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Tetraphase Says On May 12 Received Revised Proposal From La Jolla Pharmaceutical For $22.3M In Cash Plus Additional $12.5M In Cash Under Contingent Value; Co.'s Board At This Time Continues To Recommend AcelRx Merger Agreement

As previously disclosed, on May6, 2020, Tetraphase Pharmaceuticals, Inc. (“Tetraphase”) received an unsolicited proposal from La Jolla Pharmaceutical Company (“La Jolla”) to acquire Tetraphase

Benzinga · 05/13/2020 10:23

As previously disclosed, on May6, 2020, Tetraphase Pharmaceuticals, Inc. (“Tetraphase”) received an unsolicited proposal from La Jolla Pharmaceutical Company (“La Jolla”) to acquire Tetraphase for $22million in cash, plus an additional $12.5million in cash potentially payable under contingent value rights to be issued in the transaction. Tetraphase also previously announced that it had entered into a merger agreement, dated as of March15, 2020 (the “AcelRx Merger Agreement”), with AcelRx Pharmaceuticals, Inc. (“AcelRx”) and Consolidation Merger Sub, Inc. with respect to the acquisition of Tetraphase by AcelRx, pursuant to which each outstanding share of Tetraphase common stock would be automatically converted into the right to receive (1)a number of shares of the Parent’s common stock equal to 0.6303 (the “Exchange Ratio”); provided that if the Company’s closing net cash (the “Closing Net Cash”) is less than $5,000,000, the Exchange Ratio shall be adjusted to the ratio determined as follows: (a) (i) $20,000,000, minus (ii)the dollar amount by which the Closing Net Cash is less than $5,000,000, minus (iii) $10,265,292, divided by (b) (i) 10,800,166, divided by (ii) $1.43, and (2)one contingent value right per share representing the right to receive certain consideration based on the achievement of net sales milestones.

On May12, 2020, Tetraphase received a revised proposal from La Jolla dated May11, 2020 (the “La Jolla Proposal”), accompanied by a draft agreement and plan of merger (the “La Jolla Merger Agreement”) and draft support agreement (the “La Jolla Support Agreement”). Under the La Jolla Proposal, La Jolla would acquire Tetraphase for $22.3million in cash, plus an additional $12.5million in cash potentially payable under contingent value rights to be issued in the transaction. Tetraphase’s board of directors (the “Tetraphase Board”) is evaluating the La Jolla Proposal and has not made a determination as to whether the proposal constitutes a superior offer under the terms of the AcelRx Merger Agreement.

Later on May12, 2020, the Tetraphase Board determined in good faith, after consultation with its independent financial advisors and outside legal counsel, that the La Jolla Proposal could reasonably be expected to lead to a superior offer as defined in the AcelRx Merger Agreement, and that the failure to (1)furnish, pursuant to an acceptable confidentiality agreement, information (including non-public information) to La Jolla, and (2)engage in, continue or otherwise participate in discussions or negotiations with La Jolla in respect of the La Jolla Proposal could reasonably be expected to be inconsistent with the fiduciary duties of the Tetraphase Board to Tetraphase’s stockholders under applicable legal requirements. Accordingly, in accordance with the AcelRx Merger Agreement, the Tetraphase Board has determined to consider the La Jolla Proposal, to continue discussions and/or negotiations with respect to the La Jolla Proposal and to continue to furnish non-public information to La Jolla pursuant to a confidentiality agreement entered into by Tetraphase and La Jolla on May8, 2020. There can be no assurances that any definitive agreement or transaction will result from the La Jolla Proposal or Tetraphase’s discussions with La Jolla.

At this time, the Tetraphase Board (1)continues to recommend the AcelRx Merger Agreement with AcelRx to its stockholders, (2)is not modifying or withdrawing its recommendation with respect to the AcelRx Merger Agreement and the merger, or proposing to do so, and (3)is not making any recommendation with respect to the La Jolla Proposal or the La Jolla Merger Agreement.

Janney Montgomery Scott LLC is acting as financial advisor to Tetraphase and Wilmer Cutler Pickering Hale and Dorr LLP is acting as legal advisor.

Additional Information and Where to Find it

In connection with the proposed transaction between Tetraphase and AcelRx, AcelRx filed with the SEC the Registration Statement containing a document constituting a prospectus of AcelRx and a proxy statement of Tetraphase. The Registration Statement was declared effective by the SEC on April24, 2020, and Tetraphase commenced mailing the definitive proxy statement/prospectus to stockholders of Tetraphase on April28, 2020. Tetraphase and AcelRx also plan to file other relevant documents with the SEC regarding the proposed transaction. Investors and security holders are urged to read the definitive proxy statement/prospectus and other relevant documents filed with the SEC carefully and in their entirety because they contain important information.