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

Check the appropriate box:

☒

Preliminary Proxy Statement

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

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under Rule 14a-12

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Avenue Therapeutics, 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.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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(1)

Title of each class of securities to which transaction applies:
Common stock, par value $0.0001 per share.

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(2)

Aggregate number of securities to which transaction applies:
5,833,333 shares of common stock.

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(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
Solely for the purpose of calculating the filing fee, the underlying value of the transaction of  $215 million was calculated in accordance with Rule 0-11(c) of the Securities Exchange Act of 1934, as amended, based on the 5,833,333 shares of common stock to which the transaction applies multiplied by the per share Merger Consideration of  $13.92. The filing fee was determined by multiplying 0.0001212 by the proposed maximum aggregate value of the transaction of  $215,000,000.00.

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(4)

Proposed maximum aggregate value of transaction:
$215,000,000.00

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(5)

Total fee paid:
$26,058.00

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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

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(1)

Amount Previously Paid:
   

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(2)

Form, Schedule or Registration Statement No.:
   

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(3)

Filing Party:
   

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(4)

Date Filed:
   

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION,
DATED DECEMBER 11, 2018

AVENUE THERAPEUTICS, INC.
2 Gansevoort Street, 9th Floor
New York, New York 10014

December   , 2018

Dear Stockholder:

You are cordially invited to attend a special meeting of the stockholders of Avenue Therapeutics, Inc. (“Avenue” or the “Company”), to be held on January   , 2019, at 10:00 a.m., Eastern Time, at the offices of our legal counsel, Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016.

At the special meeting, our stockholders will be asked to consider and vote on proposals to adopt the Stock Purchase and Merger Agreement that the Company entered into on November 12, 2018, which we refer to as the “SPMA,” providing for the acquisition of the Company by InvaGen Pharmaceuticals Inc., which we refer to as “Parent” or “Buyer,” through a two-stage transaction. Upon the first stage closing (the “First Stage Closing”), Buyer will acquire a 33.3% stake in the Company on a fully-diluted basis, which we refer to as the “Stock Purchase Transaction,” for $35 million (currently expected to be 5,833,333 shares at $6.00 per share), which we refer to as the “Stock Purchase Consideration.” Upon the second stage closing (the “Second Stage Closing”), Madison Pharmaceuticals Inc., a wholly-owned subsidiary of Buyer which we refer to as “Merger Sub,” will merge with and into the Company, which we refer to as the “Merger Transaction,” with the Company surviving the Merger Transaction as a wholly-owned subsidiary of Buyer. If the SPMA is adopted by our stockholders and the Second Stage Closing is completed, each issued and outstanding share of our common stock (other than shares for which appraisal rights have been properly and validly perfected and not validly withdrawn or lost) will be converted into the right to receive (i) a pro rata portion of the total merger consideration of up to $180 million, subject to certain deductions, which portion is currently expected to be approximately $13.92 per share, without interest and less any applicable withholding taxes, which represents a premium of approximately 234.6% above the closing price of our common stock as of November 12, 2018; and (ii) a contingent value right (“CVR”) which represents the right to receive a certain contingent cash payment upon the achievement of certain milestones relating to annual net sales and gross profit targets of IV Tramadol, pursuant to a contingent value rights agreement (the “CVR Agreement”) to be entered into upon the Second Stage Closing by the Company and a rights agent (we refer to clauses (i) and (ii) hereof as the “Merger Consideration”). We refer to the Stock Purchase Consideration and the Merger Consideration together as the “SPMA Consideration.”

Following the Merger Transaction, the Company will be a wholly-owned subsidiary of Buyer.

To assist in evaluating the fairness of the SPMA and the transactions contemplated by the SPMA, including the Stock Purchase Transaction and the Merger Transaction, to the Company and our stockholders, the Board of Directors of the Company, which we refer to as the “Board,” formed a special committee of independent directors, which we refer to as the “Special Committee,” to consider and negotiate the terms and conditions of the Stock Purchase Transaction and the Merger Transaction and to make a recommendation to our Board.

