Sec Form 13D Filing - NOVARTIS PHARMA AG filing for Cellular Biomedicine Group Inc. (CBMG) - 2020-08-14

1

NAME OF REPORTING PERSON

Novartis Pharma AG

2

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) x

(b) o

3

SEC USE ONLY

4

SOURCE OF FUNDS

OO (See Item 3)

5

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)

o

6

CITIZENSHIP OR PLACE OF ORGANIZATION

Switzerland

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH:

7

SOLE VOTING POWER

0

8

SHARED VOTING POWER

1,458,257 shares of Common Stock

9

SOLE DISPOSITIVE POWER

0

10

SHARED DISPOSITIVE POWER

1,458,257 shares of Common Stock

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON

1,458,257 shares of Common Stock

12

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

¨

13

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

7.5%*

14

TYPE OF REPORTING PERSON

CO

1

NAME OF REPORTING PERSON

Novartis AG

2

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) x

(b) o

3

SEC USE ONLY

4

SOURCE OF FUNDS

OO (See Item 3)

5

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)

o

6

CITIZENSHIP OR PLACE OF ORGANIZATION

Switzerland

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WIT H:

7

SOLE VOTING POWER

0

8

SHARED VOTING POWER

1,458,257 shares of Common Stock

9

SOLE DISPOSITIVE POWER

0

10

SHARED DISPOSITIVE POWER

1,458,257 shares of Common Stock

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON

1,458,257 shares of Common Stock

12

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES

o

13

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

7.5%*

14

TYPE OF REPORTING PERSON

CO, HC

Item 1.

Security and Issuer

This Schedule 13D relates to the shares of common stock, par value $0.001 per share (“Common Stock”), of Cellular Biomedicine Group, Inc., a Delaware corporation (the “Issuer”), the principal executive offices of which are located at 1345 Avenue of Americas, 15th Floor, New York, New York 10105.

Item 2.

Identity and Background

This Schedule 13D is filed by Novartis Pharma AG and Novartis AG, each a corporation organized under the laws of Switzerland. Novartis Pharma AG and Novartis AG are together referred to herein as the “Reporting Persons.”

Novartis Pharma AG develops and markets pharmaceuticals. Novartis AG is the publicly owned parent of a multinational group of companies specializing in the research, development, manufacturing and marketing of healthcare products, led by innovative pharmaceuticals and also including high-quality generic pharmaceuticals. Novartis AG is the 100% direct owner of Novartis Pharma AG and may be deemed to beneficially own the shares of Common Stock held by Novartis Pharma AG. The address of the principal business office of each of Novartis Pharma AG and Novartis AG is Lichtstrasse 35, 4056 Basel, Switzerland.

This Schedule 13D is filed jointly by the Reporting Persons pursuant to Rule 13d-1(k) of the Act. The joint filing agreement among the Reporting Persons relating to the joint filing of this Schedule 13D is attached as Exhibit 99.1 hereto.

During the last five years, none of the Reporting Persons nor, to the best of the Reporting Persons’ knowledge, any of the other persons listed on Schedule A hereto has been (i) convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding a ny violation with respect to such laws.

The name, business address, present principal occupation or employment and citizenship of each executive officer and director of the Reporting Persons, in each case as of the date hereof, are set forth in Schedule A hereto and incorporated herein by reference.

Item 3.

Source and Amount of Funds or Other Consideration

The shares of Common Stock being reported on this Schedule 13D were previously reported on the Novartis Schedule 13G and the funds used for the purchase of such shares were derived from cash on hand of Novartis Pharma AG.

Item 4.

Purpose of Transaction

On August 12, 2020, the Issuer announced in a press release that it had entered into an Agreement and Plan of Merger, dated as of August 11, 2020 (the “Merger Agreement”), by and among CBMG Holdings, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”), CBMG Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”) and the Issuer. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Issuer (the “Merger”), with the Issuer surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Sub are newly-formed entities formed on behalf of a consortium consisting of (i) Bizuo (Tony) Liu, Yihong Yao, Viktor Pan, Zheng Zhou, Li (Helen) Zhang, Chengxiang (Chase) Dai, Dangdai International Group Co., Limited, Mission Right Limited, Wealth Map Holdings Limited, Earls Mill Limited, OPEA SRL, Maplebrook Limited and Full Moon Resources Limited (the “Consortium Rollover Stockholders”) and (ii) Yunfeng Fund III, L.P., TF Capital Fund III L.P., Velvet Investment Pte. Ltd., and Bizuo (Tony) Liu (the “Equity Investors,” and together with the Consortium Rollover Stockholders, the “Consortium”).

