AcelRx to Acquire Tetraphase

AcelRx Pharmaceuticals announced a definitive merger agreement to acquire Tetraphase Pharmaceuticals in a stock for stock deal at an exchange ratio of 0.6303 shares of AcelRx for each share of Tetraphase, or approximately $14.4 million as of the close of trading on March 13, 2020, plus a contingent value right (CVR). The CVR represents additional consideration upon XERAVA™ (eravacycline for injection) achieving certain net sales starting in 2021. The acquisition is consistent with AcelRx's strategic plan to expand and diversify the company's product portfolio and create a growth platform towards becoming a leader in providing innovative treatments to healthcare institutions. The transaction was unanimously approved by both the AcelRx and Tetraphase Boards of Directors and is expected to close in the second quarter of 2020, subject to customary closing conditions. Tetraphase's four largest shareholders, including Armistice Capital, have signed voting agreements in favor of the transaction.

AcelRx and Tetraphase have also entered into a co-promotion agreement to commercialize XERAVA™ for the treatment of complicated intra-abdominal infections (cIAI) and DSUVIA® for the management of acute pain in medically supervised settings. The co-promotion agreement will take effect immediately and enable the AcelRx and Tetraphase teams to benefit from the promotion of multiple products, leverage each company's customer relationships, and create efficiencies amongst commercial teams prior to the closing of the merger. The combined sales team covering 35 territories will reach in excess of 70% of each company's originally targeted hospitals, illustrating the revenue and expense synergy potential of the transaction.

"We are excited to have reached agreement with Tetraphase, a company with a well-established US salesforce and a high-growth hospital product that complements AcelRx's commercial strategy," said Vince Angotti, Chief Executive Officer of AcelRx. "This transaction highlights our focus on efficiently commercializing DSUVIA with a salesforce promoting multiple products and is the first step in our plan to create a growth platform to further consolidate hospital-focused pharmaceutical companies and products. We look forward to integrating XERAVA™ and the existing Tetraphase commercial infrastructure with our own as we strengthen our position on promoting innovative products to healthcare institutions."

"This transaction marks an exciting time for both companies, and we are thrilled to collaborate with AcelRx, a partner whose strategic goals complement our own," said Larry Edwards, President and Chief Executive Officer of Tetraphase. "We continue to believe that XERAVA is a key addition to the hospital anti-infective armamentarium, and together with AcelRx we will be able to more effectively deliver a diverse portfolio of new patient treatments to healthcare institutions."

Under the terms of the merger agreement, each share of Tetraphase common stock will be converted into the right to receive 0.6303 shares of AcelRx common stock, subject to adjustment in certain circumstances, and a CVR that could provide up to an additional aggregate $12.5 million to Tetraphase stockholders upon the achievement of net sales of XERAVA™ of $20 million, $35 million and $55 million within the applicable timeframes, and as soon as year-end 2021. AcelRx shareholders will own approximately 85.4% of the combined company and Tetraphase shareholders will own approximately 14.6% on a pro forma, fully diluted basis, giving effect to all dilutive securities at the time of announcement, and excluding any settlement of the CVR through issuance of AcelRx common stock.

Closing of the transaction – expected in the second quarter of 2020 – is subject to Tetraphase having a defined cash level at closing and receipt of approval of its shareholders, as well as satisfaction of other customary closing conditions. The transaction does not require a vote by AcelRx stockholders.

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