CVRs for U.S. federal income tax purposes is subject to substantial uncertainty. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of the CVRs pursuant to the Mergers and payments, if any, made under the CVRs. Accordingly, the amount of gain a holder of Surface common stock that is subject to U.S. federal income taxation recognizes, and the timing and character of such gain, with respect to the CVRs is uncertain.

Whether contingent payment rights with characteristics similar to the rights under a CVR should be treated as part of an “open transaction” or “closed transaction” is inherently factual in nature. Pursuant to the Treasury Regulations addressing contingent payment obligations analogous to the CVRs, if the fair market value of the CVRs is “reasonably ascertainable,” a holder of Surface common stock that is subject to U.S. federal income taxation should treat the transaction as a “closed transaction” and include the fair market value of the CVRs as additional consideration received in the Mergers for purposes of determining gain or loss. On the other hand, if the fair market value of the CVRs cannot be “reasonably ascertained,” such holder should treat the transaction as an “open transaction” for purposes of determining gain or loss. These Treasury Regulations state that only in “rare and extraordinary” cases would the value of contingent payment obligations not be reasonably ascertainable.

Coherus intends to treat the holders’ receipt of CVRs as part of an “open transaction” for U.S. federal income tax purposes, and the CVR Payment Amounts as additional consideration for the holders’ shares of Surface common stock. Coherus’ views and actions as of the date of the Mergers are not dispositive with respect to the tax treatment of the CVRs and are not binding on the IRS as to the tax treatment of the receipt of CVRs.

See “Certain U.S. Federal Income Tax Considerations Relating to the Mergers” of this proxy statement/prospectus for a more complete description of the treatment of the CVRs and payments, if any, made under the CVRs for U.S. federal income tax purposes.

Risks Relating to the Combined Company

Combining the businesses of Coherus and Surface may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the Mergers, which may adversely affect the combined company’s business results and negatively affect the value of the combined company’s common stock.

The success of the Mergers will depend on, among other things, the ability of Coherus and Surface to combine their businesses in a manner that facilitates growth opportunities and realizes expected cost savings. Coherus and Surface have entered into the Merger Agreement because each believes that the Mergers and the other transactions contemplated by the Merger Agreement are fair to, and in the best interests of, their respective stockholders and that combining the businesses of Coherus and Surface will produce benefits and cost savings.

However, Coherus and Surface must successfully combine their respective businesses in a manner that permits these benefits to be realized. In addition, the combined company must achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth. If the combined company is not able to successfully achieve these objectives, the anticipated benefits of the Mergers may not be realized fully, or at all, or may take longer to realize than expected.

 

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An inability to realize the full extent of the anticipated benefits of the Mergers and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower than what Coherus and Surface expect and may take longer to achieve than anticipated. If Coherus and Surface are not able to adequately address integration challenges, they may be unable to successfully integrate their operations or realize the anticipated benefits of the integration of the two companies.

If the combined company is unable to compete effectively, the results of operations of the combined company will be materially and adversely affected.

The competitors of the combined company include major pharmaceutical and biotechnology companies, academic institutions, government agencies, public and private research institutions and smaller or early stage companies, of which many are well-capitalized. The competitiveness of the combined company is based on factors including the efficacy, safety and convenience of its product candidates, its combined ability to raise capital and enter into strategic transactions, and recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials. If the combined company is unable to compete based on such factors, the combined company’s results of operations and business prospects could be harmed.

The combined company will have numerous product candidates and multiple discovery platforms and will need to prioritize its research programs and focus development of its product candidates on the potential treatment of certain indications. As a result, the combined company may forego or delay pursuit of opportunities with other indications or for any future product candidates that later prove to have greater commercial potential. The resource allocation decisions of the combined company may cause it to fail to capitalize on viable commercial products or profitable market opportunities. Such failure may result in the combined company being unable to raise additional capital to continue to fund its existing programs and operations, and could lead to stockholders losing all or substantially all of their investment in Coherus.

The failure to successfully integrate the businesses and operations of Coherus and Surface in the expected time frame may adversely affect the combined company’s future results.

Coherus and Surface have operated and, until the completion of the Mergers, will continue to operate independently. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Coherus or Surface employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs, including any CVR Payment Amounts under the CVRs, and an overall post-completion integration process that takes longer than originally anticipated.

The combined company may not be able to retain customers, suppliers or distributors, or customers, suppliers or distributors may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with Coherus or Surface.

As a result of the Mergers, the combined company may experience impacts on relationships with customers, suppliers and distributors that may harm the combined company’s business and results of operations. Certain customers, suppliers or distributors may seek to terminate or modify contractual obligations following the Mergers whether or not contractual rights are triggered as a result of the Mergers. There can be no guarantee that

 

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customers, suppliers and distributors will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the Mergers. If any customers, suppliers or distributors seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed. Furthermore, the combined company will not have long-term arrangements with many of its significant suppliers. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

Surface also has contracts with vendors, licensors and other business partners which may require Surface to obtain consent from these other parties in connection with the Mergers, or which may otherwise contain limitations applicable to such contracts following the Mergers. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs and lose rights that may be material to the combined company’s business. In addition, third parties with whom Coherus or Surface currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the Mergers. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the Mergers. The adverse effect of any such disruptions could also be exacerbated by a delay in the completion of the Mergers or by a termination of the Merger Agreement.

The combined company may be exposed to increased litigation, which could have an adverse effect on the combined company’s business and operations.

The combined company may be exposed to increased litigation from stockholders, customers, suppliers, distributors, consumers and other third parties due to the combination of Coherus’ and Surface’s businesses following the Mergers. Such litigation may have an adverse impact on the combined company’s business and results of operations or may cause disruptions to the combined company’s operations.

The Coherus and Surface unaudited pro forma financial information is inherently subject to uncertainties, the unaudited pro forma condensed combined financial information included in this document is preliminary and the combined company’s actual financial position and results of operations after the Mergers may differ materially from these estimates and the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information does not reflect the effect of any divestitures that may be required in connection with the Mergers.

The unaudited pro forma condensed combined financial information and unaudited pro forma per share data included in this proxy statement/prospectus are presented for illustrative purposes only, contain a variety of adjustments, assumptions and preliminary estimates and are not necessarily indicative of what the combined company’s actual financial position or results of operations would have been had the Mergers been completed on the dates indicated. The combined company’s actual results and financial position after the Mergers may differ materially and adversely from the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information.”

While presented with numeric specificity, the Coherus and Surface unaudited pro forma condensed combined financial information provided in this proxy statement/prospectus is based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition, general business, the biotechnology industry, and economic, market and financial conditions and additional matters specific to Coherus’ or Surface’s business, as applicable) that are inherently subjective and uncertain and are beyond the control of the respective management teams of Coherus and Surface. As a result, actual results may differ materially from the unaudited pro forma condensed combined financial information. Important factors that may affect actual results and cause the unaudited pro forma condensed combined financial information to not be achieved include, but are not limited to, risks and uncertainties relating to Coherus’ or Surface’s business, as applicable (including each company’s ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, general business and economic conditions.

 

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The COVID-19 pandemic, including other pandemics, epidemics or outbreaks of a contagious disease, may affect the combined company’s business and operations.

The extent to which the COVID-19 pandemic, including other pandemics, epidemics or outbreaks of a contagious disease, may impact the combined company is highly uncertain and is difficult to predict. The effects and extent will depend on various factors, including, but not limited to, the duration, scope and impact of the illness, and restrictions on business and social distancing guidelines that may be requested or mandated by governmental authorities, including limitations on elective surgeries and in-person physician visits. The impacts include, but are not limited to, delays in the initiation and enrollment of clinical trials, supply chain disruptions, prescriber behavior due to increases in virtual physician visits and volatility of prescriptions associated with elective procedures. For example, although many COVID-19 public health restrictions have eased, future surges could result in additional restrictions or other factors that may contribute to decreases in elective procedures, which in turn may impact the prescriptions associated with these procedures. Ultimately, efforts to mitigate the impact of COVID-19 or any other public health outbreak may not completely prevent the combined company’s business from being adversely affected and future impacts remain uncertain.

Any impairment of the combined company’s tangible, definite-lived intangible or indefinite-lived intangible assets, including goodwill, if any, may adversely impact the combined company’s financial position and results of operations. 

The Mergers will be accounted for using the acquisition method of accounting under the provisions of ASC 805, Business Combinations, with Coherus representing the accounting acquirer under this guidance. Coherus will record assets acquired, including identifiable intangible assets, and liabilities assumed from Surface at their respective fair values at the date of completion of the Mergers. Any excess of the purchase price over the net fair value of such assets and liabilities will be recorded as goodwill, likewise, any excess of the fair value of the identifiable net assets acquired over the fair value of the consideration transferred will be recognized as a bargain purchase gain. In connection with the Mergers, the combined company may record certain intangible assets on its consolidated balance sheet. See “Unaudited Pro Forma Condensed Combined Financial Information.”

Indefinite-lived intangible assets, including goodwill, if any, will be tested for impairment at least annually, and all tangible and intangible assets including goodwill, if any, will be tested for impairment when certain indicators are present. If, in the future, the combined company determines that tangible or intangible assets, including goodwill, if any, are impaired, the combined company would record an impairment charge at that time. Impairment testing of goodwill, if any, and intangible assets requires significant use of judgment and assumptions, particularly as it relates to the determination of fair value. A decrease in the long-term economic outlook and future cash flows of the combined company’s business could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill, if any, which may have a material adverse impact on the combined company’s financial position and results of operations.

The Coherus bylaws designate the Court of Chancery of the State of Delaware and, to the extent enforceable, the U.S. federal district courts as the exclusive forums for substantially all disputes between Coherus and its stockholders, which will restrict the ability of stockholders of the combined company to choose the judicial forum for disputes with the combined company or its directors, officers or employees.

The Coherus bylaws provide that, unless Coherus consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, the sole and exclusive forum for the following claims: (i) any derivative action or proceeding brought on behalf of Coherus, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Coherus to Coherus or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware. Nothing in the Coherus charter or the Coherus bylaws would preclude stockholders that assert claims under the Exchange Act from bringing such claims in federal court to the extent the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

 

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Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. The Coherus bylaws provide that the U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. However, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

These forum selection provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers or other employees, which may discourage such lawsuits. While Delaware courts have determined that such forum selection provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against the combined company and its directors, officers or other employees in a venue other than in the U.S. federal district courts. In such instance, the combined company would expect to vigorously assert the validity and enforceability of these forum selection provisions. This may require further significant additional costs associated with resolving the dispute in other jurisdictions, and there can be no assurance that the forum selection provisions will be enforced by a court in those other jurisdictions, any of which could seriously harm the combined company’s business.

Other Risk Factors of Coherus and Surface

Coherus’ and Surface’s businesses are and will be subject to the risks described above. In addition, Coherus and Surface are, and will continue to be, subject to the risks described in, as applicable, Coherus’ Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Surface’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Surface’s Amendment No. 1 to its Annual Report on Form 10-K/A for the fiscal year ended December 31, 2022, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each of which are filed with the SEC and incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”

 

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THE PARTIES TO THE MERGERS

Coherus BioSciences, Inc.

333 Twin Dolphin Drive, Suite 600

Redwood City, California 94065

(650) 649-3530

Coherus is a commercial-stage biopharmaceutical company focused on the research, development and commercialization of innovative cancer treatments and the commercialization of its portfolio of FDA-approved therapeutics. Coherus’ strategy is to build a leading immuno-oncology franchise funded with cash generated through net sales of its diversified portfolio of FDA-approved therapeutics.

Coherus’ commercial portfolio includes three FDA-approved biosimilar products. Coherus’ first product, UDENYCA® (pegfilgrastim-cbqv), a biosimilar to Neulasta®, a long-acting granulocyte-colony stimulating factor, was launched commercially in the United States in January 2019. Its second product, CIMERLI® (ranibizumab-eqrn), a biosimilar to Lucentis®, was approved by the FDA in August 2022 as a biosimilar product interchangeable with Lucentis for the treatment of neovascular (wet) age-related macular degeneration, macular edema following retinal vein occlusion, diabetic macular edema, diabetic retinopathy, and myopic choroidal neovascularization. The FDA also granted CIMERLI twelve (12) months of first interchangeable exclusivity. Coherus launched CIMERLI commercially in the United States on October 3, 2022. In December 2021, the FDA approved YUSIMRY^™ (adalimumab-aqvh), a biosimilar to Humira®, and Coherus announced the commercial launch of YUSIMRY in the United States on July 3, 2023, pursuant to the terms of an agreement with Humira’s manufacturer, AbbVie Inc.

In addition to three FDA-approved biosimilar products, Coherus also has an original biologic license application (“BLA”) submitted under Section 351(a) of the Public Health Service Act (“original BLA”) under review by the FDA for toripalimab. The original BLA for toripalimab is for the use of toripalimab in combination with gemcitabine and cisplatin for first-line treatment of adults with metastatic or recurrent locally advanced nasopharyngeal carcinoma (“NPC”), and for use as a monotherapy in the second- or later-line treatment of patients with recurrent unresectable or metastatic NPC that have progressed on or after a platinum-containing chemotherapy. The BLA for toripalimab remains under review. The FDA completed the manufacturing facility inspections in May 2023 and is scheduling the inspection of clinical sites (biomedical research monitoring inspections) in the third quarter. Coherus projects potential approval of toripalimab in the United States in the third quarter of 2023.

Coherus has built an experienced and robust oncology and ophthalmology market access, key account management and medical affairs capability in the United States, which has supported the successful commercialization of UDENYCA and CIMERLI. Coherus expects to leverage these capabilities as it builds and launches its immuno-oncology franchise, continues to grow its ophthalmology product portfolio and launches the commercialization of other biosimilar products.

With 297 full-time and part-time employees, Coherus’ principal executive offices are located at 333 Twin Dolphin Drive, Suite 600, Redwood City, California 94065 and its telephone number is (650) 649-3530.

Coherus is a Delaware corporation, and Coherus common stock is listed on Nasdaq GM under the ticker symbol “CHRS.”

For more information about Coherus, visit Coherus’ website at www.coherus.com. The information contained on or accessible through Coherus’ website (other than the documents incorporated by reference herein) does not constitute a part of this proxy statement/prospectus or any other report or document on file with or furnished to the SEC. Additional information about Coherus is included in the documents incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”

 

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Surface Oncology, Inc.

50 Hampshire Street, 8^th Floor

Cambridge, MA 02139

(617) 714-4096

Surface is a clinical-stage immuno-oncology company focused on using its specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment (the “TME”), for the development of next-generation cancer therapies. While first-generation immuno-oncology therapies, such as checkpoint inhibitors, represented a remarkable therapeutic advancement, Surface believes most patients do not achieve durable clinical benefit primarily because these therapies focus on only one element of the complex and interconnected immunosuppressive TME. Surface believes there is a significant opportunity to more broadly engage both the innate and adaptive arms of the immune system in a multi-faceted, coordinated and patient-specific approach, to meaningfully improve cure rates for patients with a variety of cancers. Surface aims to identify key components within the TME to gain a deep understanding of its biology, leverage this understanding to define the optimal therapeutic targets and the patients most likely to benefit, and develop novel antibody therapeutics with differentiated biologic activity. By utilizing expertise in immunology, oncology, assay development, antibody selection and characterization, and translational research, Surface is developing and advancing a broad pipeline of TME-focused programs that Surface believes are the next generation of immuno-oncology therapies. Surface’s programs demonstrate its multi-faceted approach by targeting several critical components of the immunosuppressive TME.

Surface’s lead program, SRF388, is an antibody targeting interleukin 27 (“IL-27”), an immunosuppressive cytokine, or protein that is overexpressed in certain cancers, including hepatocellular, lung and renal cell carcinoma. IL-27 is a cytokine secreted by macrophages and antigen presenting cells that plays an important physiologic role in suppressing the immune system, as evidenced by its ability to resolve tissue inflammation. In addition, one of the subunits of IL-27, EBI3, is highly expressed during pregnancy and its expression is correlated with maternal-fetal tolerance. Due to its immunosuppressive nature, there is a rationale for inhibiting IL-27 to treat cancer, as this approach will influence the activity of multiple types of immune cells that are necessary to recognize and attack a tumor. SRF388 received orphan drug designation and fast track designation from the FDA, for the treatment of hepatocellular carcinoma, (“HCC”), in November 2020. Surface initiated Phase 2 clinical trials evaluating SRF388 in patients with HCC and non-small-cell lung cancer (“NSCLC”), in April 2022. In June 2022, at the 2022 American Society of Clinical Oncology (“ASCO”), Annual Meeting, Surface presented initial Phase 1/1b data demonstrating clinical activity in multiple solid tumor types. Surface observed confirmed partial responses in two patients who received SRF388 monotherapy, one in NSCLC and one in clear cell renal cell carcinoma (“RCC”). In addition, Surface observed a partial response in a patient who was treated with SRF388 in combination with pembrolizumab for HCC. In November, Surface announced that a second patient with NSCLC experienced a confirmed partial response to SRF388 monotherapy treatment, and another patient with highly pretreated NSCLC experienced durable disease stabilization which, at the time, had continued for more than 56 weeks. Surface stopped enrolling patients in its RCC Phase 1 SRF388 monotherapy and combination trial in order to focus efforts on NSCLC and HCC. In June 2023, Surface provided updated data from the Phase 2 study evaluating SRF388 as a monotherapy in NSCLC. Two confirmed partial responses were observed (April 2023 data cutoff) in PD-L1 negative or low patients with squamous NSCLC, as well as one confirmed report of durable disease stabilization in a patient with adenocarcinoma. All three patients were previously treated with PD-(L)1 antibodies. The overall response rate in the subset of patients with squamous NSCLC (n=2/6) was 33% in this data cut. Surface also announced the full enrollment of the lead-in stage of the Phase 2 trial investigating SRF388 in combination with atezolizumab and bevacizumab for patients with first-line advanced hepatocellular carcinoma (n=30). As of the April 2023 data cut, SRF388 demonstrated a 27% overall response rate (n=7/26) with a 65% disease control rate in response-evaluable patients. These data are still early with an average of 15 weeks of follow-up and only approximately half of patients had had more than one post-treatment imaging assessment.

 

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Surface’s second clinical-stage program, SRF114, is a highly specific afucosylated immunoglobulin isotype G1, antibody targeting CCR8, a chemokine receptor highly expressed on regulatory T cells (“Treg cells”), in the TME. SRF114 is designed to cause depletion of intra-tumoral Treg cells, important regulators of immune suppression and tolerance, through antibody-dependent cellular cytotoxicity, and/or antibody-dependent cellular phagocytosis, leading to anti-tumor activity in preclinical models. In January 2023, Surface initiated a Phase 1/2 clinical study investigating SRF114 in patients with advanced solid tumors. Part A, the monotherapy dose-escalation portion of the study, will evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and preliminary efficacy of SRF114 in patients with advanced solid tumors. Once Part A is completed, Part B will evaluate SRF114 in up to 40 patients with head and neck squamous cell carcinoma, as a monotherapy. In June 2023, Surface announced that early evidence of biological effect has been seen with regulatory T cell depletion in peripheral blood CCR8+ Treg cells following treatment with SRF114, with no effect observed on non-CCR8+ Treg cells. No concerning safety signals were observed and dose escalation continues.

Surface’s third clinical-stage program, SRF617 is an antibody designed to inhibit cluster of differentiation-39 (“CD39”). CD39 is a critical enzyme involved in the production of extracellular adenosine, a key metabolite with strong immunosuppressive properties within the TME. SRF617 aims to reduce the production of immunosuppressive adenosine, and Surface believes SRF617 has the potential to stimulate anti-tumor immunity because of its ability to maintain levels of extracellular adenosine triphosphate. In November 2022, Surface announced the strategic decision to pause further development of the SRF617 program due to business considerations.

Surface expects that the unique insights generated in any one of its product programs will accelerate the development of the other programs in a synergistic fashion due to the interconnections between these TME pathways.

In addition to its internal programs, Surface has two programs, NZV930 and GSK4381562, which are exclusively licensed to Novartis and GSK, respectively.

In January 2016, Surface granted Novartis a worldwide exclusive license to research, develop, manufacture, and commercialize NZV930. NZV930 is an antibody designed to inhibit cluster of differentiation 73 (“CD73”), which is a critical enzyme involved in the production of extracellular adenosine, a key metabolite with strong immunosuppressive properties within the TME. NZV930 aims to reduce the production of immunosuppressive adenosine within the TME. Upon entering into the agreement, Surface received an upfront payment of $70.0 million from Novartis. Surface is entitled to receive potential development milestones of $325.0 million, potential sales milestones of $200.0 million, as well as tiered royalties on annual net sales of NZV930 by Novartis ranging from high single-digit to mid-teens percentages. Such amount of potential milestone payments assumes the successful clinical development and achievement of all sales milestones for NZV930. In June 2018, a Phase 1 trial of NZV930 was initiated by Novartis.

In December 2020, Surface granted GSK an exclusive license to the worldwide development and commercialization rights for GSK4381562. GSK4381562 is an antibody targeting CD112R, also known as PVRIG, an inhibitory protein expressed on natural killer (“NK”), and T cells. GSK4381562 blocks the interaction of CD112R with CD112, its binding partner that is expressed on tumor cells. GSK4381562 can promote the activation of both NK and T cells, with potential to elicit a strong anti-tumor response and promote immunological memory. Upon entering into the agreement, Surface received an upfront payment of $85.0 million, and in March 2022, GSK initiated a Phase 1 clinical trial of GSK4381562 in patients with solid tumors, triggering a $30.0 million milestone payment to Surface. Surface is currently eligible to receive up to $60.0 million in additional clinical milestones and up to $155.0 million in regulatory milestones. In addition, Surface may receive up to $485.0 million in sales milestone payments. Surface is also eligible to receive royalties on global net sales of any approved products based on the licensed antibodies, ranging in percentages from high single digits to mid-teens upon successful commercialization of GSK4381562.

 

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Surface was incorporated in April 2014 under the laws of the State of Delaware. Surface’s principal executive office is located at 50 Hampshire Street, 8th Floor, Cambridge, Massachusetts 02139.

Crimson Merger Sub I, Inc.

333 Twin Dolphin Drive, Suite 600

Redwood City, California 94065

(650) 649-3530

Merger Sub I was formed by Coherus solely in contemplation of the First Merger and has not conducted any business and does not have any assets, liabilities or obligations of any nature other than as set forth in the Merger Agreement. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub I will merge with and into Surface, with Surface continuing as the Surviving Corporation and as a direct, wholly owned subsidiary of Coherus. Merger Sub I’s principal executive offices are located at 333 Twin Dolphin Drive, Suite 600, Redwood City, California 94065, and its telephone number is (650) 649-3530.

Crimson Merger Sub II, LLC

333 Twin Dolphin Drive, Suite 600

Redwood City, California 94065

(650) 649-3530

Merger Sub II was formed by Coherus solely in contemplation of the Second Merger, and has not conducted any business and does not have any assets, liabilities or obligations of any nature other than as set forth in the Merger Agreement. Upon the terms and subject to the conditions set forth in the Merger Agreement, following the First Merger, the Surviving Corporation will merge with and into Merger Sub II, with Merger Sub II continuing as the Surviving Entity and as a direct, wholly owned subsidiary of Coherus. Merger Sub II’s principal executive offices are located at 333 Twin Dolphin Drive, Suite 600, Redwood City, California 94065, and its telephone number is (650) 649-3530.

 

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THE SURFACE SPECIAL MEETING

General

This proxy statement/prospectus is first being mailed on or about July 26, 2023, and constitutes notice of the Surface special meeting in conformity with the requirements of the DGCL and the Surface bylaws.

This proxy statement/prospectus is being provided to Surface stockholders as part of a solicitation of proxies by the Surface board of directors for use at the Surface special meeting and at any adjournment or postponement of the Surface special meeting. Before voting, Surface stockholders are encouraged to read the entire document carefully, including the annexes to this document, for more detailed information regarding the Merger Agreement and the transactions contemplated by the Merger Agreement.

Date, Time and Place

You are invited to attend the Surface special meeting on September 7, 2023 at 10:00 a.m., Eastern Time, which will be held virtually and can be accessed at www.virtualshareholdermeeting.com/SURF2023SM, where Surface stockholders will be able to participate and vote online. This proxy statement/prospectus is first being mailed to Surface’s stockholders on or about July 26, 2023.

We may announce alternative arrangements for the Surface special meeting, which may include switching to a hybrid in-person/virtual format, an in-person format or changing the time, date or location of the Surface special meeting. If we take this step, we will announce any changes through a press release that will also be filed with the SEC as additional proxy materials and we will post details at www.surfaceoncology.com under the “Investors & Media” menu. Copies of such reports are also posted via EDGAR on the SEC’s website at www.sec.gov.

Purpose of the Surface Special Meeting

At the Surface special meeting, Surface stockholders will be asked to consider and vote on the following:

 

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the Surface merger proposal;

 

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the Surface advisory compensation proposal; and

 

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the Surface adjournment proposal.

Surface will transact no other business at the Surface special meeting except such business as may properly be brought before the Surface special meeting or any adjournment or postponement thereof by or at the direction of the Surface board of directors in accordance with the Surface bylaws. This proxy statement/prospectus, including the Merger Agreement attached hereto as Annex A, contains further information with respect to these matters.

Recommendation of the Surface Board of Directors

The Surface board of directors has (i) determined that the terms of the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are fair to and in the best interest of Surface and the Surface stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, (iii) directed that the Merger Agreement be submitted to the Surface stockholders for adoption and (iv) resolved to recommend that the Surface stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the Mergers. A description of factors considered by the Surface board of directors in reaching its decision to approve and declare advisable the foregoing proposals can be found in the section titled “The Mergers—Surface’s Reasons for the Mergers; Recommendation of the Surface Board of Directors that Surface Stockholders Approve the Merger Agreement” beginning on page 77 of this proxy statement/prospectus.

 

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The Surface board of directors recommends that Surface stockholders vote “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal at the Surface special meeting.

Approval of the Surface merger proposal is a condition for the Mergers to occur. If Surface stockholders fail to approve the Surface merger proposal by the requisite vote, the Mergers will not occur.

Record Date; Stockholders Entitled to Vote

Only Surface stockholders at the close of business on July 21, 2023, the record date for the Surface special meeting, will be entitled to notice of, and to vote at, the Surface special meeting or any adjournment or postponement of the Surface special meeting. At the close of business on the Surface record date, 60,730,274 shares of Surface common stock were issued and outstanding.

Each Surface stockholder is entitled to one vote for each share of Surface common stock that is outstanding in his, her or its name on Surface’s books as of close of business on the Surface record date.

A list of Surface stockholders of record entitled to vote at the Surface special meeting will be available for examination by any Surface stockholder for any legally valid purpose at Surface’s corporate headquarters, located at 50 Hampshire Street, 8th Floor, Cambridge, Massachusetts 02139, for a period of ten days prior to the Surface special meeting in accordance with the Surface bylaws and the DGCL. The list of eligible Surface stockholders of record also will be available for inspection during the Surface special meeting at www.virtualshareholdermeeting.com/SURF2023SM by entering the 16-digit control number provided on your proxy card or voting instruction form and completing the required online attestation form.

Quorum; Adjournment or Postponement

The holders of record of a majority of the issued and outstanding shares of Surface common stock as of the Surface record date entitled to vote at the Surface special meeting, present in person or represented by proxy, will constitute a quorum for the transaction of business at the Surface special meeting. Virtual attendance by stockholders of record at the Surface special meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Surface special meeting. If you hold shares of Surface common stock in “street name,” your shares will not be counted towards a quorum unless you give voting instructions to your bank, broker, trustee or other nominee or obtain a legal proxy from your bank, broker, trustee or other nominee that enables you to attend the Surface special meeting. There must be a quorum for business to be conducted at the Surface special meeting.

Failure of a quorum to be represented at the Surface special meeting will result in an adjournment or postponement of the Surface special meeting and may subject Surface to additional expenses. The chairperson of the meeting will have the right and authority to recess, adjourn and/or postpone the Surface special meeting and, if a quorum is not present at the Surface special meeting, Surface stockholders holding a majority in voting power of shares of Surface capital stock, present in person or by proxy and entitled to vote thereat, will have the power to adjourn or postpone the meeting (subject to the terms and conditions of the Merger Agreement).