Pursuant to the Merger Agreement, each share of the Common Stock issued and outstanding immediately prior to the effective time of the Merger, other than (i) shares of the Common Stock owned by Parent, Merger Sub or any other direct or indirect wholly-owned subsidiary of Parent and shares of the Common Stock owned by the Issuer, (ii) the Rollover Shares (as defined below), and (iii) shares of the Common Stock owned by stockholders who are entitled to, and who have timely perfected and not withdrawn a demand for (or lost their right to), appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware, will be converted into the right to receive $19.75 in cash, without interest. The Merger is subject to the approval of the Issuer’s stockholders, including a non-waivable condition requiring approval by the holders of a majority of the outstanding shares of the Common Stock that are not beneficially owned by Parent, the Consortium Rollover Stockholders, Novartis Pharma AG, the Equity Investors and their respective affiliates, and various other closing conditions. If the Merger is consummated, the Common Stock will no longer be traded on the Nasdaq Global Select Market and will be deregistered under the Act, and the Issuer will be privately held by the members of the Consortium and Novartis Pharma AG. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 99.3 hereto and incorporated herein by reference.

Concurrently with the execution and delivery of the Merger Agreement, Novartis Pharma AG entered into a Rollover and Support Agreement with Parent (the “Novartis Support Agreement”). Pursuant to the Novartis Support Agreement, Novartis Pharma AG has agreed that its shares of Common Stock (the “Novartis Rollover Shares”) will be canceled for no consideration in the Merger and that it will subscribe for newly issued ordinary shares of Parent immediately prior to the closing of the Merger. Novartis Pharma AG also agreed, until the earlier of the effective time of the Merger and the termination of the Merger Agreement, to vote all of its shares of the Common Stock (i) in favor of the adoption of the Merger Agreement and any related action reasonably required in furtherance thereof, (ii) against any other acquisition proposal, (iii) against any action, agreement or proposal which could reasonably be expected to impede, interfere with, delay or adversely affect the Merger Agreement, the Merger or the Novartis Support Agreement, and (iv) any action, proposal, transaction or agreement that could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of Parent and Merger Sub under the Merger Agreement, or of Novartis Pharma AG under the Novartis Support Agreement. The foregoing description of the Novartis Support Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Novartis Support Agreement, a copy of which is filed as Exhibit 99.4 hereto and incorporated herein by reference. Concurrently with the execution and delivery of the Merger Agreement, the Consortium Rollover Stockholders also entered into a Rollover and Support Agreement with Parent (the “Consortium Support Agreement”) with terms substantially similar to the terms of the Novartis Support Agreement and pursuant to which each Consortium Rollover Stockholder has agreed that the shares of Common Stock held by it (except for certain shares of Common Stock held by Consortium Rollover Stockholders that are specifically excluded in the Consortium Support Agreement, which excluded shares will be canceled for cash consideration in the Merger to the same extent as shares of Common Stock generally) (“Consortium Rollover Shares”, and together with the Novartis Rollover Shares, the “Rollover Shares”) will be canceled for no consideration in the Merger and that it will subscribe for newly issued ordinary shares of Parent immediately prior to the closing of the Merger. Each Consortium Rollover Stockholder also agreed in the Consortium Support Agreement to substantially similar voting undertakings as Novartis Pharma AG agreed in the Novartis Support Agreement.

Concurrently with the execution and delivery of the Merger Agreement, Novartis Pharma AG also agreed to waive with respect to the Merger (i) certain early termination rights set forth in the Toll Manufacturing and Supply Agreement, dated December 21, 2018, by and among Novartis Pharma AG, Beijing Novartis Pharma Co., Ltd., Shanghai Cellular Biopharmaceutical Group Ltd. and the Issuer and (ii) certain rights of first negotiation and early termination rights set forth in the License and Collaboration Agreement, dated September 25, 2018, by and among Novartis Pharma AG, the Issuer and certain other parties thereto. The foregoing descrip tion of the waivers does not purport to be complete and is qualified in its entirety by reference to the full text of the waivers, which are filed as Exhibit 99.5 and Exhibit 99.6 hereto and incorporated herein by reference.

Other than as described in Item 4 above, none of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any of the other persons named in Item 2, has any plans or proposals which relate to or would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, formulate other purposes, plans or proposals regarding the Issuer, or any other actions that could involve one or more of the types of transactions or have one or more of the results described in clauses (a) through (j) of Item 4 of Schedule 13D.

Item 5.