The Board, acting on the unanimous recommendation of the Special Committee, unanimously determined that the SPMA and the ancillary agreements thereto, which we refer to as the “Ancillary Agreements,” and the transactions contemplated by the SPMA and the Ancillary Agreements, including the Stock Purchase Transaction and the Merger Transaction, are fair to and in the best interests of the Company and its stockholders and approved and declared advisable the SPMA and the Ancillary Agreements and the transactions contemplated by the SPMA and the Ancillary Agreements, including the Stock Purchase Transaction and the Merger Transaction, and including the appointment of a rights agent in connection with the CVR Agreement to act on behalf of our stockholders entitled to Merger Consideration. The Board unanimously recommends that the Company’s stockholders vote “FOR” the proposal to adopt the SPMA.

The enclosed proxy statement describes the SPMA, the Ancillary Agreements, the Stock Purchase Transaction, the Merger Transaction and other related matters. Copies of the SPMA and the Ancillary

Agreements are also attached to the proxy statement. We urge our stockholders to read the entire proxy statement carefully (including the SPMA and the Ancillary Agreements), as it sets forth the details of the SPMA and other important information related to the Stock Purchase Transaction and the Merger Transaction.

In accordance with the rules and regulations of the Securities and Exchange Commission, we are furnishing the proxy statement on the Internet. You may have already received an “Important Notice Regarding the Availability of Proxy Materials,” which was mailed on or about December   , 2018. That notice described how you can obtain the proxy statement. You can also receive paper copies of the proxy statement upon request.

Your vote is very important, regardless of the number of shares of the Company’s common stock you own. Fortress, by virtue of its preferred stock ownership, controls a voting majority of our common stock. The Stock Purchase Transaction and the Merger Transaction cannot be completed unless holders of a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposal vote in favor of adoption of the SPMA. If you fail to vote on the SPMA, the effect will be the same as a vote against approval of the SPMA.

If you have any questions or need assistance voting, please contact Morrow Sodali, LLC, our proxy solicitor, by calling (toll-free) at (800) 662-5200.

Thank you in advance for your cooperation and continued support.

Sincerely,​

Lucy Lu, M.D.
President and Chief Executive Officer​

New York, New York
December   , 2018​

THIS SOLICITATION IS MADE ON BEHALF OF THE COMPANY. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE PROPOSED TRANSACTIONS, PASSED UPON THE MERITS OR FAIRNESS OF THE PROPOSED TRANSACTIONS, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION DISCLOSED IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

AVENUE THERAPEUTICS, INC.
2 Gansevoort Street, 9th Floor
New York, New York 10014

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
 
To Be Held on January   , 2019

To the Stockholders of Avenue Therapeutics, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of the Stockholders of Avenue Therapeutics, Inc., a Delaware corporation (“Avenue” or the “Company”), will be held on January   , 2019 at 10:00 a.m., Eastern Time, at the offices of our legal counsel, Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016, for the following purposes:

1.

To consider and vote on a proposal to approve and adopt the Stock Purchase and Merger Agreement, dated as of November 12, 2018, which we refer to as the “SPMA,” by and among the Company, InvaGen Pharmaceuticals Inc., a New York corporation, which we refer to as “Parent” or “Buyer,” and Madison Pharmaceuticals Inc., a Delaware corporation and a wholly-owned subsidiary of Buyer, which we refer to as “Merger Sub,” and the ancillary agreements thereto, which we refer to as the “Ancillary Agreements,” and the transactions contemplated by the SPMA and the Ancillary Agreements, including the Stock Purchase Transaction and the Merger Transaction (as defined below), and the appointment of a rights agent in connection with the contingent value rights agreement to be entered into between the Company and a rights agent (the “Appointment”), which we refer to as the “CVR Agreement.” Copies of the SPMA, the CVR Agreement and the other Ancillary Agreements are attached as Annex A to the accompanying proxy statement.