Notice need not be given of the adjourned or postponed meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned or postponed meeting are announced at the meeting at which the adjournment or postponement is taken or displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication unless the adjournment or postponement is for more than 30 days, in which case a notice of the adjourned or postponed meeting will be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for the stockholders entitled to vote is fixed for the adjourned or

 

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postponed meeting, the Surface board of directors must fix a record date for the adjourned or postponed meeting in accordance with the DGCL and the Surface bylaws and provide a new notice of the adjourned or postponed meeting to each stockholder of record entitled to vote at the meeting. In addition, the Surface special meeting could be postponed before it commences.

If the Surface special meeting is adjourned or postponed for the purpose of soliciting additional votes, Surface stockholders who have already submitted their proxies will be able to revoke them at any time prior to the final vote on the proposals. If you submit your proxy over the Internet or by telephone or submit a properly executed proxy card, even if you abstain from voting, your shares will be counted as present for purposes of determining whether a quorum exists at the Surface special meeting.

Required Vote

You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to the Surface merger proposal, the Surface advisory compensation proposal and the Surface adjournment proposal.

If a quorum is present at the Surface special meeting:

 

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approval of the Surface merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Surface common stock entitled to vote on the proposal;

 

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approval of the Surface advisory compensation proposal requires the affirmative vote of a majority of the votes properly cast at the Surface special meeting;

 

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approval of the Surface adjournment proposal requires the affirmative vote of a majority of the votes properly cast at the Surface special meeting;

 

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a Surface stockholder’s “ABSTAIN” vote or failure to vote (including the failure of a Surface stockholder who holds shares in “street name” through a bank, broker, trustee or other nominee to give any voting instructions to that bank, broker, trustee or other nominee) will have the same effect as a vote “AGAINST” the Surface merger proposal;

 

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a Surface stockholder’s “ABSTAIN” vote will have no effect on the Surface advisory compensation proposal and the Surface adjournment proposal; and

 

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a Surface stockholder’s failure to vote on the Surface advisory compensation proposal or the Surface adjournment proposal (including the failure of a Surface stockholder who holds shares in “street name” through a bank, broker, trustee or other nominee to give voting instructions to its bank, broker, trustee or other nominee) will, in each case, have no effect on the Surface advisory compensation proposal or the Surface adjournment proposal.

The Mergers are conditioned on, among other things, obtaining the approval of the Surface merger proposal at the Surface special meeting. Failure to return a properly executed proxy card or to vote will have the same effect as a vote “AGAINST” the Surface merger proposal. Broker non-votes and abstentions will have the same effect as voting “AGAINST” the Surface merger proposal. The Surface merger proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

Abstentions and Broker Non-Votes

An abstention occurs when a stockholder votes “ABSTAIN.” At the Surface special meeting, abstentions will be counted as present for purposes of determining whether a quorum exists. “ABSTAIN” votes will have the same effect as voting “AGAINST” the Surface merger proposal, but will have no effect on the Surface advisory compensation proposal and Surface adjournment proposal.

If no instruction as to how to vote is given (including no instruction to abstain from voting) in an executed, duly returned and not revoked proxy, the proxy will be voted in accordance with the Surface board of directors’

 

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recommendation with respect to each proposal and consequently, will be voted “FOR” each of (i) the Surface merger proposal, (ii) the Surface advisory compensation proposal and (iii) the Surface adjournment proposal.

Broker non-votes occur as to shares held in “street name” through a bank, broker, trustee or other nominee when (i) the bank, broker, trustee or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (ii) the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Under Nasdaq rules, banks, brokers and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the Surface proposals described in this proxy statement/prospectus. Accordingly, if a beneficial owner of shares of Surface common stock held in “street name” does not give voting instructions to the bank, broker, trustee or other nominee, then those shares will not be counted as present in person or by proxy at the Surface special meeting and accordingly will not count as present for purposes of determining whether a quorum exists.

Therefore, assuming that a quorum is present, if you hold Surface common stock in “street name” and you do not instruct your bank, broker, trustee or other nominee on how to vote your shares:

 

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your bank, broker, trustee or other nominee may not vote your shares on the Surface merger proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” such proposal; and

 

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your bank, broker, trustee or other nominee may not vote your shares on the Surface advisory compensation proposal or Surface adjournment proposal, which broker non-votes, if any, will have no effect for such proposal.

Failure to Vote

If you are a stockholder of record and you do not sign and return your proxy card or vote over the Internet, by telephone or at the Surface special meeting, your shares will not be voted at the Surface special meeting, will not be counted as present in person or by proxy at the Surface special meeting and will not be counted as present for purposes of determining whether a quorum exists.

If a quorum is present at the Surface special meeting:

 

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the failure of a Surface stockholder to vote on the Surface merger proposal (including the failure of a Surface stockholder who holds shares in “street name” through a bank, broker, trustee or other nominee to give any voting instructions to that bank, broker, trustee or other nominee) will have the same effect as a vote “AGAINST” the Surface merger proposal; and

 

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the failure of a Surface stockholder to vote on the Surface advisory compensation proposal or the Surface adjournment proposal (including the failure of a Surface stockholder who holds shares in “street name” through a bank, broker, trustee or other nominee to give voting instructions to its bank, broker, trustee or other nominee) will have no effect on the Surface advisory compensation proposal or Surface adjournment proposal, respectively.

If you sign, date and return your proxy card and do not indicate how you want your shares of Surface common stock to be voted, then your shares of Surface common stock will be voted “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal.

Voting by Surface’s Directors and Executive Officers

At the close of business on June 30, 2023, directors and executive officers of Surface were entitled to vote 7,823,757 shares of Surface common stock, or approximately 12.9% of the shares of Surface common stock issued and outstanding on that date. Directors and executive officers of Surface, have informed Surface that they intend to vote their shares in favor of the Surface merger proposal, the Surface advisory compensation proposal and the Surface adjournment proposal, although none of the directors and executive officers are obligated to do so.

 

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Voting at the Surface Special Meeting

The Surface special meeting will be a virtual-only meeting. There will be no physical meeting location and the meeting will only be conducted via live webcast. The virtual Surface special meeting will be held on September 7, 2023 at 10:00 a.m., Eastern Time. To participate in the Surface special meeting and submit questions during the Surface special meeting, visit www.virtualshareholdermeeting.com/SURF2023SM and enter the 16-digit control number on the proxy card or voting instruction form you received. Online check-in will begin at 9:45 a.m., Eastern Time. Please allow time for online check-in procedures.

The virtual stockholder meeting format uses technology designed to increase stockholder access, save Surface and Surface stockholders time and money, and provide Surface stockholders rights and opportunities to participate in the meeting similar to what they would have at an in-person meeting. In addition to online attendance, Surface provides stockholders with an opportunity to hear all portions of the official meeting, submit written questions and comments during the meeting, and vote online during the open poll portion of the meeting. Although Surface offers four different voting methods, Surface encourages you to submit a proxy to vote either over the Internet or by telephone to ensure that your shares are represented and voted at the Surface special meeting.

 

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To Submit a Proxy to Vote over the Internet: To submit a proxy to vote over the Internet, go to www.proxyvote.com and follow the steps outlined on the secured website. You will need the number included on your proxy card to obtain your records and to create an electronic voting instruction form. If you submit your proxy to vote over the Internet, you do not have to mail in a proxy card. If you choose to submit your vote via proxy over the Internet, you must do so prior to 11:59 p.m., Eastern Time, on September 6, 2023.

 

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To Submit a Proxy by Telephone: To submit a proxy to vote by telephone call toll-free at 1-800-690-6903 within the U.S., U.S. territories and Canada on a touch-tone telephone. Please have your proxy card available for reference because you will need the validation details that are located on your proxy card in order to submit your vote by proxy by telephone. If you submit your proxy to vote by telephone, you do not have to mail in a proxy card. If you choose to submit your vote via proxy by telephone, you must do so prior to 11:59 p.m., Eastern Time, on September 6, 2023.

 

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To Submit a Proxy by Mail: To submit a proxy to vote by mail, complete, sign and date the proxy card and return it promptly to the address indicated on the proxy card in the postage paid enveloped provided. If you sign and return your proxy card without indicating how you want your shares of Surface common stock to be voted with regard to a particular proposal, your shares of Surface common stock will be voted in favor of such proposal. If you return your proxy card without a signature, your shares will not be counted as present at the Surface special meeting and cannot be voted.

 

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To Vote at the Surface special meeting: To vote at the Surface special meeting, follow the instructions at www.virtualshareholdermeeting.com/SURF2023SM.

If your shares are held by your bank, broker, trustee or other nominee, you are considered the beneficial owner of shares held in “street name” and you will receive a voting instruction form from your bank, broker, trustee or other nominee seeking instruction from you as to how your shares should be voted. If you plan to attend the Surface special meeting, you must obtain a legal proxy from your bank, broker, trustee or other nominee that enables you to access and attend the Surface special meeting.

If you sign your proxy, but do not indicate how you wish to vote, your shares will be voted “FOR” the Surface merger proposal, “FOR” the Surface advisory compensation proposal and “FOR” the Surface adjournment proposal.

 

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Revocation of Proxies

You can change or revoke your proxy at any time before the final vote at the Surface special meeting. If you are the stockholder of record of your shares, you may revoke your proxy by:

 

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submitting another proxy over the Internet or by telephone prior to 11:59 p.m., Eastern Time, on September 6, 2023;

 

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timely delivering a written notice that you are revoking your proxy to Surface’s Corporate Secretary;

 

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timely delivering a valid, later-dated proxy; or

 

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attending the Surface special meeting and voting.

Your attendance at the Surface special meeting will not revoke your proxy unless you give written notice of revocation to Surface’s Corporate Secretary before your proxy is exercised or unless you vote your shares in person at the Surface special meeting.

If you are the beneficial owner of shares held in “street name,” you should contact your bank, broker, trustee or other nominee with questions about how to change or revoke your voting instructions.

Solicitation of Proxies

The Surface board of directors is soliciting your proxy in connection with the Surface special meeting, and Surface will bear the cost of soliciting such proxies, including the costs of printing and filing this proxy statement/prospectus. Surface has retained Innisfree as proxy solicitor to assist with the solicitation of proxies in connection with the Surface special meeting. Surface estimates it will pay Innisfree a fee not to exceed $60,000, plus reimbursement of reasonable expenses. Surface has agreed to indemnify Innisfree against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through banks, brokers and other nominees to the beneficial owners of shares of Surface common stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by certain of Surface’s directors, officers and employees, without additional compensation.

Tabulation of Votes

Broadridge will tabulate the votes at the Surface special meeting.

Appraisal Rights

Pursuant to Section 262 of the DGCL, Surface stockholders who hold their shares through the Effective Time, do not vote their shares in favor of adoption of the Merger Agreement and who comply fully with and properly demand appraisal for their shares under the applicable requirements of Section 262 of the DGCL and do not otherwise withdraw or lose the right to appraisal under Delaware law, have the right to seek appraisal of the “fair value” of their shares of Surface common stock, as determined by the Delaware Court of Chancery, if the Mergers are completed. This means that such stockholders are entitled to seek appraisal of their shares of Surface stock and to receive payment in cash for the “fair value” of such shares of Surface stock, exclusive of any element of value arising from the accomplishment or expectation of the Mergers, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” of shares of Surface common stock as determined by the Delaware Court of Chancery may be more than, less than, or equal to the value of the Merger Consideration that Surface stockholders would otherwise be entitled to receive under the terms of the Merger Agreement. Surface stockholders also should be aware that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a

 

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sale transaction, such as the Mergers, is not an opinion as to, and does not otherwise address, “fair value” under Section 262 of the DGCL. Surface stockholders who wish to preserve any appraisal rights they may have must so advise Surface by submitting a written demand for appraisal prior to the vote to adopt the Merger Agreement and approve the transactions contemplated thereby, and must otherwise follow fully the procedures prescribed by Section 262 of the DGCL.

A copy of Section 262, which details the applicable Delaware appraisal statute, may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. You are encouraged to read these provisions carefully and in their entirety. Due to the complexity of the procedures for exercising appraisal rights, Surface stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel and their financial advisors. Failure to strictly comply with these provisions will result in the loss of appraisal rights. For additional information, please see the section titled “Appraisal Rights” beginning on page 170 of this proxy statement/prospectus.

IN ORDER TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGERS, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO SURFACE BEFORE THE VOTE IS TAKEN ON THE ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING, AND MUST NOT VOTE, IN PERSON OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL AND CONTINUE TO HOLD YOUR SHARES OF SURFACE COMMON STOCK OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE DATE OF THE MERGERS AND MUST COMPLY WITH THE OTHER REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST THE MERGER PROPOSAL WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES OF COMMON STOCK AGAINST, OR ABSTAIN WITH RESPECT TO, THE ADOPTION OF THE MERGER AGREEMENT. NEITHER VOTING AGAINST THE ADOPTION OF THE MERGER AGREEMENT, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE ADOPTION OF THE MERGER AGREEMENT. IF YOU HOLD YOUR SHARES OF SURFACE COMMON STOCK THROUGH A BANK, BROKERAGE FIRM OR NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKERAGE FIRM OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BANK, BROKERAGE FIRM OR NOMINEE. IN VIEW OF THE COMPLEXITY OF THE DGCL, SURFACE STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.

Householding

The SEC rules permit brokers to participate in a practice known as “householding,” which means that only one copy of the Notice and, if applicable, this proxy statement/prospectus will be sent to multiple stockholders who share the same address unless we have received contrary instructions from one or more of the stockholders. Householding is designed to reduce printing and postage costs, and results in cost savings for us. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you receive a householding mailing this year and would like to have additional copies of this proxy statement/prospectus mailed to you, or if you would like to opt out of this practice for future mailings, please contact your broker or submit your request to Surface Oncology, Inc., 50 Hampshire Street, 8th Floor, Cambridge, Massachusetts 02139, (617) 714-4096, Attention: Chandra Adams, Secretary, or contact Surface by telephone at

 

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(617) 714-4096. Upon receipt of any such request, we agree to promptly deliver a copy of this proxy statement/prospectus to you. In addition, if you are currently a stockholder sharing an address with another stockholder and wish to receive only one copy of future proxy materials for your household, please contact Surface using the contact information set forth above. This proxy statement/prospectus are also available at www.surfaceoncology.com under the “Investors & Media” menu. Copies of such reports are also posted via EDGAR on the SEC’s website at www.sec.gov.

Each registered Surface stockholder will receive one copy of this proxy statement/prospectus per account, regardless of whether you have the same address as another stockholder of record. SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, commonly called “householding,” provides cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. For more details, see the section titled “Householding of Proxy Materials” beginning on page 181 of this proxy statement/prospectus.

Questions

If you have more questions about the Mergers or how to submit your proxy, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card or voting instructions, please contact Surface’s Corporate Secretary at (617) 714-4096, or write to Surface Oncology, Inc., 50 Hampshire Street, 8th Floor, Cambridge, Massachusetts 02139, (617) 714-4096, Attention: Chandra Adams, Secretary.

Assistance

If you need assistance voting or in completing your proxy card or have questions regarding the Surface special meeting, please contact the Surface solicitation agent:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders May Call: (877) 717-3904 (toll-free from the U.S. and Canada)

Banks and Brokers May Call: (212) 750-5833

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

This proxy statement/prospectus is being furnished to Surface stockholders as part of the solicitation of proxies by the Surface board of directors for use at the Surface special meeting to consider and vote upon a proposal to adopt the Merger Agreement, which is attached as Annex A to this proxy statement/prospectus, and approve the transactions contemplated thereby, including the Mergers.

The Surface board of directors, after due and careful discussion and consideration, (i) determined that the terms of the Merger Agreement, the Mergers and the other transactions contemplated by the Merger Agreement are fair to and in the best interest of Surface and the Surface stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Mergers, (iii) directed that the Merger Agreement be submitted to the Surface stockholders for adoption and (iv) resolved to recommend that the Surface stockholders vote in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the Mergers.

Required Vote of Stockholders

The Surface board of directors accordingly recommends that Surface stockholders vote “FOR” the proposal to adopt the Merger Agreement, as disclosed in this proxy statement/prospectus, particularly the related narrative disclosures in the sections of this proxy statement/prospectus titled “The Mergers” and “The Merger Agreement” beginning on pages 62 and 95, respectively, and as attached as Annex A to this proxy statement/prospectus.

Obtaining approval of the Surface merger proposal is a condition to consummation of the Mergers.

The vote on the Surface merger proposal is a vote separate and apart from the vote to approve either the Surface advisory compensation proposal or the Surface adjournment proposal. Accordingly, a Surface stockholder may vote to approve the Surface merger proposal and vote not to approve the Surface advisory compensation proposal or the Surface adjournment proposal, and vice versa.

Assuming that a quorum is present, the approval of the Surface merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of Surface common stock entitled to vote on the proposal. A failure to vote (including broker non-votes, which are a failure to instruct your bank, broker, trustee or other nominee to vote) or an abstention will have the same effect as a vote “AGAINST” the Surface merger proposal.

THE SURFACE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE SURFACE MERGER PROPOSAL.

 

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PROPOSAL 2: ADVISORY VOTE WITH RESPECT TO CERTAIN COMPENSATION THAT MAY BE PAID OR BECOME PAYABLE TO SURFACE’S NAMED EXECUTIVE OFFICERS THAT IS BASED ON OR OTHERWISE RELATES TO THE MERGERS

Pursuant to Section 14A of the Exchange Act, Surface is asking Surface stockholders to approve, on an advisory (non-binding) basis, the compensation that will or may be paid to Surface’s named executive officers in connection with the Mergers as described in the section titled “Interests of Surface’s Directors and Executive Officers in the Mergers” beginning on page 150 of this proxy statement/prospectus. The Surface advisory compensation proposal gives Surface stockholders the opportunity to express their views on the Mergers-related compensation of Surface’s named executive officers.

Required Vote of Stockholders

Surface is asking Surface stockholders to vote “FOR” the adoption of the following resolution, on a non-binding advisory basis:

“RESOLVED, that the compensation that may be paid or become payable to the named executive officers of Surface that is based on or otherwise relates to the Mergers, as disclosed pursuant to Item 402(t) of Regulation S-K under the section “Interests of Surface’s Directors and Executive Officers in the Mergers” beginning on page 150 of this proxy statement/prospectus, including the associated narrative discussion, and the agreements, plans and other arrangements pursuant to which such compensation may be paid or become payable, be, and are hereby APPROVED.”

Because the vote on the Surface advisory compensation proposal is advisory only, it will not be binding on either Surface or Coherus. Accordingly, if the Surface merger proposal is approved and the Mergers are consummated, the Mergers-related compensation will be payable to Surface’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the approval of the Surface advisory compensation proposal.

Assuming a quorum is present, approval of the Surface advisory compensation proposal requires the affirmative vote of a majority of votes properly cast. A failure to vote (including broker non-votes, which are a failure to instruct your bank, broker, trustee or other nominee to vote) or an abstention will have no effect on the Surface advisory compensation proposal.

The vote on the Surface advisory compensation proposal is a vote separate and apart from the vote to approve either the Surface merger proposal or the Surface adjournment proposal. Accordingly, a Surface stockholder may vote to approve the Surface advisory compensation proposal and vote not to approve the Surface merger proposal or the Surface adjournment proposal, and vice versa.

THE SURFACE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE SURFACE ADVISORY COMPENSATION PROPOSAL.

 

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PROPOSAL 3: ADJOURNMENT OR POSTPONEMENT OF THE SURFACE SPECIAL MEETING TO SOLICIT ADDITIONAL PROXIES

The Surface special meeting may be adjourned or postponed to another time and place, including, if necessary to permit solicitation of additional proxies if there are not sufficient votes to approve the Surface merger proposal or to ensure that any supplemented or amended disclosure, including any supplement or amendment to this proxy statement/prospectus, is timely provided to Surface stockholders.

Surface is asking Surface stockholders to authorize the holder of any proxy solicited by the Surface board of directors to vote in favor of any adjournment or postponement of the Surface special meeting to solicit additional proxies if there are not sufficient votes to approve the Surface merger proposal or to ensure that any supplemental or amended disclosure, including any supplement or amendment to this proxy statement/prospectus, is timely provided to Surface stockholders.

Required Vote of Stockholders

The Surface board of directors recommends that Surface stockholders vote “FOR” the proposal to adjourn or postpone the Surface special meeting, if necessary.

Assuming a quorum is present at the Surface special meeting, approval of the Surface adjournment proposal requires the affirmative vote of a majority of votes properly cast. A failure to vote (including broker non-votes, which are a failure to instruct your bank, broker, trustee or other nominee to vote) or an abstention will have no effect on the Surface adjournment proposal.

The vote on the Surface adjournment proposal is a vote separate and apart from the vote to approve the Surface merger proposal or the Surface advisory compensation proposal. Accordingly, a Surface stockholder may vote to approve the Surface adjournment proposal and vote not to approve the Surface merger proposal or the Surface advisory compensation proposal, and vice versa.

THE SURFACE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE SURFACE ADJOURNMENT OR POSTPONEMENT PROPOSAL.

 

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THE MERGERS

The following is a description of material aspects of the Mergers. While Coherus and Surface believe that the following description covers the material terms of the Mergers, the description may not contain all of the information that is important to you. You are encouraged to read carefully this entire proxy statement/ prospectus, including the text of the Merger Agreement attached as Annex A hereto, for a more complete understanding of the Mergers. In addition, important business and financial information about each of Coherus and Surface is contained or incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.”

General

Coherus, Merger Sub I, Merger Sub II and Surface have entered into the Merger Agreement, which provides for the merger of Merger Sub I with and into Surface, with Surface surviving the First Merger and continuing its existence under the DGCL and becoming a direct, wholly owned subsidiary of Coherus and immediately thereafter, the merger of the Surviving Corporation with and into Merger Sub II, with Merger Sub II surviving. As a result of the Mergers, the separate existence of Merger Sub I and Surface will cease and Merger Sub II will continue its existence under the DLLCA as the Surviving Entity and as a direct, wholly owned subsidiary of Coherus.

Merger Consideration

At the Effective Time of the First Merger, each share of Surface common stock (other than (i) shares held in treasury by Surface or held directly by Coherus, Merger Sub I or Merger Sub II, which shares will be cancelled or (ii) shares that are held by any holder who is entitled to demand and properly demands appraisal of such shares of Surface common stock pursuant to, and in compliance with, Section 262 of the DGCL) that is issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive, without interest, (a) a number of shares of Coherus common stock equal to the Exchange Ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash, determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the VWAP for the five trading days through and including June 15, 2023) , by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement, and if applicable, cash in lieu of fractional shares (without interest and less any applicable withholding taxes), and (b) one CVR representing the right to receive the CVR Payment Amount.

The Exchange Ratio depends on the Surface Net Cash at the Closing and will not be adjusted in the event of any change in the price of either Coherus or Surface common stock. Therefore, the value of the Merger Consideration will depend on the market price of Coherus common stock at the Effective Time. The market price of Coherus common stock has fluctuated prior to and after the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the date of the Surface special meeting, and through the date the First Merger is consummated. Given that the price per share of Coherus common stock used in the calculation of the Exchange Ratio was fixed upon the execution of the Merger Agreement, the Exchange Ratio will not be adjusted for changes in the market price of either Coherus or Surface common stock prior to the completion of the Mergers. Accordingly, you should obtain current market quotations for Coherus and Surface common stock before deciding how to vote on any of the proposals described in this proxy statement/prospectus. Coherus common stock is traded on Nasdaq GM under the symbol “CHRS” and Surface common stock is traded on Nasdaq CM under the symbol “SURF.”

Background of the Mergers

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. The following chronology does not purport to catalogue every conversation among the Surface board of directors or committees thereof or the representatives of Surface and other parties.

 

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Surface is a clinical-stage immuno-oncology company focused on using its specialized knowledge of the biological pathways critical to the immunosuppressive tumor microenvironment for the development of next-generation cancer therapies. Surface’s immuno-oncology pipeline includes multiple antibody immunotherapy candidates focused on enhancing the innate and adaptive immune responses to enable a robust immunologic response and enhance outcomes for patients with cancer. SRF388 is a novel anti-IL-27 antibody currently being evaluated in Phase 1/2 clinical trials in lung and liver cancer. SRF114 is a highly selective, competitively positioned anti-CCR8 antibody currently in a Phase 1/2 study as a monotherapy in patients with advanced solid tumors. Surface also has two out-licensed partnership programs to advance its next-generation cancer therapies.

Surface management and the Surface board of directors regularly review Surface’s performance and prospects in light of its own business activities and external developments in the biotechnology and biopharmaceutical industries. From time to time, these reviews have included consideration of potential partnerships, collaborations and other strategic transactions such as acquisitions or divestitures of programs or technology to enhance stockholder value. Surface management provided periodic updates on its activities, including those described below, to the Surface board of directors.

During the first half of 2022, the Surface board of directors discussed the strategic, financial and operational challenges of operating Surface’s business in the then-current environment, including the macro-economic, industry and market conditions negatively impacting clinical-stage immuno-oncology companies such as Surface. The Surface board of directors discussed the need for significant capital investment to complete Surface’s clinical trials of its product candidates, fund its innovative research and development efforts, hire the appropriate personnel necessary to execute on those priorities, retain critical talent and operate generally as a public company, as well as the risks and uncertainties associated with drug development, in particular conducting clinical trials for its product candidates, pursuing related regulatory approvals and, if successful, launching and commercializing product candidates. The Surface board of directors discussed the risks and uncertainties associated with being a clinical-stage public biotechnology company, including reliance on clinical data read outs, the competitive immuno-oncology landscape, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the ability to obtain additional financing to fund operations. The Surface board of directors also discussed product candidates currently under development that require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization, and the likely need for combination treatment randomized Phase 2 clinical trials prior to having definitive proof of concept data and the impact of the timing and cost of these trials. The Surface board of directors also discussed that these efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities, and even if Surface’s development efforts are successful, it is uncertain when, if ever, Surface will realize significant revenue from product sales. The Surface board of directors also discussed the risks and uncertainties associated with Surface’s cash requirements and the general negative investor sentiment around the field of immuno-oncology, the combination of which had severely negatively impacted Surface’s stock price and its ability to raise sufficient capital through equity financings. The Surface board of directors further discussed Surface’s current cash position, its near-term priorities and related cash requirements, its long-term obligations (including its debt) and the lack of attractive financing alternatives given then-current market conditions.

On March 15 and April 14, 2022, the Surface board of directors held meetings at which members of Surface management and representatives of Goodwin Procter LLP (“Goodwin”), Surface’s outside legal counsel, were present. At these meetings, Surface management provided business updates to the Surface board of directors, including discussions regarding potential strategic business combinations and other corporate development opportunities. The Surface board of directors discussed the risks and challenges facing Surface mentioned above and considered the prolonged pressure on the stock prices of biopharmaceutical companies and the likelihood that, if the current economic environment were to continue, consolidation would occur in the biopharmaceutical industry, particularly in the capital intensive immuno-oncology sector in which Surface operates. Following discussion, the Surface board of directors determined that it would be in the best interests of Surface and its stockholders for Surface to proactively review potential strategic transactions available to it in order to be a first mover in such consolidation among immuno-oncology companies.

 

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The Surface board of directors was updated on the periodic discussions held by Surface management with other parties in the oncology field. As part of this discussion, Surface management discussed the larger, commercial stage, profitable, public pharmaceutical and biotechnology companies, each with an oncology focus, that Surface management perceived as having sufficient financial resources to either acquire Surface for cash, license one or more of the Surface programs or fund continued development of the Surface programs to assess potential interest in entering into a strategic relationship to acquire rights to the Surface programs. This group of companies is referred to as “Group A.” Surface management also discussed smaller, development stage private and public oncology-focused biotech companies that Surface management was evaluating for suitability as potential acquisition targets or partners in a strategic transaction, including a merger of equals transaction, rather than a cash-based license of Surface programs or an acquisition of Surface for cash consideration, because Surface management perceived this group to be less likely to have sufficient cash resources to make the related payments required for such a transaction. This group of companies is referred to as “Group B.” After considering the information presented by Surface management, the Surface board of directors determined to continue the parallel evaluation of strategic partnering opportunities with Group A companies, and those Group B companies that Surface management determined to be suitable to assess interest in a possible business combination, and continue to identify additional companies to include in Group A and Group B at the discretion of Surface management.