Interest in Securities of the Issuer

(a)

See rows (11) and (13) of the cover pages to this Schedule 13D for the aggregate number of shares of Common Stock and percentages of the shares of Common Stock beneficially owned by the Reporting Persons. The percentage is calculated based upon an aggregate of 19,432,979 shares of Common Stock outstanding as of August 11, 2020, as disclosed by the Issuer in the Merger Agreement.

(b)

See rows (7) through (10) of the cover pages to this Schedule 13D for the number of shares of Common Stock as to which the Reporting Persons have the sole or shared power to vote or direct the vote and sole or shared power to dispose or to direct the disposition.

On August 12, 2020, the Consortium Rollover Stockholders and certain other parties (collectively the “Consortium Reporting Persons”) filed a Schedule 13D amendment with respect to, among other things, the Merger Agreement and the Consortium Support Agreement. Because of the agreements set forth in Item 4, the Reporting Persons and the Consortium Rollover Stockholders may be deemed to have formed a “group” for purposes of Section 13(d)(3) of the Act. Collectively, the “group” may be deemed to beneficially own an aggregate of 11,242,071 shares of outstanding Common Stock (comprised of an aggregate of 10,085,015 shares of outstanding Common Stock, 789,416 shares of Common Stock issuable upon the exercise of options, 8,666 shares of Common Stock issuable upon the vesting of restricted stock units and 358,974 shares of Common Stock issuable upon the conversion of certain convertible notes held by the Consortium Reporting Persons), which represents approximately 54.6% of the total shares of outstanding Common Stock (accounting for all Common Stock that would be outstanding upon exercise of all of the foregoing options, vesting of the foregoing restricted stock units and conversion of the foregoing convertible notes). Neither the filing of this Schedule 13D nor any of its contents, however, shall be deemed to constitute an admission by the Reporting Persons that they are the beneficial owners of any shares of Common Stock beneficially owned by any of the Consortium Rollover Stockholders, the Consortium Reporting Persons or any of his, her or their respective affiliates for purposes of Section 13(d) of the Act or for any other purpose, and such beneficial ownership is expressly disclaimed.

(c)

The Reporting Persons have not transacted in any shares of Common Stock in the last 60 days.

(d)

No person other than the Reporting Persons is known to have the right to receive, or the power to direct the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock reported herein.

(e)

Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

&# xA0;

The descriptions of the agreements in Item 4 of this Schedule 13D are incorporated herein by reference. The summaries of certain provisions of such agreements in this Schedule 13D are not intended to be complete and are qualified in their entirety by reference to the full text of such agreements. The agreements in this Item 6 are filed herewith as Exhibits 99.3 through 99.6 and are incorporated herein by reference.

Item 7.

Material to be Filed as Exhibits

Exhibit 99.1

Joint Filing Agreement by and among the Reporting Persons, dated August 13, 2020.

Exhibit 99.2

Evidence of Signature Authority

Exhibit 99.3

Agreement and Plan of Merger, dated as of August 11, 2020, by and among Cellular Biomedicine Group, Inc., CBMG Holdings and CBMG Merger Sub Inc., incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Cellular Biomedicine Group, Inc. filed with the Securities and Exchange Commission on August 12, 2020.

Exhibit 99.4

Rollover and Support Agreement, dated as of August 11, 2020, by and between CBMG Holdings and Novartis Pharma AG.

Exhibit 99.5

Waiver of Novartis Pharma AG, dated as of August 11, 2020, with reference to the License and Collaboration Agreement dated September 25, 2018 by and among Novartis Pharma AG, Cellular Biomedicine Group, Inc. and certain other parties thereto.

Exhibit 99.6

Waiver of Novartis Pharma AG, dated as of August 11, 2020, with reference to the Toll Manufacturing and Supply Agreement dated December 21, 2018 by and among Novartis Pharma AG, Beijing Novartis Pharma Co., Ltd., Cellular Biomedicine Group, Inc. and Shanghai Cellular Biopharmaceutical Group Ltd.

NOVARTIS PHARMA AG

By:

/s/ Lukas Foertsch

Name:

Lukas Foertsch

Title:

Authorized Signatory

By:

/s/ Stefan Thommen

Name:

Stefan Thommen

Title:

Authorized Signatory

NOVARTIS AG

By:

/s/ Christian Rehm

Name:

 Christian Rehm

Title:

 Authorized Signatory

By:

 /s/ Felix Eichhorn

Name:

 Felix Eichhorn

Title:

 Authorized Signatory

Name

Relationship to
Novartis AG

Present Principal Occupation

Citizenship

Joerg Reinhardt, Ph.D.