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2.

To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to approve and adopt the SPMA or in the absence of a quorum.

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3.

To transact any other business that may properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the Board of Directors of the Company.

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The SPMA, the Stock Purchase Transaction, the Merger Transaction and the other transactions which would be effected in connection with the SPMA are described more fully in the accompanying proxy statement, and we urge you to read the attached proxy statement carefully and in its entirety.

The Board of Directors of the Company, which we refer to as the “Board,” acting on the unanimous recommendation of a special committee of the Board comprised of independent directors, which we refer to as the “Special Committee,” unanimously determined that the SPMA and the Ancillary Agreements, and the transactions contemplated by the SPMA and the Ancillary Agreements, including the Stock Purchase Transaction and the Merger Transaction, are fair to and in the best interests of the Company and its stockholders and approved and declared advisable the SPMA and the Ancillary Agreements and the transactions contemplated by the SPMA and the Ancillary Agreements, including the Stock Purchase Transaction and the Merger Transaction and the Appointment. The Board made its determination after consideration of a number of factors, including the recommendation of the Special Committee.

In accordance with the rules and regulations of the Securities and Exchange Commission, we are furnishing the proxy statement on the Internet. You may have already received an “Important Notice Regarding the Availability of Proxy Materials,” which was mailed on or about December   , 2018. That notice described how you can obtain the proxy statement. You can also receive paper copies of the proxy statement upon request.

Your vote is very important, regardless of the number of shares of the Company’s common stock you own. Generally, the Stock Purchase Transaction and the Merger Transaction cannot be completed unless holders of a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposal vote in

favor of adoption of the SPMA. Fortress Biotech Inc., our parent Company, by virtue of its preferred stock ownership, controls a voting majority of our common stock. In addition, under the SPMA, the Stock Purchase Transaction is conditioned upon approval by a majority of the outstanding common stock held by non-affiliates, which condition can be waived by Parent. If you fail to vote on the SPMA, the effect will be the same as a vote against approval of the SPMA.

The Board recommends that you vote “FOR” approval of the proposal to adopt the SPMA and “FOR” approval of the proposal to approve the adjournment of the special meeting from time to time, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the SPMA or in the absence of a quorum.

Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying postage-paid reply envelope, or submit your proxy by telephone or the Internet. If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, brokerage firm or other nominee. If you fail to return your proxy card, submit your proxy by telephone or the Internet or vote in person, or if your shares are held in “street name” by your bank, brokerage firm or other nominee and you fail to instruct your bank, brokerage firm or other nominee to vote your shares of common stock, your shares of our common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against adoption of the SPMA.

Stockholders who do not vote in favor of the proposal to adopt the SPMA and who object in writing to the Stock Purchase Transaction and the Merger Transaction prior to the special meeting and comply with all of the applicable requirements of Section 262 of the Delaware General Corporate Law, which is summarized in the section entitled “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Rights of Appraisal” in the accompanying proxy statement and reproduced in its entirety as Annex C to the accompanying proxy statement, will be entitled to rights of appraisal to obtain the fair value of their shares of common stock of the Company.

You may revoke your proxy before the special meeting by voting over the Internet or by telephone (only your latest Internet or telephone vote is counted) or by signing a new proxy and mailing it, in each case, in accordance with the instructions on the enclosed proxy card. In addition, you may revoke your proxy by attending the special meeting, requesting that your proxy be revoked and voting in person; however, attending the special meeting will not revoke your Internet vote, telephone vote or proxy, as the case may be, unless you specifically request it.

The Board has fixed the close of business on December   , 2018 as the record date for determination of stockholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. Only stockholders of record at the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof. You will be entitled to one vote for each share of our common stock that you owned on the record date. A complete list of our stockholders of record entitled to vote at the special meeting will be available for inspection at our principal executive offices at least 10 days prior to the date of the special meeting and continuing through the special meeting for any purpose germane to the meeting. The list will also be available at the meeting for inspection by any stockholder present at the meeting.