As directed by the Surface board of directors, Surface management conducted the strategic review of potential Group A and Group B companies, and had preliminary discussions with certain of these companies to ascertain interest in a potential transaction with Surface. As part of this review, in June 2022, Coherus was identified as a compelling and practical counterparty for a potential partnership or licensing transaction for the Surface programs, based on criteria including market capitalization, therapeutic indications of lead clinical assets, potential catalysts, complementary underlying technologies, synergistic capabilities, cash position, revenue and cash runway. Given that certain members of the Surface board of directors were previously colleagues with certain members of Coherus management at a cancer research institute, Surface management made an initial outreach to Coherus.

On June 22 and July 28, 2022, members of Surface management held introductory calls with members of Coherus management regarding interest in a potential licensing or collaboration agreement. In order to facilitate further discussions, Surface and Coherus entered into a mutual confidentiality agreement, effective as of August 1, 2022. This mutual confidentiality agreement did not contain a standstill obligation.

On September 20, 2022, the Surface board of directors held a meeting at which members of Surface management and representatives of Goodwin were present. Surface management provided a business update to the Surface board of directors. Surface management also provided an update on the results of the strategic review and the discussions with Coherus and other potentially interested Group A and Group B companies, including two Group A companies that had entered into preliminary diligence on the lead Surface clinical programs. The Surface board of directors discussed the risks and challenges facing Surface. Following the discussion, the Surface board of directors authorized Surface management to continue discussions with Coherus and other potentially interested parties. The Surface board of directors also directed Surface management to take additional actions to reduce costs and preserve available cash in order to extend Surface’s cash runway through key clinical milestones.

From late September through early November 2022, members of Surface and Coherus management engaged in intermittent discussions regarding Coherus’ interest in a potential licensing or collaboration agreement for Surface’s CCR8 and CD39 programs. On October 11, 2022, Surface granted Coherus access to a virtual data room containing information regarding the CCR8 and CD39 programs. These interactions, however, did not result in any proposal being made concerning a transaction.

From October 11 through October 25, 2022, in order to gauge investor interest in a potential investment in Surface’s securities, either in a public or private offering, Surface management wall-crossed approximately 20

 

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institutional investors, which included deeply knowledgeable and specialized healthcare funds, and engaged in discussions regarding Surface’s SRF388 clinical data prior to its public announcement. These investors did not find the available data to be compelling enough to support an offering at the time.

On October 27, 2022, the Surface board of directors held a meeting at which members of Surface management and representatives of Goodwin were present. At this meeting, Surface management provided a business update to the Surface board of directors. The Surface board of directors discussed the risks, challenges and strategic opportunities facing Surface, taking into consideration the recent investor feedback that the SRF388 clinical data was promising, but early. The Surface board of directors considered Surface management’s report that potential biopharmaceutical partners also wanted to see more mature data with additional patients. The Surface board of directors also considered the risks and challenges facing Surface as a result of then-current macro-economic, industry and market conditions, its then-current cash position, the need for meaningful capital investment to advance Surface’s product candidates and the lack of attractive financing alternatives at that time. The Surface board of directors and Surface management discussed that given the risks and challenges facing Surface, a low likelihood existed that third parties would be interested in providing equity financing to Surface until the next potential clinical data catalysts that might positively influence Surface’s stock price in the second half of 2023.

At this meeting, Surface management discussed a proposed plan to reprioritize aspects of Surface’s business and programs. Surface management provided an update on the progress with key clinical and preclinical programs as well as a financial budget for 2023 that took into account the continued negative financing environment for biopharmaceutical companies. Following discussion, the Surface board of directors determined that it would be in the best interests of Surface and its stockholders for Surface to narrow its pipeline priorities for 2023 to concentrate resources on completing the SRF388 studies and initiating SRF114 clinical development. The Surface board of directors authorized Surface management to proceed with implementing various actions to refocus Surface’s business on these pipeline priorities, including preserving cash available by pausing SRF617 and seeking to sublease a portion of its space in its Cambridge, Massachusetts office and research and development laboratory facility, with a reduction in force aligned with such changes, on such timeline as Surface management deemed to be in Surface’s best interest.

On November 2, 2022, Surface publicly announced positive SRF388 clinical data, and its pipeline priorities for 2023 to concentrate its resources on completing Phase 2 studies of SRF388 and initiating a Phase 1/2 study of SRF114. Surface also announced that it anticipated sharing clinical results from the SRF388 studies in the first half of 2023. As part of the re-prioritization, Surface announced a plan for Surface to pause clinical development of SRF617 and reduce its workforce by approximately 20%.

On November 10, 2022, Coherus informed Surface that it was terminating discussions with Surface regarding a potential collaboration or licensing transaction for the CCR8 and CD39 programs.

On December 13, 2022, the Surface board of directors held a meeting at which members of Surface management and representatives of Goodwin were present. At this meeting, Surface management provided a business update to the Surface board of directors. The Surface board of directors also considered the risks and challenges facing Surface as a result of then-current macro-economic, industry and market conditions, its then-current cash position, the need for meaningful capital investment to advance Surface’s product candidates and the lack of attractive financing alternatives at that time. Surface management reported on its continued evaluation of a range of potential strategic alternatives covering business development opportunities and mergers and acquisition strategies, noting that no proposals for any partnering or licensing or strategic transaction had been received.

Surface management also provided an update on Surface’s declining cash position, and that Surface would need to raise significant amounts of additional capital to complete all of its ongoing clinical trials and execute on its business plan. The meeting participants discussed the low likelihood that third parties would be interested in providing equity financing to Surface at attractive valuations in the current economic environment that would not be significantly dilutive to existing Surface stockholders, particularly in light of the lack of any other potential catalysts that might positively influence Surface’s stock price in the near term.

 

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The Surface board of directors also considered the potential value of Surface discontinuing all of its programs and focusing on cost preservation activities. Surface’s board of directors and management weighed the potential value that Surface could deliver to stockholders in the event of a possible reverse merger or liquidation scenario, compared to the continued development of its programs. Following discussion, the Surface board of directors determined that it was in the best interests of Surface stockholders for Surface to focus efforts on pursuing a broad range of strategic and financial alternatives to enhance stockholder value. The Surface board of directors directed Surface management to implement processes for pursuing (i) a strategic transaction including, a merger, merger of equals, business combination or an acquisition (the “strategic transaction process”), (ii) as a contingency, a so-called “reverse merger” transaction in which a counterparty would take control of Surface to access Surface’s cash balance and public listing status (the “reverse merger process”) and (iii) the wind-down of Surface’s operations and liabilities and declaring a dividend of available cash Surface stockholders (the “wind-down alternative”). Also at this meeting, the Surface board of directors discussed the advisability of engaging a financial advisor to assist Surface in its pursuit of such strategic and financial alternatives and the evaluation and negotiation of any proposals that may be received by Surface. Following this discussion, the Surface board of directors directed Surface management to proceed in pursuing the strategic and financial alternatives discussed at this meeting and have discussions with potential financial advisor candidates in connection therewith.

In January and early February 2023, members of Surface management, as authorized by the Surface board of directors, discussed with representatives of several financial advisory firms, including Wedbush, Surface’s business and prospects and the possibility of acting as its financial advisor in evaluating strategic alternatives that might be available to Surface considering the risks and challenges facing Surface described above.

During February and March 2023, members of Surface management, as authorized by the Surface board of directors, had preliminary discussions with another publicly traded oncology company (“Company A”) regarding a potential business combination transaction. Company A was already subject to an existing mutual confidentiality agreement with Surface that did not contain a standstill provision.

On February 8, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Goodwin were present. At this meeting, Surface management provided a business update to the Surface board of directors. Surface management also provided an update on the progress of the broad strategic process discussed at the previous Surface board of directors meeting. Surface management also provided an update on its discussions with potential financial advisor candidates, including Wedbush. The Surface board of directors considered Wedbush as a potential financial advisor to assist and advise Surface given, among other things, Wedbush’s qualifications, professional reputation, experience and expertise as a transaction advisor for reverse mergers and strategic transactions in the biopharmaceutical industry and its familiarity with clinical-stage companies like Surface. Based on these considerations, the Surface board of directors authorized the engagement of Wedbush to serve as Surface’s financial advisor in connection with a potential strategic transaction or reverse merger and Surface’s entry into an engagement letter, dated February 26, 2023, between Surface and Wedbush. See “—Opinion of Surface’s Financial Advisor” for further information regarding Wedbush’s engagement letter.

The Surface board of directors and management then discussed various considerations for the process of identifying counterparties for a possible strategic transaction or reverse merger, as well as a process for the wind-down alternative. The Surface board of directors and management agreed that outreach in the strategic process would include a broad range of parties, including companies that previously engaged in partnering or licensing discussions with Surface, including Company A and Coherus, and that outreach in the reverse merger process would include a broad selection of private and public companies in the life sciences industry proposed by Wedbush. Following discussion, the Surface board of directors authorized management to continue pursuing these matters expeditiously.

During the period beginning on March 1, 2023 and continuing until April 14, 2023, as authorized by the Surface board of directors, representatives of Wedbush and Surface management contacted a broad selection of 217 private and public companies in the life sciences industry. Included in these 217 companies, representatives

 

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of Wedbush contacted Company A, Coherus and two other Group B companies (“Company B” and “Company C”) and Surface management contacted certain Group A companies it had previously contacted in 2022 to ascertain interest in a strategic transaction or acquisition at that time, of which there was none.

Of the 217 companies: (i) 183 declined interest for a variety of reasons or did not respond to the outreach; (ii) 31 of these companies had management calls or meetings with Surface between March 14 and April 21, 2023; (iii) 27 companies submitted a non-binding indication of interest; (iv) seven companies expressed interest but did not submit a non-binding indication of interest; and (v) 41 executed a mutual confidentiality agreement with Surface. All of these mutual confidentiality agreements included customary standstill obligations (including a “don’t ask / don’t waive” provision) that automatically terminated upon Surface’s announcement of the execution of a definitive agreement with a third party to effect a change of control of Surface, except that (1) two mutual confidentiality agreements that did not include a “don’t ask / don’t waive” provision, (2) the mutual confidentiality agreement with Company E (as defined below) provided that Company E can submit a confidential proposal to Surface at any time and (3) the mutual confidentiality agreement with Company A that did not contain a standstill provision. All 41 parties were subsequently provided access to Surface’s virtual data room, which included nonpublic information about Surface and its programs.

With respect to the reverse merger process, as authorized by the Surface board of directors, Wedbush contacted primarily privately-held companies that were identified based on their need to obtain financing and their interest in becoming a public company with access to the public capital markets. Representatives of Wedbush distributed 29 process letters requesting that such companies submit non-binding indications of interest with respect to a reverse merger or other strategic transaction with Surface by April 14, 2023. The process letters indicated that Surface’s expected available net cash balance would be approximately $35-40 million for a traditional reverse merger transaction or $40-45 million for a simultaneous sign and close (accelerated) reverse merger transaction. The process letters also indicated that following evaluation of initial proposals, Surface expected to select a limited number of companies to engage in further diligence and be invited to present to members of the Surface board of directors and management team during the week of April 24, 2023. At the direction of the Surface board of directors, Surface management and representatives of Wedbush, conducted due diligence on multiple potential counterparties, focusing its diligence on strategic, scientific and clinical diligence, as well as competition and other business factors. Of the 29 process letters sent by Wedbush to potential counterparties, 27 counterparties submitted non-binding indications of interest.

On March 15, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. At the meeting, Surface management provided a business update to the Surface board of directors. Representatives of Goodwin reviewed the fiduciary duties of the Surface board of directors. Surface management reported on the status of engagement with other Group A companies regarding interest in a potential partnership/licensing transaction or acquisition, noting that the only Group A company demonstrating interest had terminated discussions with Surface regarding a partnership or licensing transaction and the Surface board of directors agreed that there remained no parties interested in potential partnership/licensing opportunities with Surface, nor an acquisition of Surface. Surface management provided an update on the strategic process with certain Group B companies, including an update on the recent discussions with Company A. Representatives of Wedbush provided an update on the reverse merger process. Representatives of Wedbush reviewed counterparty outreach to date, and discussed the process by which Wedbush, together with Surface management, were evaluating potential counterparties in the reverse merger process. The Surface board of directors discussed key considerations in narrowing the selection of potential reverse merger partners for Surface. Representatives of Wedbush then reviewed the current market conditions, various criteria to consider and the overall transaction process, as well as other items that the Surface board of directors and Surface might consider in the context of the overall strategic review process, including expectations for timelines and schedules.

Surface management discussed Surface’s cash burn and cash position, and plans for reducing operating costs and its progress on the wind-down alternative. The Surface board of directors discussed the risks and delays

 

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associated with, and uncertain value and costs to Surface stockholders of, liquidating Surface, including the uncertainties of continuing cash burn while contingent liabilities are resolved, uncertainty of timing of release of cash until contingent liabilities are resolved, and the risks and costs associated with being a shell company prior to cash distribution.

The Surface board of directors discussed the various strategic and financial alternatives in the context of the potential outcomes of the updated clinical data from the ongoing Phase 2 studies investigating SRF388 as a monotherapy in lung cancer and in combination therapy in liver cancer, which was expected in the second quarter of 2023. Following discussion, the Surface board of directors directed Surface management and its advisors to continue discussions with interested parties in the strategic process and the reverse merger process consistent with the discussions at this meeting.

Also at the meeting, the Surface board of directors established an advisory transaction committee (the “Transaction Committee”) for convenience (and not because of any actual or perceived conflicts of interests) in order to assist the Surface board of directors, as needed, in connection with the strategic process and reviewing and negotiating any proposals that might be received by Surface regarding a potential strategic or reverse merger transaction. Carsten Brunn (Chair) and David Grayzel, non-management independent directors, and J. Jeffery Goater, a non-management director, have significant strategic transaction experience and were appointed to the Transaction Committee.

From March 7 through May 2, 2023, members of Surface management and representatives of Wedbush had preliminary discussions with representatives of Company B regarding a potential business combination transaction between the companies.

On March 16, 2023 representatives of Wedbush had a preliminary discussion with representatives of Company A’s financial advisor regarding the parties’ mutual interest in pursuing a potential business combination.

From March 17 through April 14, 2023, members of Surface management and representatives of Wedbush had preliminary discussions with representatives of Company C regarding a potential business combination transaction between the companies.

On March 21, 2023, Mr. Goater had a preliminary discussion with the chair of the board of directors of Company A regarding the mutual interest of the companies in a potential business combination transaction.

On March 30, 2023, following negotiation between the parties, Surface and Coherus entered into a new mutual confidentiality agreement, which included customary non-disclosure provisions and mutual standstill provisions that prohibited either party, for six months from the date of the agreement, from offering to acquire or acquiring the other party, and from taking certain other actions, including soliciting proxies, without the prior written consent of the other party. The confidentiality agreement provided for the termination of the standstill provision on customary terms.

On April 4, 2023, Surface provided expanded access to a virtual data room to representatives of Coherus and its advisors.

On April 5, 2023, Dr. Robert Ross, the Chief Executive Officer of Surface and a director of Surface, and Mr. Goater had a discussion with the chair of the board of directors of Company A who verbally proposed a business combination transaction where the Surface stockholders would receive shares of Company A common stock equal to 20% of the post-closing company. Dr. Ross and Mr. Goater responded that they would inform the Surface board of directors of the proposal.

Also on April 5, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management provided an

 

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update on the strategic process and the perceived level of interest of companies that were contacted, noting the proposal received from Company A and that proposals from one or more other companies, including Coherus, were expected shortly. Dr. Ross reported on the recent discussions with Company A and receipt of the verbal proposal earlier that day. Following discussion, the Transaction Committee determined that Company A’s proposal did not adequately reflect Surface’s value, as it valued Surface at a discount to its cash position, and instructed Dr. Ross to inform Company A that it would need to meaningfully improve its proposal for the Surface board of directors to consider it viable. Representatives of Wedbush provided an update on the reverse merger process, noting that companies were given an April 14, 2023 deadline to provide an initial indication of interest. Following discussion of the status of the strategic process and the reverse merger process, the Transaction Committee instructed Wedbush to contact certain Group A companies to ascertain interest in an acquisition of Surface. Surface management provided an update on Surface’s net cash position and the negotiations to terminate Surface’s lease obligations. Surface management also provided an update on the timeline for the SRF388 data release. Following discussion, the Transaction Committee determined it would have subsequent meetings to review transaction proposals that may be received and select companies to advance with the goal of having a potential transaction to announce by the end of May 2023, given Surface’s net cash position.

On April 7, 2023, as instructed by the Transaction Committee, Dr. Ross informed the chief executive officer of Company A that it would need to meaningfully improve its proposal for the Surface board of directors to consider it viable. After April 7, 2023 Surface did not have any further contact with Company A.

On April 13, 2023, Christopher Slavinsky, the Chief Business and Legal Officer of Coherus, called Dr. Ross to inform him that Mr. Slavinsky would be sending a non-binding proposal (the “April 13 Proposal”), which Mr. Slavinsky subsequently sent to Dr. Ross. The April 13 Proposal proposed that Coherus would acquire Surface in an all-stock transaction. Among other terms, the April 13 Proposal offered consideration of Coherus common stock for each outstanding share of Surface common stock at an exchange ratio equal to: (i) Surface’s net cash at closing multiplied by 1.10, divided by (ii) the ten-day VWAP prior to closing, divided by (iii) Surface’s fully-diluted capitalization. The April 13 Proposal also offered that Surface stockholders would receive at closing contingent value rights for 80% of milestone and royalty-based value of Surface’s existing programs with Novartis (NZV930) and GSK (GSK4381562) (i.e., Surface’s currently out-licensed programs), payable for a period of ten years following the closing (and payable, in Coherus’ discretion, in shares of Coherus common stock, cash or a combination of stock and cash). The April 13 Proposal also provided for a closing condition in favor of Coherus requiring that Surface have net cash of at least a minimum amount (the “Minimum Net Cash Condition”) to be determined by Coherus following diligence. The April 13 Proposal was subject to, among other conditions, satisfactory completion of customary due diligence. Dr. Ross informed the Surface board of directors of the April 13 Proposal.

Between April 14, 2023 and May 8, 2023 representatives of Wedbush contacted 15 Group A companies (included in the 217 companies discussed above) to explore a potential acquisition of Surface. As a result of discussions with these companies, representatives of Wedbush distributed three process letters requesting that such companies submit non-binding indications of interest with respect to an acquisition or other strategic transaction with Surface by May 8, 2023. No such indications of interest or other proposals were submitted.

Also on April 14, 2023, in response to the process letters distributed by Wedbush, Surface received a non-binding indication of interest and proposed term sheet from each of Company B and Company C.

On April 21, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. This meeting was held to, among other things, consider the first-round reverse merger proposals, narrow the field of potential reverse merger candidates and to discuss the April 13 Proposal. Surface management and representatives of Wedbush discussed the companies and their first-round reverse merger proposals, including the diligence review of the companies conducted by Surface management and the companies’ perceived level of interest in a reverse merger transaction with Surface. The meeting participants focused on potential candidates’ strengths and weaknesses with respect to fundraising

 

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ability, valuations, product candidate viability, potential data readouts, competition and other criteria (collectively, the “Criteria”). In the course of the discussion, the meeting participants eliminated many of the indications of interest received as not viable, based on the Criteria. In particular, the Transaction Committee decided to terminate discussions with a number of these companies because the Transaction Committee determined that such companies were unlikely to meet a sufficient number of the Criteria, particularly related to the attractiveness of their technology, development pipeline and the likelihood and timing of approval of their respective product candidates. Following such discussions, the Transaction Committee decided to invite six companies to proceed to the next round of the reverse merger process, which would involve mutual diligence between Surface and each of the selected companies as well as a presentation to the Transaction Committee by each selected company. These six companies comprised of Company B, and five other reverse merger candidates (“Company D,” “Company E,” “Company F,” “Company G” and “Company H”). Following the selection of the six companies for the next round, representatives of Wedbush dismissed ten companies from the process (including Company C), as directed by the Transaction Committee.

Also at this meeting, Surface management provided an update on the strategic process and receipt of the April 13 Proposal. Following discussion, the Transaction Committee determined that the April 13 Proposal did not adequately reflect Surface’s value and instructed Dr. Ross to inform Coherus that it should improve its proposal for consideration by the Surface board of directors. Surface management also provided an update on Surface’s net cash position and the negotiations regarding the settlement of Surface’s lease obligations. Surface management also discussed with the Transaction Committee the possibility of Surface continuing as standalone company if the SRF388 data was favorable.

On April 22, 2023, Dr. Ross had a discussion with Mr. Slavinsky and conveyed the Surface board of directors’ view that the April 13 Proposal did not adequately value Surface and that the Surface board of directors would consider any improved proposal that Coherus were to submit. Dr. Ross and the representatives of Wedbush further emphasized that Surface had received proposals that attributed more value to Surface, and to be competitive, Coherus’ proposal would have to attribute a higher valuation to the Surface programs. Mr. Slavinsky expressed Coherus’ continued interest in a potential strategic transaction with Surface and indicated that he would discuss a potential revised proposal with the Coherus board of directors.

On April 24, 2023, Mr. Slavinsky submitted a revised non-binding proposal to Dr. Ross for an acquisition of Surface (the “April 24 Proposal”). Among other terms, the April 24 Proposal provided for a revised exchange ratio equal to: (i) $30 million plus Surface’s net cash at closing, divided by (ii) the ten-day VWAP of Coherus common stock prior to closing, divided by (iii) Surface’s fully-diluted capitalization. The April 24 Proposal also offered contingent value rights for Surface’s currently out-licensed programs substantially similar to the April 13 Proposal, except the April 24 Proposal reduced the net proceeds percentage to 70% from 80%. The April 24 Proposal also provided for a Minimum Net Cash Condition of at least $30 million. The April 24 Proposal was subject to, among other conditions, satisfactory completion of customary due diligence and was otherwise substantially similar to the April 13 Proposal.

On April 26, 2023, the Surface and Coherus management teams engaged in preliminary due diligence discussions.

From April 26 through April 28, 2023, each of Company B, Company D, Company E, Company F, Company G and Company H presented to the Transaction Committee, Surface management and representatives of Wedbush. Also during this time period, Surface and representatives of Wedbush conducted additional due diligence on the six companies. This additional due diligence included holding meetings with management of these companies, evaluating answers to submitted questions and reviewing the contents of the companies’ virtual data rooms.

On April 27, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management reported on the recent

 

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discussions with Coherus and receipt of the April 24 Proposal. The Transaction Committee discussed strategy with respect to further negotiations with Coherus that would be most likely to maximize value for Surface and its stockholders. Following discussion, the Transaction Committee authorized Dr. Ross to continue to negotiate with Coherus and to submit a revised proposal to Coherus ascribing an increased enterprise value of $40 million to Surface and additional contingent value rights for future licensing agreements, among other modifications described below. The Transaction Committee also discussed the presentation by Company B and its business combination proposal, and determined that Company B would have to meaningfully improve its proposal for it to be a viable basis on which to continue discussions. Surface management provided an update on Surface’s net cash position and the negotiations to terminate Surface’s lease obligations.

Later on April 27, 2023, Dr. Ross called Mr. Slavinsky to inform him that Dr. Ross would be sending a revised non-binding proposal (the “April 27 Proposal”), which Dr. Ross subsequently sent to Mr. Slavinsky. Among other terms, the April 27 Proposal provided for a revised exchange ratio equal to: (i) $40 million plus Surface’s net cash at closing, divided by (ii) the 3-day trailing 90-day VWAP of Coherus common stock prior to closing, divided by (iii) Surface’s fully-diluted capitalization. The April 27 Proposal also provided for contingent value rights for Surface’s currently out-licensed programs substantially similar to the April 24 Proposal, except the April 27 Proposal increased net proceeds percentage to 85% from 70%. The April 27 Proposal also included additional contingent value rights for 50% of payments made pursuant to any collaboration agreements relating to SRF388, SRF114 and SRF617 entered into following the closing. The April 27 Proposal was subject to, among other conditions, satisfactory completion of customary due diligence and was otherwise substantially similar to the April 24 Proposal.

Also on April 27, members of Surface management and representatives of Wedbush had discussions with representatives of Company B and informed Company B that it would have to meaningfully improve its proposal for the Surface board of director to deem it a viable proposal to continue discussions. After May 2, 2023, Surface did not have any further contact with Company B.

On April 28, 2023, Company H presented to the Transaction Committee. Following the presentation, the Transaction Committee determined that a business combination with Company H would be a poor strategic fit based on the developmental stage of its compounds and that its proposal did not adequately value Surface. Later that day, as authorized by the Transaction Committee, Dr. Ross informed the chief executive officer of Company H that Surface was declining to continue discussions with Company H. After April 28, 2023, Surface did not have any further contact with Company H.

On May 1, 2023, Dr. Ross had a discussion with Mr. Slavinsky who indicated that Coherus would submit a revised proposal in the coming days and that it would be Coherus’ “best and final” proposal.

On May 3, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management reported on the recent discussions with Coherus and that a revised proposal from Coherus was expected imminently. Surface management and representatives of Wedbush provided an update and discussed their evaluation of the six remaining companies in the reverse merger process based upon the companies’ presentations and additional Surface management due diligence. Following discussion, and based upon the Criteria, the Transaction Committee determined to prioritize reverse merger discussions with Company D and Company E based on the strength of their offers, both financial and scientific, and to hold Company F and Company G as secondary candidates in the event the Transaction Committee desired to pursue reverse merger discussions with them at a later time. The Transaction Committee then instructed Wedbush to send non-binding draft term sheets for a reverse merger to Company D and Company E, and to prepare, but not yet send, non-binding draft term sheets for a reverse merger for Company F and Company G. The Transaction Committee also authorized Surface management and its advisors to continue discussions with Coherus and other interested parties in the strategic process. Also at this meeting, Surface management provided an update on the wind-down alternative, including the discussions to settle Surface’s lease liabilities.

 

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On May 4, 2023, Mr. Slavinsky submitted a revised non-binding proposal to Dr. Ross for an acquisition of Surface (the “May 4 Proposal”). Among other terms, the May 4 Proposal provided for a revised exchange ratio equal to: (i) $40 million plus Surface’s net cash at closing, divided by (ii) the 3-day trailing 30-day VWAP of Coherus common stock prior to closing, divided by (iii) Surface’s fully-diluted capitalization. The May 4 Proposal also provided for contingent value rights substantially similar to the April 27 Proposal, except the April 27 Proposal decreased the currently out-licensed programs net proceeds percentage to 70% from 85%. The May 4 Proposal was subject to, among other conditions, satisfactory completion of customary due diligence and was otherwise substantially similar to the April 27 Proposal.

Also on May 4, 2023, Surface announced its financial results for the first quarter of 2023 and that in the second quarter of 2023, Surface expected to share updated clinical data from the ongoing Phase 2 studies investigating SRF388 as a monotherapy in lung cancer and in combination therapy in liver cancer.

On May 6, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Dr. Ross reported on his recent discussions with Mr. Slavinsky and receipt of the May 4 Proposal. Surface management reported on Coherus’ due diligence efforts to date and perceived level of interest. Surface management and representatives of Wedbush reported on the status of engagement with other companies regarding interest in the strategic process, noting that Company A had declined to submit a revised proposal. Representatives of Wedbush provided an update on the reverse merger process, including discussions with Company D and Company E regarding the draft term sheets. The meeting participants discussed that Coherus indicated that the May 4 Proposal was its “best and final” proposal. The meeting participants then discussed potential responses to Coherus and related process and timing considerations. The meeting participants discussed that Coherus’ May 4 Proposal would provide Surface stockholders with an approximate three-fold premium over Surface’s anticipated net cash at closing. The meeting participants discussed that Company A has not provided a proposal that valued Surface at a premium to its cash position and that no other company in the strategic process had submitted a proposal or indicated that it would submit a proposal for strategic transaction valuing Surface at a premium to its cash position, and that in a reverse merger Surface would expect only a modest premium ($5 – 10 million) to its net cash at closing on account of its public listing status.