Chairman of the Board of Directors

Chairman of the Board of Directors

German

Enrico Vanni, Ph.D.

Vice Chairman of the Board of Directors

Independent Director

Swiss

Nancy C. Andrews, M.D., Ph.D.

Director

Dean emerita, vice chancellor emerita for academic affairs, Duke University School of Medicine, US; Nanaline H. Duke Professor of Pediatrics, pharmacology and cancer biology, Duke University, US

American/Swiss

Ton Buechner

Director

Independent Director 

Dutch/Swiss

Patrice Bula

Director

Executive vice president and head of strategic business units, marketing, sales, and Nespresso, Nestle SA, Switzerland 

Swiss

Srikant Datar, Ph.D.

Director

Arthur Lowes Dickinson Professor, Harvard Business School, US; Faculty Chair of the Harvard Innovation Lab, US; Senior Associate Dean for University Affairs, Harvard Business School, US

American

Elizabeth (Liz) Doherty

Director

Independent Director

British

Ann Fudge

Director

Independent Director 

American

Bridgette Heller

Director

Co-founder and Chief Executive Officer, Shirley Proctor Puller Foundation, US

American

Frans van Houten

Director

Chief Executive Officer and chairman of the executive committee and the board of management, Royal Philips NV, Netherlands

Dutch

Simon Moroney

Director

Independent Director

German/New Zealander

Andreas von Planta, Ph.D.

Director

Senior Counsel, Lenz & Staehelin, Switzerland 

Swiss

Charles L. Sawyers, M.D.

Director

Chair of the Human Oncology and Pathogenesis Program, Memorial Sloan-Kettering Cancer Center, US; Professor of Medicine and of Cell and Developmental Biology, Weill Cornell Graduate School of Medical Sciences, US 

American

William T. Winters

Director

Chief Executive Officer and director of Standard Chartered PLC, UK

British/American

Vasant (Vas) Narasimhan, M.D.

Member of the Executive Committee; Chief Executive Officer

Member of the Executive Committee; Chief Executive Officer

American

Steven Baert

Member of the Executive Committee; Chief People and Organization Officer

Member of the Executive Committee; Chief People and Organization Officer

Belgian

Bertrand Bodson

Member of the Executive Committee; Chief Digital Officer

Member of the Executive Committee; Chief Digital Officer

Belgian

James (Jay) Bradner, M.D.

Member of the Executive Committee; President, Novartis Institutes for BioMedical Research 

Member of the Executive Committee; President, Novartis Institutes for BioMedical Research

American

Harry Kirsch

Member of the Executive Committee; Chief Financial Officer

Member of the Executive Committee; Chief Financial Officer 

German/Swiss

Shannon Thyme Klinger

Member of the Executive Committee; Chief Legal Officer

Member of the Executive Committee; Chief Legal Officer

American

Steffen Lang, Ph.D.

Member of the Executive Committee; Global Head of Novartis Technical Operations

Member of the Executive Committee; Global Head of Novartis Technical Operations

German/Swiss

Klaus Moosmayer, Ph.D.

Member of the Executive Committee; Chief Ethics, Risk and Compliance Officer

Member of the Executive Committee; Chief Ethics, Risk and Compliance Officer

German

Richard Saynor

Member of the Executive Committee; Chief Executive Officer, Sandoz

Member of the Executive Committee; Chief Executive Officer, Sandoz 

British

Susanne Schaffert, Ph.D.

Member of the Executive Committee; President, Novartis Oncology

Member of the Executive Committee; President, Novartis Oncology

German

John Tsai, M.D.

Member of the Executive Committee; Global Head of Drug Development and Chief Medical Officer

Member of the Executive Committee; Head of Global Drug Development and Chief Medical Officer

American

Marie-France Tschudin

Member of the Executive Committee; President, Novartis Pharmaceuticals

Member of the Executive Committee; President, Novartis Pharmaceuticals 

Swiss

Robert Weltevreden

Member of the Executive Committee; Head of Novartis Business Services

Member of the Executive Committee; Head of Novartis Business Services

Dutch

Name

Relationship to Novartis
Pharma AG

Present Principal Occupation

Citizenship

Joerg Reinhardt, Ph.D.

President of the Board of Directors

Chairman of the Board of Directors of Novartis AG

German

Shannon Thyme Klinger

Director

Member of the Novartis AG Executive Committee; Chief Legal Officer of Novartis AG

American

Harry Kirsch

Director

Member of the Novartis AG Executive Committee; Chief Financial Officer of Novartis AG

German