Only stockholders of record (including “street name” stockholders who can show that they beneficially owned our common stock on the record date), their duly appointed proxy holders and our guests may attend the special meeting. If you plan to attend the special meeting in person, please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the system. If you are a stockholder of record, you should bring the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal

proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to vote at the special meeting.

By order of the Board of Directors,​

Lucy Lu, M.D.
President and Chief Executive Officer​

New York, New York
December   , 2018​

TABLE OF CONTENTS

i

ii

Annexes

iii

iv

1

2

3

4

5

6

7

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9

10

11

12

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
AND THE STOCK PURCHASE TRANSACTION AND THE MERGER TRANSACTION

The following questions and answers address briefly some questions you may have regarding the SPMA, the Stock Purchase Transaction, the Merger Transaction and the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder of Avenue. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully in their entirety, as well as any amendments thereto or other related documents filed with the SEC. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find Additional Information” beginning on page 87.

Q.

Why did I receive an “Important Notice Regarding the Availability of Proxy Materials”?

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A.

In accordance with SEC rules, instead of mailing a printed copy of our proxy materials, we may send an “Important Notice Regarding the Availability of Proxy Materials” to stockholders. All stockholders will have the ability to access the proxy materials on a website referred to in the notice or to request a printed set of these materials at no charge. You will not receive a printed copy of the proxy materials unless you specifically request one from us. Instead, the notice instructs you as to how you may access and review all of the important information contained in the proxy materials via the Internet and submit your vote via the Internet.

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Q.

Why am I receiving this proxy statement?

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A.

You are receiving this proxy statement and proxy card or voting instruction form because you own shares of our common stock. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of our common stock with respect to such matters.

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Q.

What am I being asked to vote on at the special meeting?

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A.

At the special meeting, holders of our common stock will be asked to consider and vote on the following proposals: (i) to adopt the SPMA and the Ancillary Agreements thereto, and transactions contemplated thereunder, including the Stock Purchase Transaction and the Merger Transaction, and the appointment of a rights agent in connection with the CVR Agreement (Proposal 1 on your proxy card), and (ii) to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the SPMA Proposal or in the absence of a quorum (Proposal 2 on your proxy card).

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Q.

How does the Board recommend that I vote?

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A.

The Board unanimously recommends that you vote (i) “FOR” approval of the SPMA Proposal related to the Stock Purchase Transaction and the Merger Transaction (Proposal 1 on your proxy card), and (ii) “FOR” approval of the Adjournment Proposal (Proposal 2 on your proxy card).

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Q.

When and where is the special meeting?

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A.

The special meeting of stockholders of the Company will be held on January   , 2019 at 10:00 a.m., Eastern Time, at the offices of our legal counsel, Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016.

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Q.

Who can vote at the special meeting?

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A.

Only holders of record of our common stock as of the close of business on December   , 2018, the record date for the special meeting, or their duly appointed proxies, are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and any adjournments or postponements thereof. Please note that if you are a beneficial owner and you plan to attend the special meeting in person, please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the

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Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the system. If you are a stockholder of record, you should bring the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to vote at the special meeting.

Q.

How many votes do I have?

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A.

Each holder of our common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of our common stock that such holder owned as of the record date of December   , 2018. As of the record date, there were [•] shares of our common stock issued and outstanding.

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Q.

What is a quorum?

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A.

In accordance with Delaware law (the law under which we are incorporated) and our by-laws, the presence at the special meeting, by proxy or in person, of the holders of a majority of the outstanding shares of the capital stock entitled to vote at the special meeting constitutes a quorum, thereby permitting the stockholders to conduct business at the special meeting. Abstentions, votes withheld, and broker or nominee non-votes will be included in the calculation of the number of shares considered present at the special meeting for purposes of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we expect to adjourn or postpone the special meeting until we solicit enough proxies to obtain a quorum.

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Q.