At this meeting, Surface management also provided an update regarding the expected release of updated clinical data from the ongoing Phase 2 studies investigating SRF388 as a monotherapy in lung cancer and in combination therapy in liver cancer, which was expected in late May or early June 2023. The Surface board of directors considered the early nature of the clinical data, and that while Surface believed that the data could continue to improve over time, given that many patients experience a delayed response with immuno-oncology therapies, that waiting for the data to mature further would require time, money and resources that Surface did not currently have available.

Following discussion, the Surface board of directors considered that in its view it had obtained Coherus’ best and final offer, and given the discussions at this meeting and previous meetings of the Surface board of directors and the Transaction Committee, the Surface board of directors agreed that it was in the best interests of Surface and its stockholders to proceed with Coherus’ May 4 Proposal. Surface management then provided updates on Surface’s net cash position, the wind-down alternative and the settlement of the lease obligations. Following discussion, the Surface board of directors instructed management and its advisors to expeditiously work towards execution of transaction documents substantially on the terms of the May 4 Proposal.

On May 9, 2023, the Surface and Coherus management teams engaged in reciprocal due diligence discussions.

Also on May 9, 2023, as directed and reviewed by the Transaction Committee, representatives of Wedbush sent a draft non-binding reverse merger term sheet to Company G.

Also on May 9, 2023 the Surface and Company D management teams engaged in preliminary reciprocal due diligence discussions.

 

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Also on May 9, 2023 representatives of Wedbush and representatives of Company G discussed the potential reverse merger transaction between the companies. Representatives of Company G requested access to Surface’s virtual data room, which representatives of Wedbush facilitated.

On May 11, 2023, representatives of Goodwin had a preliminary discussion with representatives of Arnold & Porter Kaye Scholer LLP (“Arnold & Porter”), legal advisor to Coherus in connection with the proposed transaction, to discuss the May 4 Proposal. No terms were agreed to during this discussion.

Also on May 11, 2023, as directed and reviewed by the Transaction Committee, representatives of Wedbush sent a draft non-binding reverse merger term sheet to Company F.

On May 12, 2023 representatives from Company E sent representatives of Wedbush a revised reverse merger term sheet.

On May 13, 2023 Company F sent representatives of Wedbush a revised reverse merger term sheet.

On May 15, 2023, Arnold & Porter sent to Goodwin an initial draft of a merger agreement. Among other things, the draft merger agreement provided for (i) representations and warranties and interim operating covenants customary for transactions of this type, (ii) customary non-solicitation restrictions prohibiting Surface from soliciting or engaging in discussions with competing bidders, (iii) a termination fee equal to 3.5% of Surface’s equity value (payable under certain circumstances, including if the merger agreement was terminated to enter into a superior proposal), (iv) a termination right, exercisable by either party, if the transaction had not closed six months after the date the merger agreement was executed, (v) reimbursement of Coherus’ transaction expenses in an uncapped amount, payable by Surface if the merger agreement was terminated following failure of Surface stockholders to approve the transaction at the stockholder meeting, whether or not Surface later participates in an acquisition proposal (a “Naked No Vote Expense Reimbursement”), (vi) a proposed definition of “net cash” under the merger agreement and (vii) a $30 million Minimum Net Cash Condition.

From May 15 through June 15, 2023, representatives and advisors of Surface and Coherus reviewed due diligence materials provided by the other party and engaged in business, financial, and legal due diligence discussions with representatives and advisors of the other party and submitted a number of requests for supplemental due diligence information. The mutual diligence was focused on assessing Surface’s net cash position, legal and compliance matters, human resources matters and finance and accounting matters.

On May 16, 2023, the Surface and Company E management teams engaged in a discussion regarding the potential reverse merger transaction and the draft term sheet.

Also on May 16, 2023, representatives of Company G sent representatives of Wedbush a revised reverse merger term sheet.

On May 17, 2023, Arnold & Porter sent to Goodwin an initial draft of the CVR agreement, which among other things, provided for the contingent value right terms set forth in the May 4 Proposal.

On May 18, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management provided an update on the continuing discussions with Coherus, the status of the parties’ due diligence review, and timing considerations. Representatives of Goodwin reviewed key items in the draft merger agreement and contingent value rights agreement, including, among others, the tax implications of the proposed transaction, the determination of the exchange ratio, the determination of Surface net cash, the Minimum Net Cash Condition and the amount of the proposed termination fee and expense reimbursement. The Transaction Committee provided feedback and direction to Surface management and Surface’s advisors on these matters. Surface management provided an update on Surface’s net cash position and the settlement of the lease obligations. Representatives of Wedbush

 

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provided an update on the reverse merger process and the discussions with Company D, Company E, Company F and Company G. The Transaction Committee provided feedback and direction to Surface management and Surface’s advisors on these matters, including instruction to provide revised draft non-binding term sheets to Company E, Company F and Company G, incorporating a reduction to Surface’s expected available net cash balance to approximately $30 million. The Transaction Committee determined that of these three companies, Company G was the least appealing due to concerns with its management team. The Transaction Committee also determined to de-prioritize Company D due to its lack of engagement in the reverse merger process.

Also on May 18, 2023, Coherus provided access to representatives of Surface and Goodwin to a virtual data room containing documents responsive to Surface’s due diligence requests.

On May 19, 2023, Goodwin sent revised drafts of the merger agreement and contingent value rights agreement to Arnold & Porter.

On May 22, 2023, as directed and reviewed by the Transaction Committee, representatives of Wedbush sent revised drafts of non-binding reverse merger term sheets to representatives of Company E and Company F. Follow up with Company G was de-prioritized while awaiting further responses from Company E and Company F.

From May 26 through June 15, 2023, representatives of Goodwin, with input from the Surface board of directors (including through the Transaction Committee and Compensation Committee of the Surface board of directors (the “Compensation Committee”)) and management, and Coherus’ representatives and representatives of Arnold & Porter exchanged drafts and participated in discussions regarding the terms of the merger agreement, the contingent value rights agreement and related documents. The items negotiated with respect to the merger agreement, the contingent value rights agreement and related documents included, among other things, (1) the representations and warranties to be made by the parties, (2) the tax implications of the transactions, (3) the determination of the exchange ratio of the transaction, (4) the restrictions on the conduct of each party’s business until completion of the transaction, (5) exclusions of certain events and conditions from the definition of “Material Adverse Effect,” (6) the ability of Surface under certain circumstances to entertain unsolicited proposals for an acquisition that constitutes or would reasonably be expected to lead to an offer that is superior to the merger, (7) the conditions to completion of the merger, (8) certain matters regarding Surface employees discussed below, (9) the remedies available to each party under the merger agreement, including the triggers for the termination fee payable to Coherus, (10) the amount of such termination fee (which the parties ultimately agreed in the Merger Agreement to be $2 million or 3% of the aggregate equity value of the transaction), (11) the maximum amount of the Naked No Vote Expense Reimbursement (which the parties ultimately agreed in the Merger Agreement to be $500,000) (12) the definition of “net cash,” (13) the amount of the Minimum Net Cash Condition (which the parties ultimately agreed in the Merger Agreement to be $19.6 million) and (14) the terms of the CVR Agreement.

On May 31, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management provided an update on the recent discussions with Coherus and expected timeline for entering into the Merger Agreement with Coherus. Representatives of Goodwin provided an update on the negotiation of the Merger Agreement and the CVR Agreement. The Transaction Committee provided feedback and direction to Surface management and Surface’s advisors on these matters. Surface management provided an update on the settlement of the lease obligations.

Also at the meeting, Surface management discussed an analysis of a potential liquidation of Surface prepared by Surface management which had previously been provided to the Transaction Committee, including the potential timeline for liquidation and an estimate, subject to various assumptions, of the aggregate amount that would be distributable to Surface stockholders in this scenario. In the context of reviewing the liquidation plan, the Transaction Committee discussed the risks, challenges and strategic opportunities facing Surface. Following discussion and questions of management regarding various matters relating to the liquidation plan,

 

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including the assumptions on which the liquidation plan was based, the Transaction Committee, and subsequently the Surface board of directors, approved the liquidation plan.

On June 4, 2023, the Transaction Committee held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management and representatives of Goodwin provided update on the negotiation of the transaction documents with Coherus and the expected timeline for entering into the Merger Agreement with Coherus. Representatives of Wedbush discussed certain preliminary financial analyses regarding the potential strategic transaction with Coherus. The Transaction Committee provided feedback and direction to Surface management and Surface’s advisors on these matters.

Also on June 4, 2023, as authorized by the Transaction Committee, Dr. Ross discussed with Mr. Slavinsky changing the exchange ratio calculation to be based on either the five-day or ten-day VWAP of Coherus common stock prior to the date of the execution of the Merger Agreement.

On June 5 and June 6, 2023, the Surface and Coherus management teams discussed the expected communications regarding announcement of the execution of the definitive Merger Agreement the proposed transaction.

On June 6, 2023, Mr. Slavinsky confirmed to Dr. Ross Coherus’ agreement to changing the exchange ratio calculation to be based on the five-day VWAP prior to the date of the execution of the Merger Agreement.

On June 7, 2023, the Compensation Committee held a meeting at which members of Surface management and representatives of Goodwin were present. At this meeting, the participants discussed that in connection with the proposed transaction with Coherus, Surface would implement a workforce reduction of approximately 50% of its employees. The meeting participants then discussed proposals for an updated severance policy for non-executive Surface employees, amendments to the employment agreements with Surface executive officers to align certain severance terms to market standards, the potential agreement with Coherus regarding the retention of a number of the non-executive Surface employees following the closing to assist Coherus with the effective transition of the SRF388 and SRF114 programs. Following discussion, the Compensation Committee determined to recommend that the Surface board of directors consider and approve these matters in connection with approval of the execution of the Merger Agreement with Coherus. Following the meeting, Surface management made its first communication to Coherus, regarding the employee retention and severance proposals as discussed at the meeting, and as authorized by the Compensation Committee.

On June 12, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. The purpose of the meeting was, among other things, to update the Surface board of directors regarding the status of the arrangements with respect to the proposed merger with Coherus and consider the near final terms of the transaction, including the Merger Agreement and CVR Agreement. Dr. Ross provided an overview of the plan for announcement of the potential transaction with Coherus, if approved, and the plan regarding related communications, noting that in connection with the announcement of the transaction with Coherus, Surface would announce updated clinical data from the ongoing SRF388 Phase 2 studies. Surface management reported on its due diligence review of Coherus. Representatives of Goodwin reviewed with members of the Surface board of directors their fiduciary duties. Surface management and representatives of Goodwin provided an update on the negotiation of key merger agreement issues, including, among others, the determination of the exchange ratio and the determination of Surface net cash. Surface management provided an update on Surface’s net cash position and reported that Surface has reached agreement on the termination of its lease obligations contingent on the execution of the Merger Agreement. Surface management discussed with the Surface board of directors an updated liquidation analysis of Surface prepared by management, which was updated from the analysis discussed at the Transaction Committee meeting on May 31, 2023 to reflect the agreed upon terms of the Surface lease termination amount (which is summarized under “—Surface Liquidation Analysis”). After discussion of these matters, the Surface board of directors approved the updated liquidation analysis for use by Wedbush in its financial analyses.

 

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Also at the meeting, representatives of Wedbush reviewed Wedbush’s preliminary financial analyses of Surface, Coherus, and certain financial terms of the Merger Agreement. The meeting participants discussed the expected timeline to execute the Merger Agreement and announce the transaction with Coherus by the end of the week. The Surface board of directors provided feedback and direction to Surface management and Surface’s advisors on these matters. The Surface board of directors was also updated on the matters discussed at the Compensation Committee meeting on June 7, 2023. Following discussion, representatives of Goodwin reviewed and summarized resolutions that the Surface board of directors would be asked to consider and approve at a subsequent meeting in connection with the approval of the Merger Agreement and transactions contemplated thereby. The Surface board of directors did not, however, approve the Merger Agreement at this meeting.

Later on June 12, 2023, Mr. Slavinsky informed Dr. Ross that Coherus received a notice letter from AbbVie Inc. (“AbbVie”) alleging Coherus breached its settlement and license agreement with AbbVie, which grants Coherus a royalty-bearing, non-exclusive license under AbbVie’s intellectual property rights to commercialize YUSIMRY^TM in the United States commencing on July 1, 2023, because of Coherus’ announcement on June 1, 2023 of its pricing agreement with Mark Cuban Cost Plus Drug Company, PBC (“CPD”) and its plans to offer YUSIMRY^TM to CPD customers beginning in July 2023. Mr. Slavinsky also informed Dr. Ross that Coherus sent a response letter to AbbVie on June 11, 2023 denying the allegation in full and requesting that AbbVie provide more information about the allegation (the foregoing, collectively, the “AbbVie Matter”).

During June 13 and 14, 2023, representatives of Surface and Goodwin engaged in numerous diligence discussions with representatives of Coherus and its legal advisors regarding the AbbVie Matter.

On June 14, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present. Surface management and representative of Goodwin reported on their discussions with Coherus, and due diligence review, regarding the AbbVie Matter. Following discussion, the Surface board of directors concluded that it would further consider at a subsequent meeting the resolution of the AbbVie Matter in the context of the proposed transaction with Coherus and the expected timeline for execution of the Merger Agreement and announcement of the transaction with Coherus.

Also at this meeting, the participants discussed the status of the reverse merger process and that none of Company D, Company E, Company F or Company G were actively following up with Wedbush regarding the status of their draft term sheets for a possible reverse merger transaction, and that in particular, Company E and Company F were understood to be prioritizing their other financial and strategic alternatives. The meeting participants discussed the liquidation analysis, the wind-down alternative and Surface’s net cash position. Surface management noted that given the passage of time and updated estimates of wind-down costs, in connection with a reverse merger the updated expected available net cash balance would be approximately $15 million, rather than the $30 million last referenced in the reverse merger term sheet negotiations. The meeting participants discussed their belief that the potential reverse merger counterparties would no longer be interested in a reverse merger at such a decreased net cash balance on terms that would be attractive to Surface, if at all. Following discussion, the Surface board of directors determined that execution of the Merger Agreement with Coherus continued to be in the best interests of Surface and its stockholders, particularly in light of the lack of viable financial and strategic alternatives available to Surface and given the risks and challenges facing Surface previously discussed by the Surface board of directors. The Surface board of directors instructed Surface management and its advisors, pending the satisfactory resolution of the AbbVie Matter, to expeditiously work towards execution of a merger agreement with Coherus and its advisors on the terms discussed at this meeting, and to de-prioritize the reverse merger process.

On the morning of June 15, 2023, Coherus filed with the SEC a Current Report on Form 8-K disclosing the resolution of the AbbVie Matter.

On the evening of June 15, 2023, the Surface board of directors held a meeting at which members of Surface management and representatives of Wedbush and Goodwin were present to consider approval of the proposed

 

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transaction with Coherus. Surface management reported on its due diligence review of Coherus, noting the resolution of the AbbVie Matter. Representatives of Goodwin reviewed the fiduciary duties of the Surface board of directors and certain terms of the final proposed transaction documentation with Coherus, including the Merger Agreement and the CVR Agreement. Representatives of Goodwin also discussed the proposal for an updated severance policy for non-executive Surface employees, amendments to the employment agreements with Surface executive officers to align certain severance terms to market standards, the potential agreement with Coherus regarding the retention of a number of the non-executive Surface employees following the closing to assist Coherus with the effective transition of the SRF388 and SRF114 programs, and including the potential for arrangements for executive officers described in “Interests of Surface’s Directors and Executive Officers in the Mergers.” The meeting participants noted that these matters were discussed and agreed upon with Coherus only after negotiation of all material economic terms of the transaction were completed. After discussion, the members of the Surface board of directors and the Compensation Committee approved these matters.

Also at the meeting, representatives of Wedbush reviewed Wedbush’s financial analyses of Surface, Coherus, and certain financial terms of the Merger Agreement, including the exchange ratio in the Merger Agreement. Representatives of Wedbush then rendered Wedbush’s oral opinion (which was subsequently confirmed in writing by the delivery of its written opinion, dated the same date), to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Wedbush, as described in its written opinion, the Merger Consideration was fair, from a financial point of view, to the holders of Surface Common Stock, as more fully described in “—Opinion of Surface’s Financial Advisor.” After discussion, the Transaction Committee unanimously recommended that the Surface board of directors approve Surface’s entry into the Merger Agreement for the transaction with Coherus on the terms presented at this meeting. Following additional discussion and consideration of the merger agreement and the other transactions contemplated by the Merger Agreement (including the factors described in “—Surface’s Reasons for the Merger; Recommendation of the Surface Board of Directors that Surface Stockholders Approve the Merger Agreement”), the Surface board of directors unanimously adopted resolutions (i) determining that the terms of the Mergers and the other transactions contemplated by the Merger Agreement are advisable, fair to, and in the best interests of Surface and Surface stockholders, (ii) determining that it is in the best interests of Surface and Surface stockholders to enter into the Merger Agreement and the transactions contemplated thereby, (iii) approving the execution and delivery by Surface of the Merger Agreement and the performance of Surface of the covenants and agreements in the Merger Agreement and the consummation of the Mergers and other transactions contemplated by the Merger Agreement and (iv) directing that the Merger Agreement and the transactions contemplated thereby be submitted to the Surface stockholders for adoption.

Later in the evening of June 15, 2023, Coherus, the Merger Subs and Surface executed the Merger Agreement, and Surface executed the lease termination agreement.

On June 16, 2023, Coherus and Surface issued a joint press release announcing the parties’ entry into the Merger Agreement and held a joint investor call. The joint press release also announced updated clinical data from Surface’s ongoing investigating SRF388 Phase 2 studies and that Surface would implement a workforce reduction of approximately 50% of its employees.

On July 3, 2023, Surface filed with the SEC a Current Report on Form 8-K disclosing substantial doubt about Surface’s ability to continue as a going concern.

Surface’s Reasons for the Mergers; Recommendation of the Surface Board of Directors that Surface Stockholders Approve the Merger Agreement

In the course of its evaluation of the Mergers, the Merger Agreement and related agreements, the Surface board of directors and the Transaction Committee held numerous meetings, consulted with its senior management, legal counsel and its financial advisor and reviewed a significant amount of information and, in

 

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reaching its decision to approve the Mergers and the Merger Agreement, the Surface board of directors considered a number of factors, including, among others, the following:

 

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Merger Consideration. Under the terms of the Merger Agreement, Coherus will issue Coherus common stock at a price of $5.2831 per share to acquire all outstanding shares of Surface stock for a total transaction value equal to approximately $64.2 million, or $41.2 million in transaction enterprise value, based on the Company’s fully diluted shares outstanding and net cash at the time the Merger Agreement was signed. This estimated transaction value equates to an approximate three-fold premium over Surface’s anticipated net cash of $20 million to $25 million at Closing;

 

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Exchange Ratio. The Exchange Ratio will not be adjusted based on the market price of Coherus common stock, which affords Surface stockholders the opportunity to benefit from any potential appreciation in the value of Coherus common stock after the announcement of the Mergers. The Exchange Ratio resulted from extensive negotiation between the parties and, as a result, the Surface board of directors believes that the Exchange Ratio represented the highest value that Surface could obtain from Coherus. The initial Exchange Ratio implies a transaction enterprise value of $0.64 per share of Surface common stock, based on the VWAP of $5.2831 for the five trading days through and including June 15, 2023 (the last full trading day before the public announcement of the Mergers), which represents a premium of approximately 113% over the estimated liquidation value per share of Surface common stock;

 

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Participation in Potential Upside. The consideration in the Mergers will consist entirely of Coherus common stock and CVRs. Surface stockholders will own Coherus common stock following the completion of the First Merger and will have an opportunity to participate in any future earnings and the growth of the combined company, including potential synergies, and any future appreciation in the value of Coherus common stock following the Mergers. The Surface board of directors also considered its belief that the Mergers are expected to provide a number of significant strategic opportunities and benefits to the combined company to support potential future price appreciation of Coherus common stock, including, without limitation, the following (which are not necessarily presented in order of their relative importance to the Surface board of directors):

 

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the combined company is expected to have compelling clinical data in SRF388 and SRF114, which have potential as monotherapies and as combination treatments with other immuno-oncology agents such as Coherus’ toripalimab;

 

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the combined company will have an expanded franchise into the treatment of tumor types with significant unmet needs, such as lung cancer and head and neck cancer, which is expected to enhance the combined company’s competitiveness;

 

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the combined company will have an enhanced ability to fund ongoing clinical trials through year-end 2024, allowing execution across all stages of the pipeline;

 

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the pipeline prioritization enabled by the acquisition will focus clinical development activities on competitively positioned immuno-oncology programs and reduce budgeted research and development spending by at least $50 million through 2025; and

 

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the combined company is expected to have an enhanced financial profile that will provide greater access to the capital markets and therefore be better positioned to withstand challenges facing the life sciences industry with a stronger balance sheet, potential for stronger free cash flow generation and enhanced liquidity as compared with Surface on a stand-alone basis.

 

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Surface’s Operating and Financial Condition and Prospects. The Surface board of directors considered Surface’s standalone operating and financial performance and its prospects. The Surface board of directors considered, among other factors, that the holders of shares of Surface common stock would continue to be subject to the risks and uncertainties of Surface executing on its long-term plan if it remained independent. These risks and uncertainties included risks relating to the macro-economic,

 

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industry and market conditions negatively impacting valuations of clinical-stage biopharmaceutical companies such as Surface, the need for meaningful capital investment to fund Surface’s continued operations, the lack of attractive financing alternatives, the reliance on clinical data read outs, the competitive immuno-oncology landscape, protection of proprietary technology, dependence on key personnel, compliance with government regulations, the Surface product candidates currently under development that require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization, and the likely need for combination treatment randomized Phase 2 clinical trials prior to having definitive proof of concept data and the impact of the timing and cost of these trials. The Surface board of directors also considered the lease liabilities related to Surface’s Cambridge, Massachusetts office and research and development laboratory facility, among other liabilities.

 

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Surface’s Cash Position. The Surface board of directors also considered the risks and challenges facing Surface as a result of its current cash position and that, as a standalone company, Surface would need to seek substantial additional funding through future equity, royalty and/or debt financings or additional collaborations or strategic partnerships, and any such fundraising could require Surface to enter into restrictive covenants, might only be available on unfavorable terms or might not be available at all. The Surface board of directors also considered the difficult financing environment and limited financing alternatives for clinical-stage biopharmaceutical companies such as Surface and the low likelihood that third parties would be interested in providing equity financing to Surface in the current economic environment that would not be significantly dilutive to existing Surface stockholders. The Surface board of directors weighed the certainty of realizing a substantial value for shares of Surface common stock in the Mergers compared to the uncertainty that trading values would approach the value of the Merger Consideration in the foreseeable future and the substantial risk and uncertainty associated with Surface and its business as a clinical-stage biopharmaceutical company (including the risk factors set forth in Surface’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022).

 

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Surface’s Liquidation Prospects. In connection with the evaluation of the Mergers by the Surface board of directors, Surface management prepared an analysis with respect to the estimated value of the liquidation or dissolution of Surface as a potential alternative to the Mergers, including for such purposes Surface’s estimated cash position at the time of the potential dissolution or liquidation, Surface’s estimated expenses in connection with any such liquidation or dissolution, and the amount of cash available to be distributed to Surface’s stockholders in connection with any such proposed future dissolution or liquidation. The Surface board of directors, the Transaction Committee and Wedbush undertook a comprehensive and thorough process of reviewing and analyzing potential strategic alternatives and merger partner candidates along with the Liquidation Analysis (which is summarized in “—Surface Liquidation Analysis”) and the Surface board of directors concluded that no alternatives to the Mergers (including a liquidation or dissolution of Surface to distribute any available cash) were reasonably likely to create greater value to the Surface stockholders.

 

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Familiarity with Coherus’ Businesses and Financial Condition. The Surface board of directors’ knowledge of Coherus’ business, financial condition, results of operations and prospects, taking into account the results of Surface’s due diligence review of Coherus. The Surface board of directors also considered its knowledge of the biosimilars industry and the current and prospective market environment in which Coherus operates;

 

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Consideration of Strategic Alternatives. The Surface board of directors took into account its review of strategic alternatives and opportunities available to Surface, including the risks and benefits of continuing to operate as an independent public company in its current configuration, pursuing acquisitions or licensing transactions as an independent public company and pursuing alternative strategic transactions including the discussions that Surface’s management, Surface’s representatives and the Surface board of directors had in 2022 and 2023 with other potential strategic transaction candidates;

 

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Negotiations with Coherus. The Surface board of directors considered the benefits that Surface and its advisors were able to obtain during its negotiations with Coherus, including an increase in Coherus’ offer value from the beginning of the process to the end of the negotiations and generally improving the contract terms relating to transaction certainty. The Surface board of directors believed that there was no assurance that a more favorable strategic opportunity would arise later or through any alternative transaction, and the terms and consideration reflected in the Merger Agreement was the best transaction that could be obtained by Surface stockholders from Coherus at the time;

 

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Financial Advisor Opinion. The opinion of Wedbush, delivered to the Surface board of directors on June 15, 2023, to the effect that, as of such date and based upon and subject to the qualifications and assumptions set forth therein, to the effect that, as of such date, the Merger Consideration to be received pursuant to First Merger is fair, from a financial point of view, to the holders of Surface common stock, as more fully described below in “—Opinion of Surface’s Financial Advisor.”

 

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Terms of the Merger Agreement. The Surface board of directors reviewed and considered the terms of the Merger Agreement, including the parties’ respective representations, warranties and covenants, and the conditions to their respective obligations to consummate the Mergers. See “The Merger Agreement” for a detailed discussion of the terms and conditions of the Merger Agreement. In particular, the Surface board of directors considered the following:

 

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Merger Consideration. The Surface board of directors considered the relative favorability of the Exchange Ratio and resulting transaction enterprise value relative to the fully-diluted enterprise valued historically implied by the relative trading prices of shares of Surface common stock and comparable companies’ common stock and relative to the upfront enterprise values of several similar transactions, in addition to the expected value per share of Surface common stock in the event of liquidation. In addition, the Surface board of directors considered that in addition to the Coherus common stock, the holders of Surface common stock will receive one CVR per share, which provides the holders of such shares with opportunities to realize additional value through additional cash payments resulting from milestone and royalty-based value of existing programs with Novartis and GSK, as well as upfront payments made pursuant to potential ex-US licensing agreements for SRF114 and SRF388;

 

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Ability to Change Recommendation to Surface Stockholders. The Surface board of directors considered the provisions in the Merger Agreement that provide for the ability of the Surface board of directors to withdraw or modify its recommendation that holders of Surface common stock adopt the Merger Agreement:

 

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following the receipt of an alternative acquisition proposal that the Surface board of directors determines in good faith constitutes or is reasonably likely to lead to a superior proposal, subject to certain restrictions imposed by the Merger Agreement, including that the Surface board of directors shall have determined in good faith that the failure to take such action would be inconsistent with its fiduciary duties to the stockholders of Surface under applicable law and that Coherus shall have been given an opportunity to match the superior proposal; or

 

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in response to an intervening event, subject to certain restrictions imposed by the Merger Agreement, including that the Surface board of directors shall have determined in good faith that the failure to take such action would be inconsistent with its fiduciary duties to the stockholders of Surface under applicable law and provided Coherus with prior notice of its intention to take such action;

 

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Appraisal Rights. The Surface board of directors considered the availability of statutory appraisal rights to Surface’s stockholders who do not vote in favor of the adoption of the Merger Agreement and the Mergers and who otherwise comply with all required procedures under the DGCL, as further discussed in “Appraisal Rights.”

 

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Termination Fee Payable by Surface. The Surface board of directors considered that, in its view, the $2.0 million termination fee that could become payable by Surface pursuant to the Merger

 

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Agreement was reasonable, would likely not deter alternative acquisition proposals and would likely not be required to be paid unless the Surface board of directors entered into an agreement providing for a transaction that would be more favorable to the Surface stockholders than the transactions contemplated by the Merger Agreement;

 

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Expense Reimbursement Payable by Surface. The Surface board of directors considered that, in its view, the fact that if the Merger Agreement is terminated in connection with Surface’s failure to obtain approval of the Surface share issuance proposal, Surface would be required to reimburse up to $500,000 of Coherus’ documented costs incurred in connection with the negotiation, preparation and execution of the Merger Agreement and CVR Agreement, would likely not deter alternative acquisition proposals; and

 

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Registered Shares. The shares of Coherus common stock to be issued to Surface stockholders will be registered on a Form S-4 registration statement and will become freely tradeable.

