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United States securities and exchange commission logo
November 9, 2022
Suren Ajjarapu
Chief Executive Officer
Aesther Healthcare Acquisition Corp.
515 Madison Avenue, Suite 8078
New York, New York 10022
Re: Aesther Healthcare
Acquisition Corp.
Amendment No 1. to
Preliminary Proxy Statement on Schedule 14A
Filed October 26,
2022
File No. 001-40793
Dear Suren Ajjarapu:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Amendment No. 1 to Preliminary Proxy Statement on Schedule 14A filed
October 26, 2022
General
1. We note your agreements
with Vellar and Meteora obligate AHAC and New Ocean
Biomedical to
repurchase the shares they purchase in furtherance of the agreement.
Please provide us with
an analysis as to how these agreements, which may result in the
repurchase of shares at
a price as high as the redemption price plus $2.50 payable in
common shares of New
Ocean Biomedical, comply with Rule 14e-5.
Questions and Answers About the Proposals for Stockholders
What interests do AHAC's current officers and directors have in the
Business Combination?,
page 13
2. We note your response
to comment 5 and reissue our comment. Please revise your
disclosure discussing
the interests of AHAC's current officers and directors in the
Business Combination to
highlight the risk related to the sponsor s incentive to complete
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany 9,
November NameAesther
2022 Healthcare Acquisition Corp.
November
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any acquisition rather than liquidate and the potential result of
completing an acquisition
that might not be favorable to the public shareholders as it is to
your sponsors. For
example, disclose the effect a liquidation will have on the Sponsor's
Class B common
stock, Private Placement Warrants and $1,050,000 loan.
Summary of the Proxy Statement, page 19
3. We note your response to comment 2 and your revised disclosure on page
19 indicating
the conditions that AHAC has at least $5,000,001 of tangible net
assets and the shares of
New Ocean being listed on NASDAQ are not waivable conditions. Your
response and
these revisions imply that the other conditions presented can be
waived. Please revise to
clarify which conditions are subject to waiver. To the extent you
believe the remaining
conditions can be waived, please explain how you will complete the
merger if you do not
obtain shareholder approval from the stockholders of each company; if
you do not obtain
the approval of any required government authorities; if there is a law
or order preventing
the transaction; etc. Additionally, please note that the disclosure on
page 130 continues to
indicate that the Nasdaq listing and $5,000,001 net tangible asset
conditions can be
waived.
4. Please revise this discussion to quantify the total estimated amount
New Ocean
Biomedical may have to pay Vellar and Meteora assuming Vellar and
Meteora purchase
the maximum amount of shares pursuant to the Backstop Agreements and
elect to sell
them all back to the combined company at maturity, including the $2.50
per share
payments. Additionally, revise your risk factor on page 54 to disclose
the dilutive effects
of issuing new stock subject to the Backstop Agreements.
Unaudited Pro Forma Condensed Combined Financial Information
Basis of Pro Forma Presentation, page 32
5. Please expand your description of the preparation of the pro forma
condensed combined
financial information to also include the alternative levels of
utilization of the Backstop
Agreements, as there are seven scenarios presented and not just the
four for the various
redemption scenarios provided.
6. Please expand your disclosures to include all potential sources of
dilution. Refer to your
disclosures for the Ocean Warrants on page 37. Please address this
comment throughout
your document in which warrants or other dilutive securities are
discussed.
1. Basis of Presentation
General Description of the Business Combination Agreement, page 37
7. With reference to prior comment 8, please provide a prominent
discussion of the two
conditions required to be met to close the business combination,
including a calculation of
both conditions under each scenario. For each scenario that one or
both of these
conditions are not met, explain how you intend to address these
required conditions and/or
provide a fulsome explanation of the consequences of not meeting the
corresponding
Suren Ajjarapu
Aesther Healthcare Acquisition Corp.
November 9, 2022
Page 3
condition to the transaction, AHAC s business and AHAC s
shareholders. If there are
scenarios in which you will not meet one or both of these conditions,
address this
comment throughout the document where the conditions to close are
discussed.