In the course of its deliberations, the Surface board of directors also considered a variety of risks and other countervailing factors related to the Mergers, including:

 

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the fact that the Exchange Ratio will not be adjusted on the Closing Date based on the relative market values of shares of Surface common stock or Coherus common stock, which means that the market value of the Merger Consideration or the premium received by Surface stockholders could decrease prior to the Effective Time;

 

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the fact that the calculation of the Exchange Ratio will be adjusted on the Closing Date based upon the estimated closing net cash of Surface expected to be held by Surface upon completion of the Mergers;

 

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the fact that Coherus’ obligation to complete the Mergers is conditioned on Surface having no less than $19.6 million of net cash, as more fully described in “The Merger Agreement—Conditions to the Completion of the Merger;”

 

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the fact that Surface stockholders will be sharing participation of Surface’s upside with Coherus shareholders as part of the combined company;

 

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the fact that there may not be any payments at all or during the period required by the CVR Agreement for the holders of Surface common stock to receive the payments due pursuant to the CVRs;

 

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the fact that the CVRs may not be sold, assigned, transferred, pledged or encumbered, subject to limited exceptions, and will not be registered with the SEC or listed on any securities exchange;

 

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the fact that Surface stockholders would be subject to future financial, business and operational risks associated with the combined company if they retained the Coherus common stock they receive as Merger Consideration following the Effective Time, including risks related to the implementation of the combined company’s business plan and strategy, the combined company’s ability to realize the anticipated benefits of the Mergers on the timeline expected, or at all, litigation and contingent liabilities of Coherus that may adversely impact the combined company and its businesses, and the integration of Surface’s business with Coherus’ business in an efficient and cost effective manner. The Surface board of directors considered that the failure of any of these activities to be completed successfully may decrease the actual benefits of the Mergers to the extent Surface stockholders retain the Coherus common stock received as Merger Consideration following the Closing;

 

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the possible volatility, at least in the short term, of the trading price of Surface common stock resulting from the announcement of the Mergers;

 

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the potential effect of the Mergers on Surface’s business and relationships with employees, suppliers and other business partners;

 

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the terms of the Merger Agreement, including covenants relating to (i) the two companies’ conduct of their respective businesses during the period between the signing of the Merger Agreement and the

 

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completion of the Mergers, including the requirement that the two companies’ conduct business only in the ordinary course, subject to specific exceptions and (ii) the restrictions on Surface’s ability to solicit alternative transaction proposals;

 

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the fact that Surface may become obligated to pay Coherus a termination fee of $2.0 million in certain circumstances as further discussed in “The Merger Agreement—Termination Fee,” which could potentially deter a potential acquirer from proposing an alternative transaction that may provide value to Surface stockholders superior to that of the proposed Mergers;

 

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the fact that if Surface or Coherus terminate the Merger Agreement in connection with Surface’s failure to obtain approval of the Merger Agreement and the Merger, Surface would be required to reimburse up to $500,000 of Coherus’ documented costs incurred in connection with the negotiation, preparation and execution of the Merger Agreement and CVR Agreement;

 

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the risks and delays associated with, and uncertain value and costs to Surface stockholders of, liquidating Surface, including the uncertainties of continuing cash burn while contingent liabilities are resolved, uncertainty of timing of release of cash until contingent liabilities are resolved, and the risks and costs associated with being a shell company prior to cash distribution;

 

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the risk that the Mergers may not be completed despite the parties’ efforts or that the Closing may be unduly delayed and the effects on Surface as a standalone company because of such failure or delay, and that a more limited range of alternative strategic transactions may be available to Surface in such an event and its likely inability to raise additional capital through the public or private sale of equity securities;

 

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the risks involved with the required approval of the Merger Agreement and Mergers by Surface stockholders;

 

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the potential for litigation relating to the proposed Mergers and the associated costs, burden and inconvenience involved in defending those proceedings;

 

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the substantial expenses to be incurred in connection with the Mergers, including the substantial costs of integrating the businesses of Surface and Coherus, as well as the transaction expenses arising from the Mergers;

 

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the risk that the Mergers might not be consummated in a timely manner or at all and the potential adverse effect of the public announcement of the Mergers or of the delay or failure to complete the Mergers on the reputation of Surface;

 

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the risk to the Surface business, operations, and financial results and conditions in the event that the Mergers are not consummated;

 

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the fact that the strategic direction of the continuing company following the completion of the Mergers will be determined by a board of directors comprised of designees of Coherus; and

 

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various other risks associated with the combined company and the Mergers, including those described in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

The Surface board of directors also was apprised of certain interests in the Mergers of Surface’s directors and executive officers that may be different from, or in addition to, the interests of Surface’s stockholders generally as discussed in “Interests of Surface’s Directors and Executive Officers in the Mergers.”

The foregoing information and factors considered by the Surface board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Surface board of directors. In view of the wide variety of factors considered in connection with its evaluation of the Mergers and the complexity of these matters, the Surface board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual

 

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members of the Surface board of directors may have given different weight to different factors. The Surface board of directors conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Surface’s management and the legal and financial advisors of Surface, and considered the factors overall to be favorable to, and to support, its determination.

This explanation of the Surface board of directors’ reasons for recommending the adoption of the Merger Agreement and other information presented in this section is forward-looking in nature, and therefore it should be read in light of the factors described in this proxy statement/prospectus in “Cautionary Statement Regarding Forward-Looking Statements.”

Surface Liquidation Analysis

In connection with the evaluation of the Mergers by the Surface board of directors, Surface management prepared an analysis with respect to the estimated value of the liquidation or dissolution of Surface as a potential alternative to the Mergers, including for such purposes Surface’s estimated cash position at the time of the potential dissolution or liquidation, Surface’s estimated expenses in connection with any such liquidation or dissolution, and the amount of cash available to be distributed to Surface’s stockholders in connection with any such proposed future dissolution or liquidation (the “Liquidation Analysis”). Although the Liquidation Analysis assumes that the entirety of the Surface cash balance at the time of the dissolution or liquidation would be available for distribution to Surface’s stockholders, it is unlikely that the entirety of such cash balance would be available at the time of an actual dissolution or liquidation due to the requirements of applicable law.

The inclusion of the Liquidation Analysis should not be deemed an admission or representation by Surface or any of its officers, directors, affiliates, advisors, or other representatives with respect to the Liquidation Analysis. The Liquidation Analysis is not included to influence your views on the Mergers, the Merger Agreement and the transactions contemplated thereby and is summarized in this proxy statement/prospectus solely to provide stockholders access to certain information considered by the Surface board of directors in connection with its evaluation of the Mergers, the Merger Agreement and the transactions contemplated thereby and provided to Wedbush, who was authorized and directed to rely upon the Liquidation Analysis for purposes of its opinion to the Surface board of directors. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Surface do not purport to be appraisals or reflect the prices at which shares of Surface common stock may actually be valued or trade, either before or after the consummation of the Mergers.

The Liquidation Analysis was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, or GAAP. The Liquidation Analysis included in this document has been prepared by, and is the responsibility of, Surface’s management.

The Liquidation Analysis includes estimates of cash and of certain expenditures, which for the purpose of the Liquidation Analysis were not calculated in accordance with GAAP. Non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, non-GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP. The SEC rules, which otherwise would require a reconciliation of a non-GAAP financial measure to a GAAP financial measure, do not apply to non-GAAP financial measures provided to a board of directors or financial advisors in connection with a proposed business combination transaction such as the merger if the disclosure is included in a document such as this proxy statement/prospectus to comply with requirements under state laws, including case law.

 

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Neither Ernst & Young LLP nor any other independent accountant has compiled, reviewed, examined, performed any other assurance procedures, or expressed any form of assurance with respect to either the Liquidation Analysis or the prospective financial information included in this registration statement. The report of Ernst & Young LLP incorporated by reference in this registration statement relates to Coherus BioSciences, Inc.’s historical audited financial statements and does not extend to the Liquidation Analysis or the unaudited prospective financial information and should not be read to do so.

The Liquidation Analysis included in this document has been prepared by, and is the responsibility of, Surface’s management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this Registration Statement relates to Surface Oncology, Inc’s previously issued financial statements. It does not extend to the prospective financial information and should not be read to do so.

In light of the foregoing factors and the uncertainties inherent in estimated cash balances, stockholders are cautioned not to place undue reliance, if any, on the Liquidation Analysis.

The below summary of the Liquidation Analysis is subject to the statements above, and it represents Surface management’s estimates of Surface’s cash which may be distributed to stockholders as permitted under applicable law pursuant to a plan of dissolution.

Key assumptions underlying the Liquidation Analysis included: (i) that the entire distribution of Surface’s net cash would be made in August 2023; (ii) that Surface would have approximately $19.3 million of net cash as of August 2023, after deducting costs and expenses, including legal fees, wind-down of certain clinical programs, fees payable upon termination of Surface’s lease, employee retention bonuses, severance and benefits, insurance expenses and other transaction-related costs, with no adjustments for taxes; (iii) that these costs and expenses were forecasted to total approximately $61.4 million assuming the closing of a liquidation in August 2023; and (iv) approximately 64.5 million total shares of Surface common stock outstanding as of June 5, 2023. The analysis resulted in an estimated cash distribution per share in August 2023 of $0.30 per share.

Opinion of Surface’s Financial Advisor

Pursuant to an engagement letter, dated February 26, 2023 (the “Engagement Letter”), Surface engaged Wedbush Securities Inc. to act as Surface’s exclusive strategic financial advisor in connection with a strategic transaction. Wedbush was engaged to, among other things, assist Surface in analyzing, structuring, negotiating and effecting a proposed strategic transaction and, if requested, to provide a fairness opinion to the Surface board of directors. On June 15, 2023, at the request of the Surface board of directors, Wedbush rendered its oral opinion to the Surface board of directors, subsequently confirmed by delivery of a written opinion dated June 15, 2023, that, as of the date of such opinion, and based upon the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review set forth in its opinion, the Merger Consideration to be received by holders of Surface common stock in the First Merger was fair, from a financial point of view, to such holders.

The full text of Wedbush’s written opinion, which sets forth the procedures followed, assumptions made, matters considered and qualifications and limitations of the review undertaken in connection with such opinion, is attached to this proxy statement/prospectus as Exhibit 99.1. Wedbush’s opinion was intended for the benefit and use of the Surface board of directors (in its capacity as such) in connection with its consideration of the Mergers. Wedbush’s opinion was not intended to be used for any other purpose without Wedbush’s prior written consent in each instance, except as expressly provided for in the Engagement Letter. Wedbush has consented to the use of Wedbush’s opinion in this proxy statement/prospectus. Wedbush’s opinion did not address the underlying business decision of Surface or any other party to proceed with or effect the Mergers, the relative

 

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merits of the Mergers as compared to any alternative business strategies that might have existed or as to the merits of the Mergers as compared to any alternative transactions that might have been available to Surface, and did not constitute a recommendation to the Surface board of directors or to any holder of Surface common stock as to how such holder should vote with respect to the Mergers or otherwise. The following summary of Wedbush’s opinion is qualified in its entirety by reference to the full text of such opinion.

For purposes of its opinion and in connection with its review, Wedbush, among other things:

 

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reviewed a draft of the Merger Agreement dated June 14, 2023 (the “Draft Merger Agreement”) and a draft of the CVR Agreement dated June 14, 2023 (the “Draft CVR Agreement”) and assumed that no changes would be made to the Draft Merger Agreement or the Draft CVR Agreement that would be material to its analysis;

 

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reviewed certain publicly available business and financial information relating to Surface;

 

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reviewed certain internal information, primarily financial in nature, including financial and operating data furnished to us by members of management of Surface, and approved for our use by Surface;

 

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reviewed certain publicly available information with respect to Surface and other companies in the healthcare industry that Wedbush believed to be similar in certain respects to Surface, in whole or in part; and

 

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considered the financial terms, to the extent publicly available, of selected recent business combinations and trading metrics of companies in the healthcare industry that Wedbush believed to be similar in certain respects to Surface, in whole or in part, and to the First Merger.

In addition, Wedbush held discussions with the members of Surface’s management concerning their views as to the financial and other information described above. Wedbush also conducted such other analyses and examinations and considered such other financial, economic and market criteria as Wedbush deemed appropriate to arrive at its opinion.

For purposes of its opinion, management of Surface directed Wedbush to assume and, for purposes of its opinion, Wedbush assumed without independent verification, that (i) the outstanding shares of Surface common stock will be 64,502,206 shares immediately prior to the Effective Time, (ii) Surface Net Cash will equal $23.0 million, (iii) no value is attributable to the CVR and (iv) the Merger Consideration shall not represent more than 19.9% of the aggregate Coherus common stock outstanding. Surface management also advised Wedbush and, for purposes of its opinion, Wedbush assumed without independent verification, that Surface will exhaust its cash resources in a short period of time and, absent a sale transaction or a financing, Surface will be forced to liquidate. Wedbush expressly disclaimed any opinion as to the reasonableness of these assumptions or as to the actual number of shares of Coherus common stock to be issued in the First Merger.

Wedbush assumed and relied upon the accuracy and completeness of all information that was publicly available or was furnished to or discussed with Wedbush by Surface or otherwise reviewed by it. With respect to information provided to or reviewed by it, Wedbush was advised by the management of Surface that such information was reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Surface. Wedbush expressed no view as to the reasonableness of such financial information or the assumptions on which it was based.

In preparing its opinion, Wedbush did not conduct any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (contingent or otherwise) of Surface nor was Wedbush furnished with such materials. Wedbush did not evaluate the solvency or fair value of Coherus, Surface or any of their respective subsidiaries (or the impact of the First Merger thereon) under any law relating to bankruptcy, insolvency or similar matters.

Wedbush’s opinion was based on financial, economic, market and other conditions as in effect on, and the information made available to Wedbush as of, the date of such opinion. Wedbush also relied, without

 

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independent verification, on the accuracy and completeness of Coherus’ and Surface’s representations and warranties in the Draft Merger Agreement and the Draft CVR Agreement, without regard to any qualifications or exceptions that might be set forth in disclosure schedules, and the information provided to Wedbush by Surface. In addition, Wedbush assumed that the First Merger would be consummated in accordance with the terms set forth in the Draft Merger Agreement and the Draft CVR Agreement without any waiver, amendment or delay of any terms or conditions that would be material to Wedbush’s analysis. Surface management advised Wedbush, and Wedbush further assumed, that the final terms of the Merger Agreement would not differ from the terms set forth in the Draft Merger Agreement and that the final terms of the CVR Agreement would not differ from the terms set forth in the Draft CVR Agreement, in each case in any respect material to Wedbush’s analysis. Wedbush also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the First Merger would be obtained without imposition of any terms or conditions that would be material to Wedbush’s analysis. Wedbush noted that events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Wedbush did not undertake any obligation to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of such opinion.

Wedbush is not a legal, tax or regulatory advisor, and did not express any opinion as to any tax or other consequences that might arise from the First Merger, nor did its opinion address any legal, regulatory or accounting matters. Wedbush acted as a financial advisor only and relied upon, without independent verification, the assessment of Coherus and Surface and their legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Wedbush assumed that the Mergers would have the tax effects contemplated by the Merger Agreement.

Wedbush is an investment banking firm and a member of the New York Stock Exchange and other principal stock exchanges in the United States, and is regularly engaged as part of its business in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, private placements, secondary distributions of listed and unlisted securities, and valuations for corporate, estate and other purposes. Wedbush was selected by Surface based on Wedbush’s experience, expertise and reputation and its familiarity with Surface. The Surface board of directors did not impose any limitations on Wedbush with respect to the investigations made or procedures followed in rendering its opinion. Wedbush’s opinion was approved by a fairness committee at Wedbush in accordance with the requirements of the Financial Industry Regulatory Authority Rule 5150. In rendering its opinion, Wedbush expressed no opinion as to the amount or nature of any compensation to any officers, directors or employees of Surface, or any class of such persons, whether relative to the Merger Consideration to be paid in the First Merger or otherwise, or with respect to the fairness of any such compensation.

Wedbush was not asked to, nor did it, offer any opinion as to the terms, other than the Merger Consideration to be received by the holders of Surface common stock to the extent expressly set forth in Wedbush’s opinion, of the Merger Agreement or the form of the Mergers. Wedbush did not express any opinion with respect to the terms of any other agreement entered into or to be entered into in connection with the Mergers. Wedbush expressed no opinion as to the price at which shares of Coherus common stock or shares of Surface common stock might trade at any time subsequent to the announcement or consummation of the Mergers.

Surface paid Wedbush a nonrefundable retainer of $50,000 at the time of Wedbush’s engagement. Surface agreed to pay Wedbush a fee of $500,000 for rendering its opinion, which fee was not contingent upon the consummation of the Mergers. Surface has also agreed to pay Wedbush a success fee in an amount equal to 1% of the transaction value, subject to a minimum fee of $1,500,000, for its services as Surface’s exclusive strategic financial advisor, which fee is contingent upon consummation of the Mergers. In addition, Surface agreed to reimburse Wedbush for its reasonable out-of-pocket expenses and to indemnify Wedbush for certain liabilities arising out of its engagement. Wedbush did not have a material relationship with, or otherwise receive fees from, Coherus or Surface during the two years prior to the date of its opinion. Wedbush may in the future seek to provide investment banking and financial advisory services to Coherus, Surface or its affiliates for which Wedbush would expect to receive customary fees.

 

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In the ordinary course of its business, Wedbush and its affiliates, as well as investment funds in which Wedbush and its affiliates may have financial interests, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or make investments in, Surface or in any other entity.

Summary of Analyses

The following is a summary of the material financial analyses performed by Wedbush in connection with reaching its opinion:

 

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Historical Trading Analysis;

 

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Liquidation Analysis;

 

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Public Comparable Companies Analysis; and

 

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Select Precedent Transactions Analysis.

Representatives of Wedbush and members of Surface’s management determined that a discounted cash flow analysis was not an appropriate indicator to measure the value of Surface because Surface did not anticipate any significant revenue for the foreseeable future.

The following summaries are not a comprehensive description of Wedbush’s opinion or the analyses and examinations conducted by Wedbush, and the preparation of an opinion necessarily is not susceptible to partial analysis or summary description. Wedbush believes that such analyses and the following summaries must be considered as a whole and that selecting portions of such analyses and of the factors considered, without considering all such analyses and factors, would create an incomplete view of the process underlying the analyses. The order in which the analyses are described below does not represent the relative importance or weight given to the analyses by Wedbush. Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand the analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of Wedbush’s analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the analyses.

At Surface’s instruction, Wedbush did not value the CVRs and assumed for purposes of its analysis that the CVRs had no value.

Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before June 15, 2023 and is not necessarily indicative of current market conditions.

In performing each of analyses described below, Wedbush compared the results of its analysis to its analysis of the Merger Consideration to be received by holders of Surface common stock in the First Merger based on the assumptions described above.

Historical Trading Analysis

Using publicly available information, Wedbush analyzed the historic trading price of Surface common stock over a 52-week period ended June 15, 2023. Wedbush noted that the closing price of Surface common stock on June 15, 2023 was $0.74 per share, and one week prior had been $0.78 per share. The 30-trading day volume weighted average price had been $0.75 per share and the 52-week closing high had been $2.10 per share and the 52-week closing low had been $0.57 per share. The implied enterprise value of the 52-week high was $38.4 million, or $0.60 per share, while the implied enterprise value of the 52-week low was ($39.6) million, or

 

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($0.61) per share, based on Surface’s fully diluted shares outstanding and cash and debt from public SEC filings closest to the dates of the 52-week high and low. Wedbush compared this to the expected $41.2 million in implied transaction enterprise value of Coherus common stock to be received by holders of Surface common stock in the First Merger.

Liquidation Analysis

A liquidation analysis is a valuation methodology that calculates a company’s value based on the amount of cash it would have available for distribution to common shareholders in a liquidation after the payment of creditors. Surface provided Wedbush with an estimated cash balance of $80.7 million as of August 2023. Surface management estimated that the cash available for distribution to holders of common stock would be $19.3 million upon liquidation of Surface in August 2023, or $0.30 per share. Surface management further advised Wedbush that Surface would exhaust its cash resources in a short period of time and, absent a sale transaction or a financing, Surface would be forced to liquidate. The table below reflects Surface management’s estimated residual value payable to holders of Surface common stock upon liquidation:

 

		$ in millions
August 2023 Estimated Ending cash Balance		$	80.7
Estimated Payables and Accruals
Principal Payoff			(25.0	)
Final Payment			(1.8	)
Prepayment Fee			(1.3	)
Total Estimated Payables and Accruals			(28.1	)
Program Wind-down
SRF388 - IL- 27			(9.0	)
SRF114 - CCR8			(3.0	)
SRFE617 - CD39			(1.4	)
Total Program Wind-down			(13.4	)
Employee Severance			(9.6	)
Non C-Level Retention			(0.5	)
Misc. / addt’l amt. for unplanned expenses
Legal Wind-down Costs			(0.5	)
D&O Tail			(0.9	)
Lease Settlement			(8.4	)
Total Misc. / addt’l amt. for unplanned expenses			(9.8	)
Total Projected Liabilities / Expenses through Aug. 2023		($	61.4	)
Estimated Residual Value to Common Shareholders on 08/30/23		$	19.3

Wedbush compared this to the expected $41.2 million in implied transaction enterprise value of Coherus common stock to be received by holders of Surface common stock in the First Merger.

Comparable Public Companies Analysis

Using publicly available information, Wedbush reviewed data from 12 publicly traded “microcap” or “nanocap” companies (the SEC refers to microcap companies as those with market capitalizations below $250.0 million and nanocap companies as those with market capitalizations below $50.0 million) in the biopharma and specialty pharmaceutical industry. Wedbush only reviewed U.S.-domiciled companies that are listed on Nasdaq, and excluded companies that are dual-listed on Nasdaq and a foreign exchange. Wedbush only

 

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included companies with an immuno-oncology focus in a development stage no later than Phase 2b or Phase 2 pivotal and no earlier than IND-filed. Companies that have complicated modalities (such as gene therapy and radiopharmaceuticals) and those with diagnostic or device offerings were excluded, as were companies with a cash balance greater than $150.0 million. Wedbush noted that, although such companies were considered similar, none of the companies had the same management, make-up, regulatory outlook, technology, or size or mix of business as Surface and, accordingly, there were inherent limitations on the applicability of these peer companies to Wedbush’s valuation analysis. Wedbush, based on its experience and professional judgment, deemed relevant to consider in relation to Surface:

 

Company Name		$/Share				Fully-Diluted Mkt Cap ($M)				Cash ($M)				Debt ($M)				Fully-Diluted EV ($M)
Cue Biopharma Inc.		$	3.87			$	173.0			$	66.2			$	10.0			$	116.8
Sonnet BioTherapeutics Holdings Inc.			0.93				26.5				11.4				0.0				15.1
Werewolf Therapeutics Inc.			3.33				120.0				147.9				39.1				11.2
Phio Pharmaceuticals Corp.			3.27				8.2				13.0				0.0				(4.8	)
GT Biopharma Inc.			0.35				14.1				19.9				0.0				(5.8	)
Harpoon Therapeutics Inc.			0.74				28.0				61.4				25.0	(1)			(8.4	)
Aptevo Therapeutics Inc.			1.60				12.2				25.3				3.5				(9.6	)
Xilio Therapeutics Inc.			2.73				75.3				93.3				8.2				(9.8	)
Shattuck Labs Inc.			2.78				119.9				135.5				0.0				(15.6	)
Bolt Biotherapeutics Inc.			1.51				73.0				126.4				0.0				(53.4	)
Sensei Biotherapeutics Inc.			1.34				41.9				95.5				0.0				(53.6	)
NextCure Inc.			1.67				46.5				145.5				0.0				(99.0	)
Surface Oncology Inc. - Transaction Value		$	1.00			$	64.2			$	23.0			$	0.0			$	41.2
Mean*		$	2.01			$	61.6			$	78.4			$	7.2			($	9.7	)
Median*		$	1.64			$	44.2			$	79.8			$	0.0			($	9.0	)

 

*	Excludes Surface Oncology, Inc.

(1)	$25.0M debt is Series A shares at face value

The financial data reviewed included estimated enterprise values, calculated as implied equity values based on closing stock prices on June 15, 2023 and their estimated fully diluted shares outstanding plus total debt less cash and cash equivalents. Financial data of the selected companies were based on the most recent public SEC filings.

Based on this information, Wedbush noted that these companies had a median enterprise value (based on fully diluted shares) of ($9.0) million and a mean of ($9.7) million. The mean enterprise value plus 15% was ($11.2) million, and the median enterprise value minus 15% was ($7.7) million (both based on fully diluted shares). Wedbush compared this to the expected $41.2 million in implied transaction enterprise value of Coherus common stock to be received by holders of Surface common stock in the First Merger.

Select Precedent Transactions Analysis

Using publicly available information, Wedbush selected and reviewed seven M&A transactions closed since 2020 involving “microcap” or “nanocap” publicly traded target companies (the SEC refers to microcap companies as those with market capitalizations below $250.0 million and nanocap companies as those with market capitalizations below $50.0 million) in the biopharma and specialty pharmaceutical industry. Wedbush only reviewed targets that were listed on Nasdaq and excluded targets that were dual-listed on Nasdaq and a foreign exchange at the time of the acquisition. Wedbush only included targets in a development stage no later than Phase 2b or Phase 2 pivotal and no earlier than IND-filed. Target companies with diagnostic or device offerings were excluded, as were targets that were not 100% acquired. Wedbush noted that there had been only a small number of comparable transactions over the relevant Coherus period and that market conditions had varied

 

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significantly over the precedent time period. Wedbush further noted that, although such transactions were considered similar, none of the target companies had the same management, make-up, regulatory outlook, technology, or size or mix of business as Surface and, accordingly, there were inherent limitations on the applicability of these transactions to the valuation analysis of Surface. To present a fair comparison, only proposed upfront consideration payable to equity shareholders outlined at deal announcement was considered.

Wedbush noted that the small number of transactions over a long period of time, differences in market conditions, and the uniqueness of each microcap and nanocap company made this analysis less likely to be predictive of the equity value of Surface than the other analyses Wedbush performed.

The seven M&A transactions Wedbush, based on its experience and professional judgment, deemed relevant to consider in relation to Surface and the Mergers, are listed below:

 

Ann. Date		Close Date								Target at Announce																Upfront at Announce:
						Target		Acquiror		MC ($M)				Cash ($M)				Debt ($M)				EV ($M)				Trxn Value ($M)				EV ($M)
03/14/23			05/03/23			Jounce Therapeutics, Inc.		Concentra Biosciences LLC		$	54.8			$	189.5			$	0.0			($	134.7	)		$	98.8			($	90.7	)
03/06/23			06/01/23			TCR2 Therapeutics, Inc.		Adaptimmune Therapeutics			47.4				110.3				0.0				(62.9	)			104.7				(5.6	)
10/03/22			11/16/22			LogicBio Therapeutics, Inc.		Alexion Pharmaceuticals, Inc.			9.0				30.8				5.9				(15.9	)			71.6				46.7
07/05/22			09/16/22			Tyme Technologies, Inc.		Syros Pharmaceuticals, Inc.			46.5				77.1				0.0				(30.6	)			68.7				(8.4	)
06/23/22			03/08/23			F-star Therapeutics, Inc.		invoX Pharma Ltd.			85.5				53.0				9.8				42.3				157.1				113.9
01/16/20			05/06/20			Neon Therapeutics, Inc.		BioNTech SF			35.3				29.4				0.0				5.9				67.2				37.8
12/05/19			02/03/20			Aevi Genomic Medicine, Inc.		Cerecor, Inc.			9.8				2.4				0.0				7.4				14.4				12.0
								Mean		$	41.2			$	70.4			$	2.2			($	26.9	)		$	83.2			$	15.1
								Median		$	46.5			$	53.0			$	0.0			($	15.9	)		$	71.6			$	12.0

Using publicly available information obtained from public SEC filings as of the time of the announcement of the relevant transactions, Wedbush calculated, for each selected transaction, the transaction enterprise value (calculated as the offer value determined using the fully diluted shares outstanding and taking into account outstanding in-the-money options, warrants, restricted stock units and other convertible securities, plus total debt and certain liabilities less cash and cash equivalents and excluding the value of any contingent consideration) implied for each target company. Based on this information, Wedbush noted that these companies had a median upfront enterprise value at announcement of $12.0 million, and a mean of $15.1 million. Wedbush compared this to the expected $41.2 million in implied transaction enterprise value of Coherus common stock to be received by holders of Surface common stock in the First Merger.

Miscellaneous

This summary is not a complete description of Wedbush’s opinion or the underlying analyses and factors considered in connection with Wedbush’s opinion. The preparation of a fairness opinion is a complex process involving the application of subjective business and financial judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to partial analysis or summary description. Wedbush believes that its analyses described above must be considered as a whole and that considering any portion of such analyses and of the factors considered without considering all analyses and factors could create a misleading view of the process underlying its opinion. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying the Wedbush opinion. In arriving at its fairness determination, Wedbush considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, it made its fairness determination on the basis of its

 

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experience and professional judgment after considering the results of all of its analyses. No company or transaction in the analyses described above is identical to Surface or the Mergers.

In conducting its analyses and arriving at its opinion, Wedbush utilized a variety of valuation methods. The analyses were prepared solely for the purpose of enabling Wedbush to provide its opinion to the Surface board of directors as to the fairness, from a financial point of view, to the holders of Surface common stock of the consideration to be received by the holders of Surface common stock in the Mergers, as of the date of the opinion, and do not purport to be an appraisal or necessarily reflect the prices at which businesses or securities actually may be sold, which are inherently subject to uncertainty.

The terms of the Mergers were determined through arm’s-length negotiations between Surface and Coherus, and were approved by the Surface board of directors. Although Wedbush provided advice to the Surface board of directors during the course of these negotiations, the decision to enter into the Merger Agreement was solely that of the Surface board of directors. Wedbush did not recommend any specific consideration to Surface or the Surface board of directors, or that any specific amount or type of consideration constituted the only appropriate consideration for the Mergers. As described above, the opinion of Wedbush and its presentation to the Surface board of directors were among a number of factors taken into consideration by the Surface board of directors in making its determination to approve the Merger Agreement and the Mergers.

Closing and Effective Time of the Mergers

The closing of the Mergers will take place at 10:00 a.m., New York City time, on no later than the second business day following the satisfaction or waiver (to the extent permitted) of the conditions to Closing (described under “The Merger Agreement—Conditions to the Completion of the Mergers”) to be satisfied or waived (other than such conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions at the Closing), unless the Closing is delayed pending resolution of the determination of Surface Net Cash by the accounting firm in accordance with the Merger Agreement.

At the Closing, the parties to the Merger Agreement will cause a certificate of merger relating to the First Merger and immediately thereafter a certificate of merger relating to the Second Merger to be executed and filed with the Secretary of State of the State of Delaware and make all other filings or recordings required by the DGCL and the DLLCA, as applicable, in connection with effecting the Mergers. Each Merger will become effective at the time when the applicable certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as may be agreed to in writing by Coherus and Surface and specified in the applicable certificate of merger.

Coherus and Surface currently expect the Mergers to be completed in the third quarter of 2023 and are working to complete the Mergers on this timeline. However, it is possible that factors outside the control of the parties to the Merger Agreement could result in the Mergers being completed at a different time, or not at all.

Ownership of the Combined Company

Based on the number of shares of Coherus and Surface common stock outstanding on July 21, 2023, the latest practicable date prior to the date of this proxy statement/prospectus, and assuming that the Surface Net Cash at Closing is approximately $20 million to $25 million, upon completion of the Mergers (without consideration of the shares of Coherus common stock underlying the CVRs), former Surface stockholders are expected to own approximately 11% to 12% of the outstanding shares of Coherus common stock (without consideration of any potential shares of Coherus common stock underlying the CVRs) and Coherus stockholders immediately prior to the Mergers are expected to own approximately 88% to 89% of the outstanding shares of Coherus common stock. The relative ownership interests of Coherus stockholders and the former Surface stockholders in the combined company immediately following the Mergers will depend on the actual amount of

 

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Surface Net Cash as calculated pursuant to the Merger Agreement as of the Closing, as well as the number of shares of Coherus and Surface common stock issued and outstanding immediately prior to the Effective Time.

Governance of the Combined Company

None of the directors and officers of Surface will continue as directors or executive officers of the Surviving Entity or combined company, and the Coherus board of directors and executive officers as of the Effective Time will oversee and manage the combined company following Closing.

U.S. Federal Securities Law Consequences

Assuming the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part, the shares of Coherus common stock issued in the Mergers will not be subject to any restrictions on transfer arising under the Securities Act or the Exchange Act, except for shares of Coherus common stock issued to any Surface stockholder who may be deemed an “affiliate” of Coherus after the completion of the Mergers. This proxy statement/prospectus does not cover resales of shares of Coherus common stock received by any person upon the completion of the Mergers, and no person is authorized to make any use of this proxy statement/prospectus, or the registration statement on Form S-4 of which this proxy statement/prospectus forms a part, in connection with any resale of shares of Coherus common stock.

Accounting Treatment

Coherus prepares its financial statements in accordance with GAAP. The Mergers will be accounted for using the acquisition method of accounting under the provisions of ASC 805, Business Combinations, with Coherus representing the accounting acquirer under this guidance. Coherus will record assets acquired, including identifiable intangible assets, and liabilities assumed from Surface at their respective fair values at the date of completion of the Mergers. Any excess of the purchase price (as described in Note 2 (Basis of Pro Forma Presentation) to the unaudited pro forma condensed combined financial information) over the net fair value of such assets and liabilities will be recorded as goodwill, likewise any excess of the fair value of the identifiable net assets acquired over the fair value of the consideration transferred will be recognized as a bargain purchase gain.

The financial condition and results of operations of Coherus after completion of the Mergers will reflect Surface after completion of the Mergers, but will not be restated retroactively to reflect the historical financial condition or results of operations of Surface. The earnings of Coherus following completion of the Mergers will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities. All tangible and intangible assets including goodwill, if any, will be tested for impairment when certain indicators are present. If, in the future, Coherus determines that tangible or intangible assets (including goodwill, if any) are impaired, Coherus would record an impairment charge at that time.

Exchange of Shares

Exchange Agent

Coherus has selected Equiniti Trust Company Shareowner Services to act as Exchange Agent (the “Exchange Agent”). Prior to the Effective Time, Coherus will deposit (or cause to be deposited) with the Exchange Agent (a) book-entry shares representing the shares of Coherus common stock issuable pursuant to the Merger Agreement and (b) cash sufficient to make payments in lieu of fractional shares in accordance with the Merger Agreement and any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

Exchange of Surface Stock Certificates and Surface Book-Entry Shares

With respect to certificates representing shares of Surface common stock (collectively, the “Surface stock certificates”), as promptly as reasonably practicable after the Effective Time and in any event not later than the

 

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third business day thereafter, the Exchange Agent will mail to each holder of record of each such Surface stock certificate (a) a letter of transmittal and (b) instructions for surrendering the Surface stock certificates in exchange for the Merger Consideration. Promptly after the Effective Time (and no later than three business days after the Effective Time), the Exchange Agent will deliver a letter of transmittal to each holder of book-entry positions representing non-certificated shares of Surface common stock (the “Surface book-entry shares”).

Upon surrender of a Surface stock certificate and a duly completed and validly executed letter of transmittal to the Exchange Agent in accordance with the instructions for surrender, the holder will be entitled to receive:

 

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a number of whole shares of Coherus common stock that such holder is entitled to receive pursuant to the Merger Agreement; and

 

•

the amount (after giving effect to any required tax withholdings as provided in the Merger Agreement) of (a) any cash in lieu of fractional shares of Coherus common stock plus (b) any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

With respect to Surface book-entry shares, upon delivery of a duly executed letter of transmittal to the Exchange Agent, the holder will be entitled to receive:

 

•

a number of whole shares of Coherus common stock that such holder is entitled to receive pursuant to the Merger Agreement; and

 

•

the amount (after giving effect to any required tax withholdings as provided in the Merger Agreement) of (a) any cash in lieu of fractional shares of Coherus common stock plus (b) any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

Lost, Stolen or Destroyed Certificates

In the event that any Surface stock certificate has been lost, stolen or destroyed, then, upon the making of an affidavit, in form and substance reasonably acceptable to Coherus, that such Surface stock certificate has been lost, stolen or destroyed and, if required by the Exchange Agent, the posting of a bond in such customary amount as the Exchange Agent may determine is reasonably necessary as indemnity against any claim that may be made against the Exchange Agent or the Surviving Corporation with respect to such certificate, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Surface stock certificate, the Merger Consideration, any cash in lieu of fractional shares of Coherus common stock and any other dividends or other distributions, in each case, payable or issuable pursuant to the Merger Agreement.

Dividends and Distributions with Respect to Unexchanged Shares of Surface Common Stock

No dividends or other distributions declared or made with respect to shares of Coherus common stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Surface stock certificate or Surface book-entry shares with respect to the shares of Coherus common stock that such holder has the right to receive in the Mergers until the holder surrenders such Surface stock certificate or Surface book-entry shares in accordance with the Merger Agreement and, if applicable, the appropriate payment date for such dividend or distribution with respect to shares of Surface common stock.

Rights of Surface Stockholders Following the Effective Time and Transfers Following the Effective Time

At the Effective Time, all shares of Surface common stock outstanding immediately prior to the Effective Time will automatically be cancelled and retired and will cease to exist, and all holders of Surface stock certificates and of Surface book-entry shares will cease to have any rights as Surface stockholders, except the right to receive the Merger Consideration, any cash in lieu of fractional shares of Coherus common stock and any dividends or other distributions that such holder has the right to receive pursuant to the Merger Agreement.

 

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None of Coherus, Surface as the Surviving Corporation, the Exchange Agent or any other person will be liable to any person in respect of shares of Coherus common stock, dividends or other distributions with respect thereto or cash in lieu of fractional shares of Coherus common stock properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. No dividends or other distributions with respect to Coherus common stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Surface stock certificate with respect to the shares of Coherus common stock that the holder has the right to receive upon the surrender, and no fractional share cash consideration will be paid to any holder until the holder surrenders such Surface stock certificate or Surface book-entry shares in accordance with the Merger Agreement. Following the surrender of a Surface stock certificate or Surface book-entry shares the record holder will be paid, without interest, (i) promptly after such surrender, the amount of any dividends or other distributions with a record date after the Effective Time paid with respect to such whole shares of Coherus common stock and the amount of any fractional share cash consideration to which such holder is entitled and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Coherus common stock.

Withholding Rights

Coherus, the Exchange Agent, the Rights Agent, Merger Sub I, Merger Sub II and Surface as the Surviving Corporation, as applicable, will each be entitled to deduct and withhold any amounts required to be deducted or withheld pursuant to applicable tax laws from the amounts that would otherwise be payable under the terms of the Merger Agreement. Any such amounts that are deducted or withheld and, if required, paid over to the appropriate governmental authorities will be treated as having been paid to the person in respect of which such deduction or withholding was made. In the event any such deduction and withholding are required to be made in respect of any Coherus common stock to be received by holders of shares Surface common stock or Surface equity awards, such deduction and withholding shall be satisfied by reducing the number of shares of Coherus common stock to which such holder of shares Surface common stock or Surface equity awards otherwise would be entitled under the Merger Agreement by a number of shares equal to (x) the dollar amount of such deduction and withholding divided by (y) $5.2831 (the VWAP for the five trading days through and including June 15, 2023).

Listing of Coherus Common Stock; Delisting and Deregistration of Surface Common Stock

It is a condition of the Mergers that the shares of Coherus common stock to be issued to Surface stockholders in the Mergers be approved for listing on Nasdaq GM, subject to official notice of issuance.

If the Mergers are completed, Surface common stock will be delisted from Nasdaq CM and deregistered under the Exchange Act, and Surface will no longer be required to file periodic reports with the SEC with respect to Surface common stock.

Surface has agreed to cooperate with Coherus and use its reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable laws and Nasdaq rules and policies to enable the delisting by the combined company of the shares of Surface common stock from Nasdaq CM and the deregistration of the shares of Coherus common stock under the Exchange Act as promptly as practicable after the Effective Time.

 

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THE MERGER AGREEMENT

The following description sets forth the principal terms of the Merger Agreement, which is attached as Annex A hereto and incorporated by reference in this proxy statement/prospectus. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this description, which is a summary by nature. This description does not purport to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement. You are encouraged to read the Merger Agreement carefully and in its entirety, as well as this proxy statement/prospectus and the documents incorporated by reference herein, before making any decisions regarding any of the proposals described in this proxy statement/prospectus. This section is intended to provide you with information regarding the terms of the Merger Agreement. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this proxy statement/prospectus and in the public filings Coherus and Surface make with the SEC. See “Where You Can Find More Information.”

Explanatory Note Regarding the Merger Agreement

The Merger Agreement and this summary of its terms have been included to provide you with information regarding the terms of the Merger Agreement. Coherus and Surface are responsible for considering whether additional disclosure of material information is required to make the statements in this proxy statement/prospectus not misleading. Factual disclosures about Coherus and Surface contained in this proxy statement/prospectus and in the public filings Coherus and Surface make with the SEC may supplement, update or modify the factual disclosures about Coherus and Surface contained in the Merger Agreement and described in this summary. The representations, warranties and covenants made in the Merger Agreement by Coherus, Merger Sub I, Merger Sub II and Surface are qualified and subject to important limitations agreed to by the parties to the Merger Agreement in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the Merger Agreement, and were negotiated with the principal purpose of allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality that may be different from that generally relevant to stockholders or applicable to reports and documents filed with the SEC, and in some cases are qualified by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the Merger Agreement or otherwise publicly disclosed. The representations and warranties in the Merger Agreement will not survive the completion of the Mergers. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement/prospectus, may have changed since the date of the Merger Agreement. If specific material facts exist that contradict the representations, warranties and covenants contained in the Merger Agreement, Coherus and Surface have disclosed those material facts in this proxy statement/prospectus. If subsequent information concerning the subject matter of the representations, warranties and covenants contained in the Merger Agreement has not been reflected in this proxy statement/prospectus, each of Coherus and Surface will make publicly available any material information necessary to provide stockholders a materially complete understanding of the provisions of the Merger Agreement. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement/prospectus and in the public filings Coherus and Surface make with the SEC.

Additional information about Coherus and Surface can be found elsewhere in this proxy statement/prospectus and in the public filings Coherus and Surface make with the SEC. See “Where You Can Find More Information.”

 

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Structure of the Mergers

At the Effective Time, Merger Sub I will merge with and into Surface, with Surface surviving such First Merger as a direct, wholly owned subsidiary of Coherus in accordance with the DGCL and on the terms and subject to the conditions set forth in the Merger Agreement, and, as part of the same overall transaction, promptly after the First Merger at the Second Effective Time, the Surviving Corporation will merge with and into Merger Sub II, with Merger Sub II surviving the Second Merger in accordance with the DGCL and DLLCA and on the terms and subject to the conditions set forth in the Merger Agreement, and Merger Sub II will be the surviving entity upon consummation of the Mergers and a direct, wholly owned subsidiary of Coherus. At the Effective Time, all of the property, rights, powers, privileges and franchises of Surface and Merger Sub I will vest in Surface as the Surviving Corporation, and all of the debts, obligations, liabilities, restrictions and duties of Surface and Merger Sub I will become debts, obligations, liabilities, restrictions and duties of Surface as the Surviving Corporation. At the Second Effective Time, all the property, rights, privileges, powers and franchises of the Surviving Corporation and Merger Sub II shall vest in Merger Sub II as the Surviving Entity, and all debts, liabilities and duties of such Surviving Corporation and Merger Sub II shall become the debts, liabilities and duties of Merger Sub II as the Surviving Entity.

Completion and Effectiveness of the Mergers

The closing of the Mergers will take place at 10:00 a.m., New York City time, on the second business day following the satisfaction or waiver (to the extent permitted) of the conditions to Closing (described under “—Conditions to the Completion of the Mergers”) to be satisfied or waived (other than such conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions at the Closing), unless the Closing is delayed pending resolution of the determination of Surface Net Cash by the accounting firm in accordance with the Merger Agreement.

At the Closing, the parties to the Merger Agreement will cause certificates of merger relating to the First Merger and, promptly thereafter, the Second Merger to be executed and filed with the Secretary of State of the State of Delaware and make all other filings or recordings required by the DGCL and the DLLCA in connection with the Mergers. The Mergers will become effective at the time when the applicable certificates of merger are filed with the Secretary of State of the State of Delaware or at such later time as may be agreed to in writing by Coherus and Surface and specified in the certificates of merger.

Merger Consideration

At the Effective Time, automatically, by virtue of the First Merger and without any further action on the part of Surface, Coherus, Merger Sub I, Merger Sub II or the holders of any shares of capital stock of Surface, Coherus, Merger Sub I or Merger Sub II:

 

•

each share of Surface common stock that is held in treasury by Surface or is owned directly or indirectly by Coherus, Merger Sub I or Merger Sub II immediately prior to the Effective Time will automatically be cancelled and will cease to exist, and no consideration will be delivered in exchange therefor;

 

•

each share of Surface common stock held by Surface stockholders that are entitled to demand and properly demand appraisal of the Surface common stock in accordance with Section 262 of the DGCL will be entitled to receive payment of the fair value of such share in accordance with Section 262 of the DGCL;

 

•

except as described in the preceding bullets, each share of Surface common stock that is issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive, without interest, (a) a number of shares of Coherus common stock equal to the Exchange Ratio determined by dividing (x) the quotient obtained by dividing (1) $40,000,000 plus Surface Net Cash, determined and calculated in accordance with the Merger Agreement, by (2) $5.2831 (the VWAP for

 

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the five trading days through and including June 15, 2023), by (y) the total number of shares of Surface common stock issued and outstanding immediately prior to the Effective Time, on a fully-diluted and as-converted basis as determined in accordance with the Merger Agreement, and if applicable, cash in lieu of fractional shares (without interest and less any applicable withholding taxes); and (b) one CVR representing the right to receive the CVR Payment Amount, as provided for in the CVR Agreement;

 

•

each share of common stock, par value $0.01 per share, of Merger Sub I that is issued and outstanding immediately prior to the Effective Time will be converted into one validly issued, fully paid and non-assessable share of common stock, par value $0.001 per share, of Surface as the Surviving Corporation following the First Merger; and

 

•

each share of common stock of Surface as the Surviving Corporation following the First Merger issued and outstanding immediately prior to the Second Effective Time will be converted into one validly issued, fully paid and non-assessable common unit of Merger Sub II as the Surviving Entity.

Surface Net Cash

For purposes of determining the Exchange Ratio, “Surface Net Cash” means the amount equal to the following, without duplication, and as calculated as of the applicable determination dates set forth in the Merger Agreement: (x) Surface’s cash and cash equivalents on a consolidated basis, as of August 31, 2023; (y) minus the sum of the following: (i) Surface’s long-term liabilities and short-term liabilities, including, without limitation, the total obligations outstanding under indebtedness, unpaid rent, operating lease liabilities and other obligations under lease agreements (including remaining rent payments following Closing, if any), accounts payable, accrued expenses and other current liabilities, unpaid tax liabilities, and other accrued expenses, in each case determined as of August 31, 2023; plus (ii) any interest expenses required to be paid by Surface prior to the Closing, as well as any and all prepayment fees and other costs and expenses incurred in connection with the payoff of outstanding loans and other indebtedness, in each case as determined as of the Anticipated Closing Date; plus (iii) the amount of all fees and expenses incurred by Surface and its subsidiaries in connection with the transactions contemplated by the Merger Agreement, including transaction expenses that become due in connection with the Merger Agreement, regardless of the timing of actual payment and including, without limitation, any such costs and amounts that are payable or may become payable after the Anticipated Closing Date or Closing Date, in each case as determined as of the Anticipated Closing Date; plus (iv) the cash cost of any unpaid change of control payments or severance, termination or similar payments that become due in connection with or in relation to the transactions contemplated by the Merger Agreement or otherwise in connection with the Mergers, including the amounts of salary and benefits paid following any required termination notice, whether payable by Surface, Coherus or the Surviving Corporation and regardless of the timing of actual payment and including, without limitation, any such costs and amounts that are payable or may become payable after the Anticipated Closing Date or the Closing Date (other than amounts in connection with tax payments resulting from the settlement of Surface RSUs and exercises of Surface Stock Options on or prior to or in connection with the Effective Time), in each case as determined as of the Anticipated Closing Date; plus (v) the cash cost of any paid time off, accrued and unpaid retention payments or other bonuses, deferred compensation and similar costs and liabilities, due to any current or former officer, employee, independent contractor, consultant or director, of or to Surface or any of its subsidiaries or affiliates in connection with or in relation to the transactions contemplated by the Merger Agreement, regardless of the timing of actual payment and including, without limitation, any such costs and amounts that are payable or may become payable after the Anticipated Closing Date or the Closing Date, in each case as determined as of the Anticipated Closing Date; plus (vi) the employer portion of all payroll, employment or other withholding taxes incurred by Surface or any of its subsidiaries and any current or former officer, employee, independent contractor, consultant or director, of or to Surface or any of its subsidiaries or affiliates (to the extent paid or to be paid by Surface on the behalf of such person) in connection with any payment amounts set forth in (iii), (iv) or (v) above and the exercise of any Surface Stock Option or the settlement of any Surface RSUs on or prior to or in connection with the Effective Time, in each case as determined as of the Anticipated Closing Date; plus (vii) the cash cost of any unpaid retention payment amounts due under any insurance policy with respect to any actions or legal proceedings

 

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involving Surface or any of its subsidiaries, and the expected costs and expenses of the aggregate liability of Surface or any of its subsidiaries relating to such actions or legal proceedings, regardless of the timing of actual payment, in each case as determined as of August 31, 2023; plus (viii) payments up to the deductible amounts under Surface’s insurance policies for reasonably expected costs and expenses relating to any actions or legal proceedings in effect as of the date of the Merger Agreement or initiated following the date of the Merger Agreement (but excluding any stockholder litigation relating to the Merger Agreement), in each case as determined as of August 31, 2023; plus (ix) notice and termination payments required to terminate certain specified Surface contracts and that become due in connection with or in relation to the transactions contemplated by the Merger Agreement, regardless of the timing of actual payment and including, without limitation, any such costs and amounts that are payable or may become payable after the Anticipated Closing Date or the Closing Date, in each case as determined as of the Anticipated Closing Date; plus (x) the amount, if any, of cash used by Surface after August 31, 2023 through the Anticipated Closing Date in excess of the budgeted cash expenditures included in a budget agreed to between Surface and Coherus at the signing of the Merger Agreement; plus (z) the sum of the following: (i) the expected cost and/or any premium related to the director and officer insurance tail policy, in each case as determined as of August 31, 2023; plus (ii) Surface’s prepaid CMC, prepaid clinical and other receivables, in each case as determined as of August 31, 2023; plus (iii) certain payment amounts as agreed between Surface and Coherus as of the signing of the Merger Agreement, and as determined as of the Anticipated Closing Date. The specific items of Surface Net Cash will be determined in accordance with GAAP applied on a consistent basis with the application of GAAP in the preparation of Surface’s last audited balance sheet.

Calculation of Surface Net Cash

At least 15 days prior to the anticipated Closing Date of the First Merger, which date shall be agreed upon by Coherus and Surface 15 days prior to the Surface special meeting, subject to adjournment or postponement pursuant to the Merger Agreement (the “Anticipated Closing Date”), Surface shall deliver to Coherus a schedule setting forth a good faith estimated calculation of the Surface Net Cash as of the applicable dates of termination under the Merger Agreement (the “Net Cash Schedule”). Within five business days after delivery of the Net Cash Schedule, Coherus has the right to dispute any part of the Net Cash Schedule by delivering a written notice identifying in reasonable detail the nature of any disputed items and proposed revisions to the Net Cash Schedule and related calculation of Surface Net Cash. If Coherus does not respond within five business days after the delivery of the Net Cash Schedule or notifies Surface that it has no objections, the Net Cash Schedule shall be final and represent the Surface Net Cash. If Coherus timely disputes the Net Cash Schedule, Coherus and Surface shall promptly meet and attempt in good faith to resolve the disputed item(s) and negotiate an agreed upon determination of Surface Net Cash. If Coherus and Surface are unable to negotiate an agreed upon determination of Surface Net Cash, within three business days after Coherus delivers a dispute notice to the Net Cash Schedule, Coherus and Surface shall select an independent auditor to resolve any remaining disagreements to the calculation of Surface Net Cash. Coherus and Surface shall use commercially reasonable efforts to cause the auditor to make its determination within 10 days of after accepting its selection. The closing of the Mergers shall be delayed until the disputes relating to Surface Net Cash are resolved by the auditor. The determination of Surface Net Cash made by the auditor shall be deemed final for purposes of the Merger Agreement. The fees of the auditor shall be borne by the parties in the same proportion that the disputed amount of Surface Net Cash was unsuccessfully disputed by such party based on the total disputed amount of Surface Net Cash. The parties shall not be required to determine Surface Net Cash again after it is finally determined even if the Closing occurs after the Anticipated Closing Date of the First Merger, except either party may request a re-determination of Surface Net Cash if the Closing is more than five business days after the Anticipated Closing Date of the First Merger.

Cap on Cash Consideration

Pursuant to the terms of the Merger Agreement and the CVR Agreement, in no event shall the aggregate cash consideration payable under the Merger Agreement and the CVR Agreement, taken together, exceed 60% of the aggregate value of the total consideration payable under the Merger Agreement and the CVR Agreement, taken together.

 

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Treatment of Options and Other Equity-Based Awards

The Merger Agreement provides for the treatment set forth below with respect to the Surface equity awards that are outstanding at the Effective Time.

Surface Stock Options

At the Effective Time, each Surface Stock Option granted under any of Surface’s equity incentive plans, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall be converted, assumed or cancelled as follows:

 

•

with respect to each In-the-Money Option, such In-the-Money Option shall be cancelled and converted into the right to receive: (x) a number of shares of Coherus common stock, subject to certain exceptions for fractional shares and any applicable withholdings, that is equal to the quotient of (A) the product of (1) the total number of shares of Surface common stock underlying the In-the-Money Option multiplied by (2) the excess, if any, of the value of the Upfront Consideration over the exercise price of such In-the-Money Option, divided by (B) $5.2831 (the VWAP for the five trading days through and including June 15, 2023); and (y) a number of CVRs equal to the number of shares of Surface common stock underlying such In-the-Money Option;

 

•

with respect to each Underwater Option held by any employee who continues to be employed by Coherus and its affiliates after the Effective Time, such Underwater Option shall be assumed by Coherus and converted into an Assumed Option in a manner consistent with applicable tax laws in accordance with the Merger Agreement. Each Assumed Option will continue to have, and be subject to, the same vesting schedule, term exercisability provisions and other terms and conditions set forth in the applicable Surface equity incentive plan and the applicable Surface Stock Option award agreement as in effect immediately prior to the Effective Time, except that (i) Coherus and its board of directors shall have any and all amendment and administrative authority with respect to such Assumed Options and Surface’s equity incentive plans, (ii) each Assumed Option will become exercisable for that number of whole shares of Coherus common stock equal to the product (rounded down to the next whole number of shares of Coherus common stock) of (A) the number of shares of Surface common stock that would have been issuable upon full exercise of such Assumed Option immediately prior to the Effective Time multiplied by (B) the Exchange Ratio, and (iii) the per share exercise price for the shares of Coherus common stock issuable upon exercise of such Assumed Option shall be equal to the quotient (rounded up to the next whole cent) obtained by dividing the exercise price per share of Surface common stock at which such Assumed Option was exercisable immediately prior to the Effective Time by the Exchange Ratio; and

 

•

with respect to each Underwater Option held by an employee who is not continuing to be employed by Coherus and its affiliates after the Effective Time, such Underwater Option shall be cancelled, and the holder of such Underwater Option will receive no Merger Consideration (whether under the Merger Agreement or under the CVR Agreement or otherwise) and, effective as of immediately prior to the Effective Time, will have no further rights with respect to such Underwater Option.