Merger Consideration, page 37
8. As requested in prior comment 12, please expand your disclosure to
include a discussion
of the material terms for the Earnout Shares along with your intended
accounting for this
consideration to both Ocean Biomedical and Sponsor recipients. As part
of your response,
please provide us with your assessment of the material terms for each
type of recipient
along with your consideration of the guidance in ASC 480, ASC 815-40,
and ASC 718 for
any employee.
9. As requested in prior comment 12, please address the Extension Share
Award component
of the merger consideration, as discussed on page 128.
10. Please expand your disclosure for the Ocean Warrants to state the number
of New Ocean
Biomedical warrants that will be issued along with the material terms of
these warrants.
FirstName LastNameSuren Ajjarapu
11. For the Class B Units Profit Interest held by Ocean Biomedical
employees, please expand
Comapany
yourNameAesther Healthcare
disclosure to state Acquisition
whether Corp. will have an impact on
those interests and
this transaction
whether
November Poseidon
9, 2022 Page 3Bio will continue to make such grants subsequent to
this transaction.
FirstName LastName
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany 9,
November NameAesther
2022 Healthcare Acquisition Corp.
November
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2. Adjustments to Unaudited Pro Forma Combined Financial Information
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, page 38
12. For footnote (2) with reference to prior comment 13, please address
the following:
Clarify what the redemption period and expiration of the
redemption offer are in
the last paragraph on page 38.
Disclose any material differences between the material terms of
the Vellar Backstop
Agreement and the Meteora Backstop Agreement, if any.
Disclose that you have concluded that both Backstop Agreements are
within the
scope of ASC 480-10, if correct, and the corresponding accounting
implications.
As noted in your disclosures on page 40, a possible outcome is
that Vellar and
Meteora are unable to acquire any shares under the Backstop
Agreements. As such,
we continue to request that you expand your pro forma presentation
to also provide
scenarios in which this is the outcome in accordance with the
guidance in Article 11-
02(a)(10) of Regulation S-X.
Tell us how you determined that the sale of the shares acquired by
Vellar and
Meteora under the Backstop Agreements on the day of closing is
within the range of
possible outcomes to be reflected in the pro forma financial
statements. To the extent
that you are able to demonstrate the appropriateness of scenarios
2, 3 and 4, tell us
why you are reflecting a cash inflow from Vellar and Meteora,
since AHAC would
not have made the prepayments on the day of closing the business
combination.
For scenarios 5, 6 and 7, revise your presentation on the face of
the balance sheet to
show the cash outflow, as described in the disclosure (i.e., $26.8
million adjustment
to reduce cash under scenario 5, $73.9 million under scenario 6,
and $67.3 million
under scenario 7) rather than combining the adjustment under
footnote (4).
13. Please expand footnote (3) to address the fact that there would be
insufficient cash under
scenario 7 to make the full $3.5 million payments and the implications
to consummating
the business combination without having the financing to make these
payments.
14. Please revise the adjustment amounts associated with footnote (4) to
be consistent with the
application of the Vellar and Meteora Backstop Agreements. In this
regard, the 25% of
assumed redemptions are not actually redeemed but rather the
redemption request is
rescinded and acquired by Vellar and Meteora instead.
15. As previously requested in prior comment 14, please expand footnote
(5) to provide the
calculation showing the adjusted number of shares Ocean Biomedical
would be issued and
reflect the adjusted amount in the pro forma presentation. To the
extent that any of those
conditions are present as of the most recent balance sheet date. If
none of the factors that
would reduce the number of shares issuable to Ocean Biomedical are
present, disclose this
conclusion. Also address this comment throughout the document where
the pro forma
number of shares to be held is included along with appropriate
footnote disclosure for the
number of shares reflected. Refer to Article 11-02(a)(11)(ii)(A) of
Regulation S-X for
guidance.
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany 9,
November NameAesther
2022 Healthcare Acquisition Corp.
November
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16. As previously requested in prior comment 15 regarding the adjustments
associated with
footnote (7), please provide a more comprehensive explanation why you
are only
reflecting a cash payment of $11.2 million with an offset to
accumulated deficit. Provide
a reconciliation of the adjustments reflected in the pro forma balance
sheet with the
disclosures on page 243 that state $21.4 million of cash from the
proceeds of the Business
Combination will be used to pay $10.1 million of certain accrued
expenses, short-term
debt and contingent license fees is due upon any financing event with
an additional $11.3
million of contingent compensation, contingent vendor payments and
related party
expenses due upon a $50 million financing event.
3. Net income per Share, page 41
17. Please include the number of warrants to be outstanding related to the
Ocean Warrants in
your disclosure on page 42.
Some intellectual property that we have in-licensed may have been
discovered..., page 75
18. We note your response to comment 19. However, your revised disclosure
does not clarify
which of your product candidates are dependent on intellectual
property that may have
been discovered through government funded programs. Therefore, it is
not clear which
product candidates may be subject to march-in rights. Please revise to
clarify.
Timeline of the Business Combination, page 137
19. We note your response to comment 28 and reissue in part. Please revise
this discussion to
explain how you narrowed the list of thirty six potential acquisition
targets to the ten you
entered into non-disclosure agreements with.
Certain Unaudited Ocean Biomedical Prospective Financial Information, page 141
20. We note your response to comment 31. Please revise this discussion to
discuss the
assumptions underlying the projections in greater detail. For example,
disclose whether
the projections assume that all product candidates obtain FDA
approval, when they obtain
FDA approval and the competitive landscape when they receive FDA
approval and the
competitive landscape in the years that follow. Given the early stage
of development,
explain why you believed your assumptions related to candidate
approval were
reasonable. Clarify whether KPMG's analysis of commercial potential
assumes the
product candidate is a first line therapy, second line therapy or
third line therapy and
whether the assumption(s) changes during the 18 years presented.
Finally, discuss the
limitations of these projections by addressing how they may differ if
some or all of your
products do not obtain FDA approval, you encounter delays in
commencing or completing
your clinical trials, you experience obstacles in developing
commercial scale
manufacturing and establishing sales, marketing and distribution
capabilities. Your
discussion should clarify how common these circumstances are and how
likely it is for a
pre-clinical company to have all of its product candidates obtain FDA
approval of all of its
Suren Ajjarapu
FirstName LastNameSuren Ajjarapu
Aesther Healthcare Acquisition Corp.
Comapany 9,
November NameAesther
2022 Healthcare Acquisition Corp.
November
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product candidates in the timeframe contemplated by the assumptions
used in developing
your projections.
21. Discuss the reasonableness of the assumption that all of your product
candidates receive
FDA approval given the early stage of development and the disclosure
that for 337 drugs
reviewed over the period 2000-2019, the probability of success was
14.9% for infectious
disease, 16.3% for pulmonary fibrosis, 9.9% for NSCLC and 5.3% for GBM
mAbs.
22. Please clarify whether the projections appearing in Schedule 2 of
Annex E are the
projections prepared by Ocean Biomedical or if these projections are
The Mentor Group's
summary of the projections prepared by Ocean Biomedical.
The AHAC Board's Reasons for Approval of the Business Combination, page 141
23. We note your response to comment 29 please disclose any potentially
negative factors the
board considered prior to approving the business combination. To the
extent the board did
not consider and negative factors in this process, please revise to
clarify.
Opinion of the Mentor Group, page 144
24. Provide the interest rate used for the projections and the growth rate
for the fast growth
phase.
25. We note your response to comment 32. Please revise your disclosure to
clarify Ocean
Biomedical currently has no revenues and all product candidates are in
preclinical stages
and that Mentor did not consider any companies with these
characteristics in its analysis.
Business of Ocean Biomedical
Our Pipeline, page 172
26. We note in the exhibit furnished in your 8-K filed on November 1,
2022, regarding the
research presented by Dr. Jake Curtis, your CEO stated he "look[ed]
forward to working
with Ocean to bring these therapies to patients." Please explain this
statement here in light
of the early stage of development of your two malaria indications,
which are both in
preclinical stages of development.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Tracey Houser at 202-551-3736 or Kevin Kuhar at
202-551-3662 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Daniel Crawford at 202-551-7767 or Suzanne Hayes at 202-551-3675 with
any other
questions.
Suren Ajjarapu
Aesther Healthcare Acquisition Corp.
November 9, 2022
Page 7
Sincerely,
FirstName LastNameSuren Ajjarapu
Division of Corporation
Finance
Comapany NameAesther Healthcare Acquisition Corp.
Office of Life Sciences
November 9, 2022 Page 7
cc: Andy Tucker, Esq.
FirstName LastName