Surface RSUs

At the Effective Time, each Surface RSU granted under any of Surface’s equity incentive plans, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall automatically be cancelled and converted into the right to receive the Merger Consideration in respect of each share of Surface common stock subject to such Surface RSU, subject to certain exceptions for fractional shares and applicable withholdings.

 

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Surface 2018 Employee Stock Purchase Plan

With respect to the Surface ESPP, Surface will take such actions as are necessary with respect to the Surface ESPP to provide that no offering periods will commence under the Surface ESPP following the date of the Merger Agreement and the Surface ESPP shall terminate prior to the Effective Time.

Certain Actions

Prior to the Effective Time, Surface will adopt such resolutions and take all other actions (including, as applicable, providing advance notice to holders of Surface Stock Options and Surface RSUs) to effectuate the treatment of the Surface Stock Options, Surface RSUs and the Surface ESPP described above.

Exchange of Shares

Exchange Agent

Coherus has selected Equiniti Trust Company Shareowner Services to act as Exchange Agent. Prior to the Effective Time, Coherus will deposit (or cause to be deposited) with the Exchange Agent (a) book-entry shares representing the shares of Coherus common stock issuable pursuant to the Merger Agreement and (b) cash sufficient to make payments in lieu of fractional shares in accordance with the Merger Agreement and any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

Exchange of Surface Stock Certificates and Surface Book-Entry Shares

With respect to certificates representing shares of Surface common stock, as promptly as reasonably practicable after the Effective Time and in any event not later than the third business day thereafter, the Exchange Agent will mail to each holder of record of each such Surface stock certificate (a) a letter of transmittal and (b) instructions for surrendering the Surface stock certificates in exchange for the Merger Consideration. Promptly after the Effective Time (and no later than three business days after the Effective Time), the Exchange Agent will deliver a letter of transmittal to the holders of Surface book-entry shares.

Upon surrender of a Surface stock certificate and a duly completed and validly executed letter of transmittal to the Exchange Agent in accordance with the instructions for surrender, the holder will be entitled to receive:

 

•

a number of whole shares of Coherus common stock that such holder is entitled to receive pursuant to the Merger Agreement; and

 

•

the amount (after giving effect to any required tax withholdings as provided in the Merger Agreement) of (a) any cash in lieu of fractional shares of Coherus common stock plus (b) any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

With respect to the Surface book-entry shares, upon delivery of a duly executed letter of transmittal to the Exchange Agent, the holder will be entitled to receive:

 

•

a number of whole shares of Coherus common stock that such holder is entitled to receive pursuant to the Merger Agreement; and

 

•

the amount (after giving effect to any required tax withholdings as provided in the Merger Agreement) of (a) any cash in lieu of fractional shares of Coherus common stock plus (b) any dividends or distributions that such holder has the right to receive pursuant to the Merger Agreement.

Lost, Stolen or Destroyed Certificates

In the event that any Surface stock certificate has been lost, stolen or destroyed, then, upon the making of an affidavit, in form and substance reasonably acceptable to Coherus, that such Surface stock certificate has been

 

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lost, stolen or destroyed and, if required by the Exchange Agent, the posting of a bond in such customary amount as the Exchange Agent may determine is reasonably necessary as indemnity against any claim that may be made against the Exchange Agent or the Surviving Corporation with respect to such certificate, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Surface stock certificate, the Merger Consideration, any cash in lieu of fractional shares of Coherus common stock and any other dividends or other distributions, in each case, payable or issuable pursuant to the Merger Agreement.

Dividends and Distributions with Respect to Unexchanged Shares of Surface Common Stock

No dividends or other distributions declared or made with respect to shares of Coherus common stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Surface stock certificate or Surface book-entry shares with respect to the shares of Coherus common stock that such holder has the right to receive in the Mergers until the holder surrenders such Surface stock certificate or Surface book-entry shares in accordance with the Merger Agreement and, if applicable, the appropriate payment date for such dividend or distribution with respect to shares of Surface common stock.

Rights of Surface Stockholders Following the Effective Time and Transfers Following the Effective Time

At the Effective Time, all shares of Surface common stock outstanding immediately prior to the Effective Time will automatically be cancelled and retired and will cease to exist, and all holders of Surface stock certificates and of Surface book-entry shares will cease to have any rights as Surface stockholders, except the right to receive the Merger Consideration, any cash in lieu of fractional shares of Coherus common stock and any dividends or other distributions that such holder has the right to receive pursuant to the Merger Agreement.

None of Coherus, Surface as the Surviving Corporation, the Exchange Agent or any other person will be liable to any person in respect of shares of Coherus common stock, dividends or other distributions with respect thereto or cash in lieu of fractional shares of Coherus common stock properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. No dividends or other distributions with respect to Coherus common stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Surface stock certificate with respect to the shares of Coherus common stock that the holder has the right to receive upon the surrender, and no fractional share cash consideration will be paid to any holder until the holder surrenders such Surface stock certificate or Surface book-entry shares in accordance with the Merger Agreement. Following the surrender of a Surface stock certificate or Surface book-entry shares the record holder will be paid, without interest, (i) promptly after such surrender, the amount of any dividends or other distributions with a record date after the Effective Time paid with respect to such whole shares of Coherus common stock and the amount of any fractional share cash consideration to which such holder is entitled and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Coherus common stock.

Withholding Rights

Coherus, the Exchange Agent, the Rights Agent, Merger Sub I, Merger Sub II and Surface as the Surviving Corporation, as applicable, will each be entitled to deduct and withhold any amounts required to be deducted or withheld pursuant to applicable tax laws from the amounts that would otherwise be payable under the terms of the Merger Agreement. Any such amounts that are deducted or withheld and, if required, paid over to the appropriate governmental authorities will be treated as having been paid to the person in respect of which such deduction or withholding was made. In the event any such deduction and withholding are required to be made in respect of any Coherus common stock to be received by holders of shares Surface common stock or Surface equity awards, such deduction and withholding shall be satisfied by reducing the number of shares of Coherus common stock to which such holder of shares of Surface common stock or Surface equity awards otherwise would be entitled under the Merger Agreement by a number of shares equal to (x) the dollar amount of such deduction and withholding divided by (y) $5.2831 (the VWAP for the five trading days through and including June 15, 2023).

 

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Treatment of Fractional Shares

No fractional shares of Coherus common stock will be issued in connection with the First Merger. Each Surface stockholder or holder of other Surface equity awards who would otherwise be entitled to receive in the First Merger a fractional share of Coherus common stock pursuant to the Merger Agreement will, in lieu of such fractional share and upon surrender of such holder’s certificates representing shares of Surface common stock or book-entry positions representing non-certificated shares of Surface common stock, in each case outstanding as of immediately prior to the Effective Time, be paid in cash the dollar amount (rounded to the nearest whole cent), without interest and subject to any required tax withholding, determined by multiplying such fraction by $5.2831 (the VWAP for the five trading days through and including June 15, 2023). No such holder will be entitled to dividends, voting rights or any other rights in respect of any fractional share of Coherus common stock that would otherwise have been issuable as part of the Merger Consideration. The payment of cash in lieu of fractional share interests is not a separately bargained-for consideration, but merely represents a mechanical rounding-off of the fractions in the exchange.

Organizational Documents and Directors and Officers of the Surviving Corporation and the Surviving Entity

Subject to the requirements under “—Indemnification; Directors’ and Officers’ Insurance,” at the Effective Time, the certificate of incorporation of Merger Sub I in effect immediately prior to the Effective Time will be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms, except that the name of Merger Sub I will be changed to “Surface Oncology, Inc.” The Surface bylaws also will be amended and restated to conform to the bylaws of Merger Sub I, as in effect immediately prior to the Effective Time, except that references to the name of Merger Sub I will be changed to “Surface Oncology, Inc.”

Subject to the requirements under “—Indemnification; Directors’ and Officers’ Insurance,” at the Second Effective Time, the certificate of formation of Merger Sub II in effect immediately prior to the Second Effective Time will be the certificate of formation of the Surviving Entity, and the limited liability company agreement of Merger Sub II in effect immediately prior to the Second Effective Time will be the limited liability company agreement of the Surviving Entity.

The directors of Merger Sub I immediately prior to the Effective Time will become the directors of the Surviving Corporation upon the First Merger until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified, and the officers of Merger Sub I immediately prior to the Effective Time will become the officers of the Surviving Corporation until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified.

The sole member of Merger Sub II immediately prior to the Effective Time will remain the sole member of the Surviving Entity until the sole member’s interests are transferred to another person or persons or additional members are admitted, each in accordance with the terms of the limited liability company agreement of Merger Sub II, and the officers of Merger Sub II immediately prior to the Second Effective Time will become the officers of the Surviving Entity until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified.

Representations and Warranties

The Merger Agreement contains customary and, in certain cases, reciprocal, representations and warranties by Coherus, Merger Sub I, Merger Sub II and Surface that are subject, in some cases, to specified exceptions and qualifications contained in confidential disclosure letters and qualified by certain information filed by the parties with the SEC, excluding, in each case, any disclosures set forth in any risk factor section or “forward-looking statements” sections.

 

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The reciprocal representations and warranties relate to, among other things:

 

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organization, good standing and qualification to do business and subsidiaries’ organization, good standing and qualification to do business;

 

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capitalization;

 

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corporate authority and approval relating to the execution, delivery and performance of the Merger Agreement;

 

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the absence of any violation of organizational documents, any conflict with or violation of applicable laws, any violation of or default under contracts, or any lien on the properties, rights or assets of a party or its subsidiaries as a result of the execution and delivery of the Merger Agreement and completion of the Mergers;

 

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the proper filing of reports, schedules, forms, documents and financial statements required by the SEC and compliance with certain provisions of the Sarbanes-Oxley Act;

 

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the maintenance of internal controls and procedures;

 

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the absence of undisclosed liabilities;

 

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the absence of untrue or omitted statements of material fact in statements submitted for inclusion in the proxy statement / prospectus;

 

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the absence of certain material changes or events in the respective businesses of each of Coherus and Surface;

 

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investigations, litigations and proceedings;

 

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compliance with applicable laws and the holding of necessary permits;

 

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maintenance and effectiveness of employee benefit plans;

 

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compliance with tax laws and other tax matters;

 

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insurance policies;

 

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intellectual property and information technology, including with respect to the enforceability of intellectual property, third-party intellectual property infringement claims, licensing arrangements, the protection of trade secrets, security breaches and compliance with privacy and security laws and regulations;

 

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compliance with data privacy laws;

 

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owned and leased real property;

 

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compliance with health care laws and regulations;

 

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the absence of any violations of any anti-corruption laws or similar violations by either party, its subsidiaries or any director, officer, employee, or agent of such party or its subsidiaries;

 

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the inapplicability of state anti-takeover statutes;

 

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the absence of any certain affiliate transactions; and

 

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broker’s and finder’s fees.

The Merger Agreement also contains additional representations and warranties by Surface relating to, among other things, the following:

 

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Surface’s material contracts and agreements;

 

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compliance with labor laws;

 

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compliance with environmental laws and regulations; and

 

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opinions of financial advisors.

The Merger Agreement also contains additional representations and warranties by Coherus relating to, among other things, the following:

 

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no prior activities of Merger Subs.

The representations and warranties will not survive the Mergers. Many of the representations and warranties contained in the Merger Agreement are qualified by a “materiality” standard or by a “material adverse effect” standard.

Material Adverse Effect

A material adverse effect, with respect to Coherus or Surface, as applicable, means any state of facts, circumstance, condition, event, change, development, occurrence, result, effect, action or omission (each, an “Effect”) that, individually or in the aggregate with any one or more other Effects, (i) results in a material adverse effect on the business, condition (financial or otherwise) or results of operations of the party and its subsidiaries, taken as a whole or (ii) prevents, materially impairs, materially impedes or materially delays the consummation of the Mergers and the other transactions contemplated by the Merger Agreement on a timely basis and in any event on or before the Termination Date; provided, that with respect to clause (i) only, no Effect to the extent arising out of the following, alone or in combination, shall, to such extent, be deemed to constitute, or be taken into account in determining whether there has been or would or could be, a material adverse effect:

 

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any changes in general economic or business conditions or in the financial, debt, banking, capital, credit or securities markets, or in interest or exchange rates;

 

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changes or conditions generally affecting the industries in which the party and its subsidiaries operate;

 

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any change in the price or trading volume of a party’s stock, in and of itself (provided that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of material adverse effect may be taken into account in determining whether there has been a material adverse effect);

 

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political, geopolitical, social or regulatory conditions, including any outbreak, continuation or escalation of any military conflict, declared or undeclared war, armed hostilities, civil unrest, public demonstrations or acts of foreign or domestic terrorism or sabotage, or any escalation or worsening of any such conditions;

 

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any natural disasters or calamities, weather conditions including hurricanes, floods, tornados, tsunamis, earthquakes and wildfires, epidemics, pandemics or public health emergencies (as declared by the World Health Organization or the Health and Human Services Secretary of the United States) or other force majeure events, or any escalation or worsening of such conditions;

 

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changes in law (including adoption of or changes in any Public Health Measures) or GAAP, including changes in applicable accounting regulations or principles, or in interpretations of any of the foregoing;

 

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any failure, in and of itself, by the parties to meet any internal or published projections, forecasts, estimates or predictions in respect of the revenues, earnings or other financial or operating metrics for any period (provided that, in each case, the underlying causes of such failure which may themselves constitute or be taken into account in determining whether there has been, or would be, a material adverse effect);

 

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any action taken (or omitted to be taken) by a party, or which a party cause to be taken by any of its subsidiaries, in each case which is expressly required by the Merger Agreement or at the express written request of Coherus;

 

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the announcement or pendency of the Merger Agreement and the transactions contemplated thereby, including the initiation of litigation by any person with respect to the Merger Agreement, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, partners, or employees of the parties and their subsidiaries due to the announcement or consummation of the transactions contemplated thereby or the identity of the parties to the Merger Agreement, or the consummation of the transactions contemplated thereby;

 

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changes in regulatory, preclinical or clinical, competitive, pricing, reimbursement or manufacturing events, or any Effects relating to or affecting any products or product candidates of the parties or any product or product candidate competitive with or related to any products or product candidates of the parties, including any results, outcomes, data, adverse events, side effects (including toxicity) or safety observations related to or arising from any preclinical or clinical studies, trials or tests with respect to any products or product candidates of the parties or any product or product candidate competitive with or related to any products or product candidates of the parties, or announcements of any of the foregoing, (provided that in the event that any of the foregoing Effects result in or are related to the FDA revoking the investigational new drug application for any product or product candidate of a party, then such changes and Effects, and any such revocation, shall be taking into account when determining whether there has been a material adverse effect with respect to such party); or

 

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except that with respect to the first, second, fourth, fifth and sixth bullets above, the impact of such Effect is not disproportionately adverse to the parties and their subsidiaries, taken as a whole, as compared to other companies operating in the industries in which the parties and their subsidiaries operate (and provided further, that in such event, only the incremental disproportionate adverse impact shall be taken into account when determining whether there has been a material adverse effect).

Conduct of Business Prior to the Mergers’ Completion

Coherus and Surface have agreed that, except as expressly required by the Merger Agreement, as set forth in their respective disclosure schedules, as may be required by applicable laws, or unless the other party approves in writing (such approval not to be unreasonably withheld, conditioned or delayed), Coherus and Surface, as applicable, will, and will cause each of its subsidiaries to, conduct its business in the ordinary course in all material respects.

Surface has also agreed that, except as may be required by applicable laws, as expressly permitted or required by the Merger Agreement, as set forth in Surface’s disclosure schedule, or unless Coherus approves in writing (such approval not to be unreasonably withheld, conditioned or delayed), neither Surface nor any of its subsidiaries will:

 

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amend or otherwise change its certificate of incorporation or bylaws or any similar governing instruments;

 

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issue, deliver, sell, pledge, dispose of or encumber or subject to any lien any shares of capital stock, or grant or offer to any person any right to acquire (w) any shares of its capital stock or of the capital stock of its subsidiaries, (x) any other equity interests or voting securities of Surface or any of its subsidiaries, (y) any securities convertible into or exchangeable or exercisable for capital stock or voting securities of, or other equity interests in, Surface or any of its subsidiaries, or (z) any warrants, calls, options or other rights to acquire any capital stock or voting securities of, or other equity interests in, Surface or any of its subsidiaries, except, in each case of (w)-(y), for issuing shares upon the exercise of Surface Stock Options or settlement of Surface RSUs outstanding under Surface’s equity incentive plans in accordance with their respective terms as of the date of the Merger Agreement;

 

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declare, set aside, make or pay any dividend on or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

 

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adjust, split, combine, redeem, repurchase or otherwise acquire any shares of capital stock or other securities, convertible or exchangeable for, or any rights, warrants or options to acquire any shares of

 

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capital stock or other securities of Surface or any of its subsidiaries (except in connection with the cashless exercises or similar transactions pursuant to the exercise or settlement of Surface’s stock awards outstanding under Surface’s equity incentive plans as of the date of the Merger Agreement and as required by their respective terms), or reclassify, combine, split, subdivide or otherwise amend the terms of its capital stock or other securities of Surface or any of its subsidiaries;

 

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(A) acquire or agree to acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, other than (x) purchases of inventory and other assets in the ordinary course of business consistent with past practice in all material respects or pursuant to existing contracts, other than such acquisitions set forth the disclosure schedules and (y) purchases of inventory and other assets in the ordinary course of business consistent with past practice in all material respects and pursuant to the terms of contracts existing on the date of the Merger Agreement; (B) sell or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, other than sales of inventory, goods or services in the ordinary course of business consistent with past practice in all material respects and non-exclusive licenses granted to customers in the ordinary course of business consistent with past practice in all material respects;

 

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amend or voluntarily terminate any material contract, or enter into any new contract that would be a material contract or lease agreement assuming such new contract was in force and effective as of the date of the Merger Agreement;

 

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make, or agree or commit to make, any capital expenditure, except in accordance with the capital expenditure budget set forth in the disclosure schedules or expend cash following August 31, 2023 in an amount in excess of the budget set forth in the disclosure schedules;

 

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fail to maintain compliance with the material terms of any loan agreement;

 

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sell, lease (as lessor), license, covenant not to assert, mortgage and leaseback or otherwise encumber or subject to any lien (other than any permitted lien), or otherwise dispose of any properties, rights or assets (including any intellectual property of Surface or its subsidiaries) that are material to Surface and its subsidiaries taken as a whole (other than sales and non-exclusive licenses of products or services in the ordinary course of business consistent with past practice in all material respects), except (A) pursuant to contracts or commitments in effect on the date of the Merger Agreement (or entered into after the date of the Merger Agreement without violating the terms of the Merger Agreement), (B) any of the foregoing with respect to inventory in the ordinary course of business consistent with past practice in all material respects, or (C) in relation to mortgages, liens and pledges to secure indebtedness for borrowed money permitted to be incurred under the Merger Agreement and guarantees thereof;

 

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(A) make any loans, advances or capital contributions to, or investments in, any other person (other than a subsidiary of Surface), (B) incur any indebtedness or issue any debt securities or (C) assume, guarantee, endorse or otherwise become liable or responsible for the indebtedness or other obligations of another person (other than a guaranty by Surface on behalf of its subsidiaries), in each case, in excess of $250,000 individually or $500,000 in the aggregate;

 

•

except to the extent contemplated by the Merger Agreement or required by applicable law (including Section 409(A) of the Code) or any incentive plan in effect on the date of the Merger Agreement, (A) increase the compensation or benefits of any current or former director, officer, employee or independent contractor of Surface, other than in the ordinary course of business consistent with past practice in all material respects for such persons with base annual compensation less than $150,000, (B) grant or pay to any current or former director, officer, employee or independent contractor any severance, change in control or termination pay, or modifications thereto or increases therein, (C) amend, adopt, modify or terminate any incentive plan, (D) grant or amend any equity award

 

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(including in respect of stock options, stock appreciation rights, performance units, restricted stock or other stock-based or stock-related awards or the removal or modification of any restrictions in any Surface’s equity incentive plans or awards made thereunder), (E) take any action to accelerate the vesting or payment of any compensation or benefit under any Surface’s equity incentive plan or awards made thereunder or other contract with any current or former director, officer, employee or independent contractor of Surface or any of its subsidiaries, other than as required pursuant to the Merger Agreement, (F) hire or terminate other than for cause the service of any executive officer or any employee, independent contractor or consultant with annual base compensation equal to or greater than $150,000, (G) waive or materially amend any restrictive covenant entered into by any current or former director, officer, employee or independent contractor of Surface or any of its subsidiaries, or (H) enter into or modify any labor agreement;

 

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implement or adopt any material change in its financial methods of accounting, principles or practices, except as may be required by a change in GAAP or regulatory requirements with respect thereto (in each case, if adopted after the date of the Merger Agreement);

 

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commence, institute, waive, release, compromise, settle or agree to settle any action (including any action relating to the Merger Agreement or the transactions contemplated thereby), or consent to the same, other than waivers, releases, compromises, settlements or agreements in the ordinary course of business consistent with past practice in all material respects that involve only the payment of money damages for an amount for each such waiver, release compromise or settlement that is, individually, less than $250,000 and for all such waivers, releases, compromises or settlements that are, in the aggregate, less than $500,000 and that do not impose any restrictions on Surface’s or its subsidiaries’ businesses, that do not relate to any action by Surface’s stockholders in connection with the Merger Agreement or the Mergers, subject to the Merger Agreement, and that do not include an admission of liability or fault on the part of Surface or any of its subsidiaries;

 

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enter into, modify, amend, extend, renew, replace or terminate any collective bargaining or other labor union contract applicable to the employees of Surface or any of its subsidiaries;

 

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subject to a lien (other than permitted liens), assign, transfer, convey title (in whole or in part), license, covenant not to assert, grant any right or other licenses to, or otherwise dispose of, material trademarks, trademark rights, trade names or service marks or other material intellectual property, or enter into licenses or agreements that impose material restrictions upon Surface or any of its subsidiaries with respect to material trademarks, trademark rights, trade names or service marks or other material intellectual property rights owned by any third party, in each case other than non-exclusive licenses in the ordinary course of business consistent with past practice in all material respects;

 

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with respect to intellectual property, (A) sell, assign, license, sublicense, encumber, fail to maintain, transfer or otherwise dispose of any right, title or interest of Surface in any intellectual property, (B) grant, extend, amend, or waive, cancel or modify any rights in or to intellectual property, (C) fail to use diligent efforts to file and prosecute any patent applications included in intellectual property, except in the case of clauses (A) and (B) licenses and sales in the ordinary course of business or otherwise pursuant to contracts in effect on the date of the Merger Agreement;

 

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(A) amend any permits in a manner that adversely impacts Surface’s ability to conduct its business in any material respect or (B) terminate or knowingly allow to lapse any material permits;

 

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fail to keep in force insurance policies or replacement or revised provisions regarding insurance coverage with respect to the assets, operations and activities of Surface and its subsidiaries as currently in effect, including any directors’ and officers’ liability insurance;

 

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commence any clinical trial of any product candidate of Surface, or enter into any new line of business outside of Surface’s and its subsidiaries’ existing business;

 

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dissolve or liquidate Surface or any of its subsidiaries, or adopt any plan of complete or partial liquidation of Surface or its subsidiaries;

 

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(A) settle or compromise any tax claim, audit, or assessment, (B) make or change any material tax election, change any annual tax accounting period, or adopt or change any method of tax accounting, (C) amend any tax returns or file claims for tax refunds, or (D) enter into any closing agreement, surrender in writing any right to claim a tax refund, offset or other reduction in tax liability or consent to any extension or waiver of the limitation period applicable to any tax claim or assessment relating to Surface or its subsidiaries; or

 

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authorize any of, or commit, resolve or agree to take any of the actions described in the bullet points above.

Coherus has also agreed that, except as may be required by applicable laws, as expressly permitted or required by the Merger Agreement, as set forth in Coherus’ disclosure schedule, or unless Surface approves in writing (such approval not to be unreasonably withheld, conditioned or delayed), neither Coherus nor any of its subsidiaries will:

 

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amend or otherwise change its certificate of incorporation or bylaws or any similar governing instruments;

 

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issue, deliver, sell or grant any shares of capital stock, or grant to any person any right to acquire any additional shares of, or securities convertible or exchangeable for, or options, warrants or rights to acquire, any shares of its capital stock or other equity interests, except (w) pursuant to the exercise of equity awards or settlement of equity awards; (x) shares of common stock issuable upon exercise or exchange of any outstanding convertible notes or warrants; (y) the issuance and grant of equity awards in the ordinary course of business; or (z) to any of Surface and its subsidiaries;

 

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declare, set aside, make or pay any dividend on or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for any distribution or dividend by a subsidiary of Coherus);

 

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(A) acquire or agree to acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, other than (x) purchases of inventory and other assets in the ordinary course of business consistent with past practice in all material respects or pursuant to existing contracts, other than such acquisitions set forth in the disclosure schedules and (y) purchases of inventory and other assets in the ordinary course of business consistent with past practice in all material respects and pursuant to the terms of contracts existing on the date of the Merger Agreement; (B) sell or otherwise dispose of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof or any assets, other than sales of inventory, goods or services in the ordinary course of business consistent with past practice in all material respects and non-exclusive licenses granted to customers in the ordinary course of business consistent with past practice in all material respects;

 

•

adjust, split, combine, redeem, repurchase or otherwise acquire any shares of capital stock or other securities, convertible or exchangeable for, or any rights, warrants or options to acquire any shares of capital stock or other securities of Coherus or any of its subsidiaries (except in connection with the cashless exercises or similar transactions pursuant to the exercise of equity awards), or reclassify, combine, split, subdivide or otherwise amend the terms of its capital stock or other securities of Coherus or any of its subsidiaries;

 

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fail to maintain compliance with the material terms of any loan agreement;

 

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with respect to intellectual property, (A) sell, assign, license, sublicense, encumber, fail to maintain, transfer or otherwise dispose of any right, title or interest of Coherus in any material intellectual property, (B) grant, extend, amend, or waive, cancel or modify any rights in or to any material intellectual property, (C) fail to use diligent efforts to file and prosecute any patent applications included in any material intellectual property;

 

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(A) amend any permits in a manner that adversely impacts Coherus’ ability to conduct its business in any material respect or (B) terminate or knowingly allow to lapse any material permits;

 

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fail to keep in force insurance policies or replacement or revised provisions regarding insurance coverage with respect to the assets, operations and activities of Coherus and its subsidiaries as currently in effect, including any directors’ and officers’ liability insurance;

 

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dissolve or liquidate Coherus or any of its subsidiaries, or adopt any plan of complete or partial liquidation of Coherus or its subsidiaries;

 

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except as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect, (A) settle or compromise any tax claim, audit, or assessment, (B) make or change any material tax election, change any annual tax accounting period, or adopt or change any method of tax accounting, (C) amend any tax returns or file claims for tax refunds, or (D) enter into any closing agreement, surrender in writing any right to claim a tax refund, offset or other reduction in tax liability or consent to any extension or waiver of the limitation period applicable to any tax claim or assessment relating to Coherus or its subsidiaries; or

 

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authorize any of, or commit, resolve or agree to take any of the actions described in the bullet points above.

No Solicitation of Acquisition Proposals

Except as expressly permitted by the Merger Agreement and described under “—No Change of Recommendation—Permitted Change of Recommendation—Superior Proposal” and “—No Change of Recommendation—Permitted Change of Recommendation—Intervening Event,” Coherus and Surface have agreed that Surface will not, and will cause its subsidiaries and direct its and their respective directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives not to, directly or indirectly:

 

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initiate, solicit, endorse, assist, induce, facilitate or encourage (including by providing information) any inquiries, proposals or offers with respect to, or the making, submission, announcement or completion of, any inquiry, proposal or offer that constitutes, or would be reasonably expected to lead to, an acquisition proposal;

 

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enter into, continue or otherwise engage or participate in any negotiations or discussions with any person other than Coherus, the Merger Subs and their respective affiliates and representatives concerning any acquisition proposal or any inquiry, proposal or offer that would reasonably be expected to lead to any acquisition proposal;

 

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furnish, provide or cause to be furnished or provided any non-public information or data relating to Surface or any of its subsidiaries in connection with, or for the purpose of soliciting, initiating, encouraging or facilitating, or in response to, any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to, an acquisition proposal;

 

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execute or enter into any letter of intent or any other contract contemplating an acquisition proposal (other than an acceptable confidentiality agreement); or

 

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resolve or agree or propose to do any of the foregoing.

Notwithstanding the restrictions described above, prior to Surface obtaining approval by the Surface stockholders of the Merger Agreement, if Surface receives an unsolicited, bona fide (as determined by the Surface board of directors acting in good faith) acquisition proposal that did not result from a material breach of the foregoing restrictions and the Surface board of directors determines in good faith (after consultation with its outside legal counsel and its financial advisor) that such acquisition proposal either constitutes or is reasonably likely to lead to a superior proposal and that the failure to engage in such discussions or negotiations, or to furnish or provide such information, would reasonably be expected to be inconsistent with the Surface board of directors’ fiduciary duties to Surface and its stockholders under applicable law, then Surface may:

 

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furnish information with respect to Surface and its subsidiaries to the person making such acquisition proposal pursuant to a customary confidentiality agreement on terms substantially similar to those

 

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contained in the confidentiality agreement between the parties to the Merger Agreement (except for such changes specifically necessary in order for Surface to be able to comply with its obligations under the Merger Agreement and it being understood that Surface may enter into a confidentiality agreement without a standstill provision), and

 

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participate in discussions or negotiations with such person and its representatives regarding such acquisition proposal; provided that Surface is required to provide promptly to Coherus (and not later than 24 hours after receipt of such acquisition proposal) a nonredacted copy of each confidentiality agreement entered into with the person making the acquisition proposal and provide to Coherus any written non-public information concerning Surface or any of its subsidiaries that is provided to the person making such acquisition proposal which was not previously provided or made available to Coherus.

An “acquisition proposal” means any indication of interest, proposal or offer from any person or group of persons for:

 

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a merger, reorganization, consolidation, share exchange, business combination, issuance of securities, direct or indirect acquisition of securities, recapitalization, tender offer, joint venture, partnership, exclusive licensing, liquidation, dissolution or other similar transaction involving Surface (or any subsidiary or subsidiaries of Surface) pursuant to which (i) any person, persons or group (or the stockholders of any such person(s)) would own, directly or indirectly, 20% or more of the voting securities of Surface or of the surviving entity in a merger involving Surface or the resulting direct or indirect parent of Surface or such surviving entity, other than, in each case, the Mergers or (ii) the owners of outstanding shares immediately prior to such transaction would own less than 50% of the voting securities of Surface or of the surviving entity in a merger involving Surface or the resulting direct or indirect parent of Surface or such surviving entity, other than, in each case, the Mergers;

 

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any issuance or acquisition of securities representing more than 20% of the outstanding shares of Surface;

 

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any direct or indirect sale, lease, exchange, transfer, acquisition or disposition of any assets of Surface and of its subsidiaries that constitute or account for (x) more than 20% of the consolidated net revenues of Surface, consolidated net income of Surface or consolidated book value of Surface; or (y) more than 20% of the fair market value of the consolidated assets of Surface and its subsidiaries; or

 

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any liquidation or dissolution of Surface.

A “superior proposal” means any acquisition proposal (with all references to 20% in the definition of acquisition proposal changed to 50%):

 

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made by any person on terms which the Surface board of directors determines in good faith, after consultation with its outside legal counsel and financial advisors, to be more favorable from a financial point of view (including taking into account payment by Surface of the termination fee due in connection therewith) to the stockholders of Surface than the Merger Agreement, taking into account all the terms, conditions and other relevant circumstances of such proposal (including the person making such acquisition proposal and the timing, likelihood of consummation, legal, financial, regulatory, financing and other aspects of such acquisition proposal), and the Merger Agreement (including after giving effect to any adjustments to the terms and conditions as may be proposed in writing by Coherus in response to such proposal); and

 

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that the Surface board of directors believes in good faith, after consultation with its outside legal counsel and financial advisors, is reasonably capable of being consummated in accordance with its terms, taking into account all financial, regulatory, legal and other aspects of such proposal and the person or group of persons making the proposal.

 

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Existing Discussions or Negotiations; Notice Regarding Acquisition Proposals

Coherus and Surface have agreed that Surface will, and will cause its subsidiaries and direct its representatives to:

 

•

immediately cease and cause to be terminated any existing activities, discussions or negotiations with any persons with respect to any acquisition proposal and deliver a written notice to any such persons explicitly stating that Surface is terminating all discussions and negotiations with such person;

 

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immediately terminate all data room access previously granted to any such persons and request the prompt return or destruction of all confidential information previously furnished with respect to any acquisition proposal; and

 

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not terminate or waive, amend, modify or release any provision of any confidentiality or standstill agreement to which Surface or any of its affiliates or representatives is a party with respect to any acquisition proposal.

In addition to Surface’s other obligations, Surface will promptly (and in any event within 48 hours of receipt) notify Coherus in writing of (i) any written acquisition proposal, (ii) any other written request for non-public information relating to Surface or its subsidiaries, other than requests for information not made in connection with or reasonably expected to be related to an acquisition proposal and (iii) any written or other inquiry or request for discussion or negotiation regarding, or that could reasonably be expected to lead to, an acquisition proposal, including in each case the identity of the person making any acquisition proposal, inquiry or request and the material terms of any acquisition proposal, inquiry or request and thereafter will keep Coherus informed, on a current basis (and in any event within 48 hours), of any developments with respect to any such proposals or offers (including amendments thereto) the status and terms of any such proposals or offers and the status of any such discussions or negotiations, including by promptly providing copies of any additional written requests, proposals or offers, including any drafts of proposed agreements and any amendments thereto and other information set forth above.

No Change of Recommendation

Coherus and Surface have agreed that, except as otherwise set forth in the Merger Agreement, the Surface board of directors will not:

 

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withdraw, change, withhold, amend or modify in a manner adverse to Coherus or the Merger Subs, or publicly propose to withdraw, change, withhold, amend or modify in a manner adverse to Coherus or the Merger Subs, the Surface board of directors’ recommendation to stockholders to adopt the Merger Agreement (the “Surface recommendation”);

 

•

adopt, approve, declare advisable or recommend, or publicly propose to approve, declare advisable or recommend, any acquisition proposal or alternative acquisition agreement;

 

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fail to include the Surface recommendation in the proxy statement;

 

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fail to publicly recommend against (and fail to publicly reaffirm the Surface recommendation) within 10 business days after a request to do so by Coherus following the public announcement of a tender or exchange offer that constitutes an acquisition proposal (and in no event later than one business day prior to the date of the Surface special meeting, as it may be postponed or adjourned);

 

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if requested by Coherus, fail to issue, within 10 business days after an acquisition proposal is publicly announced (and in no event later than one business day prior to the date of the Surface special meeting, as it may be postponed or adjourned), a press release reaffirming the Surface recommendation (any actions described in this bullet and the preceding four bullets, each a “change of recommendation”);

 

•

cause or permit Surface or any of its subsidiaries to enter into or agree to any letter of intent, memorandum of understanding or similar document, agreement in principle, acquisition agreement, option agreement, joint venture agreement, partnership agreement, merger agreement, or other similar agreement or commitment (other than a confidentiality agreement entered into in compliance with the Merger Agreement) contemplating or relating to an acquisition transaction; or

 

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take any action to make the provisions of any anti-takeover or similar statute or regulation inapplicable to any acquisition proposal or counterparty thereto.

Permitted Change of Recommendation—Superior Proposal

However, Surface, at any time prior to its stockholders voting to approve the Merger Agreement, may make a change of recommendation and terminate the Merger Agreement if Surface receives a written acquisition proposal after the date of the Merger Agreement that did not result from a material breach of the Merger Agreement’s non-solicitation provisions and that the Surface board of directors determines in good faith, after consultation with its outside legal counsel and financial advisors, to constitute a superior proposal (after taking into account all adjustments to the terms of the Merger Agreement that may be offered in writing by Coherus), only after the following conditions are met:

 

•

(A) Surface will have provided Coherus at least four business days’ prior notice before taking any of the foregoing actions, which notice will state expressly (1) that Surface has received a written acquisition proposal that constitutes a superior proposal, (2) the material terms and conditions of the acquisition proposal and (3) that the Surface board of directors has determined to make an adverse recommendation change or to terminate the Merger Agreement in order to enter into a binding agreement with respect to the superior proposal, as applicable, and (B) prior to making such recommendation change or terminating this Agreement, as applicable, (x) Surface will, and will cause its financial and legal advisors to, negotiate in good faith with Coherus (to the extent Coherus wishes to engage or seeks to negotiate) during such notice period, regarding any adjustments proposed by Coherus to the terms and conditions of the Merger Agreement such that the acquisition proposal and related definitive agreement cease to constitute a superior proposal and (y) in determining whether to make an adverse recommendation change or to effect a termination in accordance with the Merger Agreement, the Surface board of directors will have taken into account any changes to the terms of the Merger Agreement proposed by Coherus in writing in response to such notice; and

 

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the Surface board of directors has determined, in good faith, after consultation with its financial advisors and outside legal counsel, that, in light of such superior proposal and taking into account any revised terms proposed by Coherus in writing, such superior proposal continues to constitute a superior proposal and that the failure to make an adverse recommendation change or to terminate the Merger Agreement would reasonably be expected to be inconsistent with the directors’ fiduciary duties to the stockholders under applicable law.

In the case of terminating the Merger Agreement to enter into a definitive agreement with respect to a superior proposal, Surface shall have paid, or caused the payment of, the applicable termination fee in accordance with the Merger Agreement and described under “—Termination of the Merger Agreement.”

Permitted Change of Recommendation—Intervening Event

In addition, Surface, at any time prior to its stockholders voting to approve the Merger Agreement, may make a change of recommendation if an intervening event occurs and prior to making such change of recommendation all of the following conditions are met:

 

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the Surface board of directors has determined in good faith, after consultation with its outside legal counsel and financial advisor, that, in light of such intervening event, a failure to effect a change of recommendation would reasonably be expected to be inconsistent with the Surface board of directors’ fiduciary duties to its stockholders under applicable law;

 

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Surface has provided four business days’ prior written notice to Coherus advising that the Surface board of directors intends to make a change of recommendation as a result of the intervening event and providing information describing the intervening event and the rationale for the change of recommendation and stating that the Surface board of directors has determined to make a change of recommendation;

 

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prior to making a change of recommendation, Surface has negotiated in good faith with Coherus, and caused its financial advisors and outside legal counsel to negotiate in good faith with Coherus (to the extent Coherus wishes to engage or negotiate) during a four business day period regarding any revised terms proposed by Coherus in writing to the terms and conditions of the Merger Agreement; and

 

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following the end of such four business day period, the Surface board of directors has determined in good faith, after consultation with its outside legal counsel and financial advisor, that in light of such intervening event and taking into account any revised terms proposed by Coherus in writing, the failure to make a change of recommendation would reasonably be expected to be inconsistent with directors’ fiduciary duties to its stockholders under applicable law.

An “intervening event” means any event, occurrence, fact, condition, change, development or effect that has a material effect on Surface and its subsidiaries, taken as a whole, occurring or arising after the date of the Merger Agreement that (a) was not known to, or reasonably foreseeable by, the Surface board of directors prior to the execution of the Merger Agreement, which event, occurrence, fact, condition, change, development or effect, or any material consequence thereof, becomes known to, or reasonably foreseeable by, the Surface board of directors prior to obtaining approval by Surface’s stockholders of the Merger Agreement; and (b) does not relate to:

 

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an acquisition proposal or superior proposal;

 

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any changes in the market price or trading volume of the shares of Surface (it being understood that the cause of any such change may be taken into consideration unless otherwise excluded); and

 

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Surface meeting, failing to meet or exceeding published or unpublished revenue or earnings projections or forecasts or other financial performance or results of operations, in each case in and of itself (it being understood that the cause of such change may be taken into consideration unless otherwise excluded).

Surface Special Meeting

(x) Coherus and Surface will cooperate to mutually agree upon the record date and the date for a special meeting of the Surface stockholders to approve the Merger Agreement, (y) Surface will duly call, give notice of, convene and hold the Surface special meeting for the purpose of obtaining the approval by Surface’s stockholders of the Merger Agreement and (z) Surface will use reasonable best efforts to cause the proxy statement to be mailed to Surface’s stockholders.

Surface may postpone or adjourn the Surface special meeting solely:

 

•

with the consent of Coherus;

 

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due to the absence of a quorum or if Surface has not received proxies representing a sufficient number of shares for stockholder approval, whether or not a quorum is present, to solicit additional proxies; or

 

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to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the Surface board of directors has determined in good faith after consultation with outside legal counsel is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by Surface’s stockholders prior to the Surface special meeting; provided, that Surface may not postpone or adjourn the Surface special meeting more than a total of two times pursuant to the foregoing.

Surface will, at the request of Coherus, to the extent permitted by law, adjourn the Surface special meeting to a date mutually agreed with Coherus for the absence of a quorum or if Surface has not received proxies representing a sufficient number of shares for the stockholder approval including regarding the final determination of net cash; provided, that Surface shall not be required to adjourn the Surface special meeting more than one time pursuant to this sentence, and no such adjournment pursuant to this sentence shall be required to be for a period exceeding 10 business days.

 

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Except in the case of an adverse recommendation change, Surface, through its board of directors, will (i) recommend to its stockholders that they adopt the Merger Agreement and the Mergers and (ii) include such recommendation in the proxy statement. Surface agrees that, notwithstanding any change of recommendation, unless the Merger Agreement is terminated in accordance with its terms, (x) Surface will use its reasonable best efforts to solicit proxies to obtain the stockholder approval and (y) Surface’s obligations will not be affected by the commencement, public proposal, public disclosure or communication to Surface or any other person of any acquisition proposal or the occurrence of any adverse recommendation change. Surface agrees to provide Coherus with reasonably detailed periodic updates concerning proxy solicitation results upon Coherus’ reasonable request.

Access to Information

Subject to certain limitations, prior to the Effective Time, each of Coherus and Surface will afford the other party and its representatives reasonable access, during normal business hours upon reasonable advance notice, to Coherus’ or Surface’s, as applicable, and its subsidiaries’ properties, assets, books, contracts, commitments, personnel and records and, during such period, will furnish promptly to the other party all available information concerning Coherus’ or Surface’s, as applicable, business as the other party may reasonably request.

Indemnification; Directors’ and Officers’ Insurance

For at least six years following the Effective Time:

 

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all rights to indemnification, exculpation and the advancement of expenses by Surface or its subsidiaries existing in favor of any current or former directors and officers of Surface and its subsidiaries prior to the Effective Time (“indemnified persons”) for their acts, errors and omissions as directors and officers of Surface or its subsidiaries occurring on or prior to the Effective Time, all as in effect and existing on the date of the Merger Agreement, will survive the Mergers and be observed, honored and fulfilled, in all respects, by Coherus, the Surviving Entity and their subsidiaries to the fullest extent permitted by applicable law;

 

•

the Surviving Entity and its subsidiaries will (and Coherus will cause the Surviving Entity and its subsidiaries to) cause the Surviving Entity’s organizational documents to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in Surface’s certificate of incorporation and bylaws and those of its subsidiaries (as in effect as of the date of the Merger Agreement), and such provisions may not be repealed, amended or otherwise modified in any manner adverse to any applicable indemnified persons except as required by applicable law; and

 

•

Coherus will, and will cause the Surviving Entity and its subsidiaries to, to the fullest extent permitted under applicable law, indemnify, advance reasonable expenses to, and hold harmless any indemnified person who was or is a party or is threatened to be made a party to any actual or threatened action or proceeding in respect of any acts, errors or omissions occurring on or prior to the Effective Time (including in respect of the transactions contemplated by the Merger Agreement) by reason of the fact that such person is or was a director or officer of Surface or its subsidiaries, or is or was a director or officer of Surface serving at the request of Surface as a director or officer of, or in a fiduciary capacity with respect to, another corporation, partnership, joint venture, trust or other enterprise, against any resulting claims and losses and reasonable fees and expenses, including reasonable attorneys’ fees and expenses, and other costs, arising from such actions or proceedings.

For a period of six years after the Effective Time, Coherus must maintain Surface’s current directors’ and officers’ liability insurance covering each person currently covered by Surface’s directors’ and officers’ liability insurance policy for acts, errors or omissions occurring on or prior to the Effective Time (including with respect to the approval of the Merger Agreement and the consummation of the Mergers); provided, that (i) Coherus may

 

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substitute policies of an insurance company or companies the material terms of which, including coverage and amount, are no less favorable in any material respect to such directors and officers than Surface’s existing policies as of the date of the Merger Agreement, or (ii) Surface may obtain extended reporting period coverage under its existing insurance programs to be effective as of the Effective Time, provided, that in no event shall Coherus or Surface be required to pay annual premiums for insurance in excess of 300% of the amount of the annual premiums paid by Surface for the policy period in effect prior to the Effective Time.

Certain Tax Matters

Coherus, the Merger Subs and Surface intend that the First Merger and the Second Merger be considered together as a single integrated transaction for U.S. federal income tax purposes, and will together constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder, and the Merger Agreement be adopted as a “plan of reorganization” for the purposes of Section 368 of the Code and Section 1.368-2(g) of the Treasury Regulations.

Each of Coherus and Surface will (and will cause its respective subsidiaries to) file all tax returns in a manner consistent with the Intended Tax Treatment. Both prior to and following the Effective Time, Coherus, Merger Subs and Surface will use their respective commercially reasonable efforts, and will cause their respective subsidiaries to use their commercially reasonable efforts, to take or cause to be taken any action necessary for the Mergers to qualify for the Intended Tax Treatment, including reasonably refraining from any action that is not contemplated by the Merger Agreement, that such party knows, or is reasonably expected to know, is reasonably likely to prevent the Intended Tax Treatment and not taking any tax reporting position inconsistent with the Intended Tax Treatment for U.S. federal (and applicable state, local and non-U.S.) income tax purposes, unless otherwise required by a change in applicable tax law after the date of the Merger Agreement or a “determination” within the meaning of Section 1313(a) of the Code (or any similar provision of state, local, or non-U.S. Law). Coherus and Surface agree to use commercially reasonable efforts to promptly notify the other party of any challenge to the Intended Tax Treatment by any governmental entity, and the parties will use commercially reasonable efforts to preserve the Intended Tax Treatment during the course of such challenge.

If, in connection with any filings to be made by Coherus or Surface and required under the Exchange Act, Securities Act or any other United States federal, foreign or “blue sky” laws or the SEC’s review thereof, the SEC requests or requires that a tax opinion (or tax opinions) with respect to the U.S. federal income tax consequences of the Mergers be prepared and submitted in connection with such securities filing:

 

•

each of Coherus and Surface will use its commercially reasonable efforts to deliver to Goodwin (or such other nationally recognized tax or accounting firm in the United States reasonably acceptable to Coherus and Surface), in connection with any tax opinion rendered by Goodwin (or such other nationally recognized tax or accounting firm), customary tax representation letters in a mutually agreeable form, dated and executed as of the date such relevant filing shall have been declared effective by the SEC and such other date(s) as determined to be reasonably necessary by Goodwin (or such other nationally recognized tax or accounting firm) in connection with the preparation and filing of such securities filing;

 

•

each of Coherus and Surface will use its commercially reasonable efforts to deliver to Arnold & Porter (or such other nationally recognized tax or accounting firm in the United States reasonably acceptable to Coherus and Surface), in connection with any tax opinion rendered by Arnold & Porter (or such other nationally recognized tax or accounting firm), customary tax representation letters in a mutually agreeable form, dated and executed as of the date such relevant filing shall have been declared effective by the SEC and such other date(s) as determined to be reasonably necessary by Arnold & Porter (or such other nationally recognized tax or accounting firm) in connection with the preparation and filing of such securities filing; and

 

•

each of Coherus and Surface will use their commercially reasonable efforts to cause Goodwin (or such other nationally recognized tax or accounting firm) and Arnold & Porter (or such other nationally

 

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recognized tax or accounting firm), as applicable, to furnish the tax opinions, subject to customary assumptions and limitations.

Publicity

So long as the Merger Agreement is in effect, neither Coherus and the Merger Subs, on the one hand, nor Surface, on the other hand, shall issue any press release or other public statements with respect to the Merger Agreement, the Mergers and the other transactions contemplated thereby without the prior consent of each of the other parties, which consent shall not be unreasonably withheld, conditioned or delayed and shall not issue any press release or make any public announcement prior to such consultation and review, except (i) as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, or (ii) by Surface with respect to any acquisition proposal or adverse recommendation change in compliance with the Merger Agreement.

Employee Benefits Matters

From and after the Effective Time, Coherus shall honor, in accordance with their terms as in effect immediately prior to the Effective Time, all severance arrangements or other employment, severance and retention agreements, plans or arrangements that applied to Surface employees prior to the Effective Time, subject to and in accordance with the Merger Agreement and related disclosures.

For twelve months following the Effective Time (or, if sooner, upon the termination of employment of the applicable Covered Employee (as defined below)), Coherus will provide each employee who is actively employed by Surface or any of its subsidiaries immediately prior to the Effective Time and who continues in the employment of Coherus and its affiliates after the Effective Time (the “Covered Employees”) with (i) annual base salaries or wages no less than the base salaries or wages in effect immediately prior to the Effective Time, (ii) a target annual bonus opportunity that is no less favorable than the target annual bonus opportunity provided to the applicable Covered Employee as of immediately prior to the Effective Time and (iii) other employee benefits (excluding certain plans that provide for payments or benefits upon a change in control, defined benefit pension plans, plans providing for retiree welfare benefits, plans that provide equity-based compensation and retention payments) that are substantially similar in the aggregate to those provided by Coherus to its similarly-situated employees.

Coherus has agreed to give the Covered Employees full credit for purposes of eligibility and vesting and benefit levels (but not for purposes of benefit accruals other than determining the level of vacation pay accrual), under any Coherus benefit plan to the same extent recognized by Surface immediately prior to the Effective Time. With respect to each Coherus benefit plan that is a “welfare benefit plan,” Coherus and its subsidiaries also will use commercially reasonable efforts to (i) cause each Covered Employee to be immediately eligible to participate, without any waiting time, in any and all Coherus benefit plans to the extent coverage under such Coherus benefit plan replaces coverage under a substantially similar Surface benefit plan, (ii) cause to be waived any pre-existing condition or eligibility limitations and (iii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, Covered Employees under similar plans maintained by Surface and its subsidiaries immediately prior to the Effective Time.

Surface has agreed, prior to the Effective Time, to terminate the Surface Oncology, Inc. 401(k) Plan.

Certain Additional Covenants

The Merger Agreement also contains additional covenants, including, among others, covenants relating to the filing of this proxy statement/prospectus, the delisting of shares of Surface common stock from Nasdaq CM and the deregistration of Surface under the Exchange Act (which are described under “The Mergers—Listing of Coherus Common Stock; Delisting and Deregistration of Surface Common Stock”), notification of certain events and coordination with respect to litigation relating to the Mergers.

 

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Conditions to the Completion of the Mergers

The obligations of each of Coherus, the Merger Subs and Surface to complete the Mergers are subject to the satisfaction at or prior to the Effective Time of the following conditions:

 

•

the approval of the Merger Agreement by Surface’s stockholders shall have been obtained;

 

•

no restraining order, injunction or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition remains in effect, and no law has been enacted, entered, promulgated or enforced by any governmental entity that, in any case, prohibits or makes illegal the consummation of the Mergers or the other transactions contemplated by the Merger Agreement;

 

•

the approval for listing on Nasdaq GM of shares of Coherus common stock issuable in connection with the Mergers, subject to official notice of issuance;

 

•

the effectiveness of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, under the Securities Act and the absence of any stop order suspending the effectiveness of the Form S-4 that has not been withdrawn; and

 

•

the execution of the CVR Agreement by Coherus and the Rights Agent and its continued effectiveness.

The obligation of Surface to complete the Mergers is subject to the satisfaction, or waiver by Surface, at or prior to the Effective Time, of the following conditions:

 

•

Coherus’ representations and warranties regarding (a) Coherus’ and Merger Subs’ organization and good standing, (b) corporate authority and approval, (c) non-violation of Coherus’ or its subsidiaries’ organizational documents and (d) brokers must be true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Coherus’ representations and warranties regarding capitalization must have been true and correct in all respects (other than de minimis inaccuracies) as of the date of the Merger Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Coherus’ and Merger Subs’ representations and warranties regarding state takeover statutes must have been true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Coherus’ and Merger Subs’ remaining representations and warranties must have been true and correct (without giving effect to any exception or qualification contained therein relating to materiality or a material adverse effect), except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, did not have, or would not be reasonably expected to have, a material adverse effect, as of the date of the Merger Agreement and as of the Closing Date, as if made as of such date (except for those representations and warranties which address matters as of an earlier date, which shall have been so true and correct as of such earlier date);

 

•

Coherus’ and Merger Subs’ covenants required to be complied with or performed at or prior to the Closing must have been complied with and performed in all material respects;

 

•

since the date of the Merger Agreement, there must not have occurred any event, change, circumstance, occurrence, effect or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have, a material adverse effect on Coherus; and

 

•

Surface must have received a certificate, dated as of the Closing Date and signed by an executive officer of Coherus, confirming that the conditions described in the preceding bullets have been satisfied.

 

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The obligation of Coherus and Merger Subs to complete the Mergers is subject to the satisfaction, or waiver by Coherus, at or prior to the Effective Time of the following conditions:

 

•

Surface’s representations and warranties regarding (a) Surface’s organization and good standing, (b) corporate authority and approval, (c) non-violation of Surface’s or its subsidiaries’ organizational documents and (d) no rights plan must have been true and correct in all material respects as of the date of the Merger Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Surface’s representations and warranties regarding capitalization must have been true and correct in all respects (other than de minimis inaccuracies) as of the date of the Merger Agreement and as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Surface’s representations and warranties regarding state takeover statutes and opinion of financial advisors must have been true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date);

 

•

Surface’s remaining representations and warranties must have been true and correct (without giving effect to any exception or qualification contained therein relating to materiality or a material adverse effect), except where the failure of such other representations and warranties to be true and correct, individually or in the aggregate, has not had, or would not be reasonably expected to have, a material adverse effect, as of the date of the Merger Agreement and as of the Closing Date, as if made as of such date (except for those representations and warranties which address matters as of an earlier date, which shall have been so true and correct as of such earlier date);

 

•

Surface’s covenants required to be complied with or performed at or prior to the Closing must have been complied with and performed in all material respects;

 

•

since the date of the Merger Agreement there must not have occurred any event, change, circumstance, occurrence, effect or state of facts that, individually on in the aggregate, has had or would reasonably be expected to have a material adverse effect on Surface;

 

•

Coherus must have received a certificate, dated as of the Closing Date and signed by an executive officer of Surface, confirming that the conditions described in the preceding bullets have been satisfied; and

 

•

the amount of Surface Net Cash, calculated as of the applicable determination dates, shall not be less than $19,600,000 (or a lower amount that Coherus may consent to in writing).

Termination of the Merger Agreement

The Merger Agreement may be terminated and the Mergers abandoned:

 

•

by mutual written consent of Coherus and Surface at any time prior to the Effective Time;

 

•

by either Coherus or Surface, if the Mergers are not consummated on or before the Termination Date; provided that the right to terminate the Merger Agreement is not available to any party whose material breach of the Merger Agreement has been the primary cause of, or the primary factor that resulted in, the failure of the Mergers to be consummated by the Termination Date;

 

•

by either Coherus or Surface, if any court of competent jurisdiction or other governmental entity shall have issued a judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the Merger Agreement and such judgment, order, injunction, rule, decree or other action has become final and non-appealable or if any law has been enacted, entered, promulgated, endorsed or deemed applicable by any governmental

 

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