How do I vote?

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A.

Stockholder of Record.   If you are a stockholder of record and your shares are registered directly in your name, you may have your shares of our common stock voted on matters presented at the special meeting in any of the following ways:

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•

In Person.   You may attend the special meeting and cast your vote there. Even if you plan to attend the meeting, it is desirable that you vote in advance of the meeting. To attend the meeting in person (regardless of whether you intend to vote your shares in person at the meeting), please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the system. If you are a stockholder of record, you should bring the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to vote at the special meeting.

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•

By Proxy.   Stockholders of record have a choice of voting by proxy:

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Over the Internet:   Go to the website of our tabulator, Broadridge Financial Solutions, Inc., which we refer to as “Broadridge,” at the website referenced on your proxy card. Use the vote control number printed on your enclosed proxy card to access your account and vote your shares. You must specify how you want your shares voted or your Internet vote cannot be completed and you will receive an error message. Your shares will be voted according to your instructions. You must submit your Internet proxy before 11:59 p.m., Eastern Time, on January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count;

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By Telephone:   Call 1-800-690-6903, toll-free from the United States, Canada and Puerto Rico, and follow the recorded instructions. You must specify how you want your shares voted and confirm your vote at the end of the call or your telephone vote cannot be completed. Your shares will be voted according to your instructions. You must submit your telephonic proxy before 11:59 p.m., Eastern Time, on January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count; or

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By Mail:   Complete and sign your enclosed proxy card and mail it in the enclosed postage-paid envelope to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your shares will be voted according to your instructions. Broadridge must receive the proxy card by January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count.

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Beneficial Owner.   If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. To attend the meeting in person (regardless of whether you intend to vote your shares in person at the meeting), please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the system. If you are a stockholder of record, you should bring the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to vote at the special meeting.

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Q.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

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A.

If your shares of our common stock are registered directly in your name, you are considered, with respect to those shares of our common stock, the stockholder of record. This proxy statement and proxy card have been sent directly to you by the Company. As the stockholder of record, you have the right to vote in person at the meeting or to grant your voting rights directly to the Company or to a third party by a proxy duly executed or transmitted in a manner in accordance with applicable law.

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If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you are considered the beneficial owner of those shares. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of our common stock, the stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting. Your bank, brokerage firm or other nominee should send you, as the beneficial owner, a package describing the procedure for voting your shares (see also the next Q&A below).

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Q.

How can I change or revoke my vote?

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A.

You have the right to revoke a proxy. If your shares are registered directly in your name, you may revoke your proxy or change your vote before the special meeting. To do so, you must do one of the following:

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•

Vote over the Internet or by telephone as instructed above. Only your latest Internet or telephone vote is counted. You may not change your vote over the Internet or by telephone after 11:59 p.m., Eastern Time, on January   , 2019.

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•

Sign a new proxy and mail it as instructed above. Only your latest dated, valid proxy received by Broadridge not later than January   , 2019 will be counted.

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•

Attend the special meeting, request that your proxy be revoked and vote in person as instructed above. Attending the special meeting will not revoke your Internet vote, telephone vote or proxy, as the case may be, unless you specifically request it. To attend the special meeting, please bring either (i) the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting or, (ii) if your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. For more information, please follow the instructions under “The Special Meeting — Attendance” beginning on page 49 of this proxy statement.

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Q.

What is a proxy?

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A.

A proxy is your legal designation of another person, referred to as a “proxy”, to vote your shares of our common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement”. The document used to designate a proxy to vote your shares of our common stock is called a “proxy card”.

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Q.

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

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A.

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of our common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of our common stock should be voted “FOR” or “AGAINST” or to “ABSTAIN” from voting on all, some or none of the specific items of business to come before the special meeting.

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If you are a holder of record and you properly sign your proxy card but do not mark the boxes showing how your shares of our common stock should be voted on a matter, the shares of our common stock represented by your properly signed proxy will be voted “FOR” approval of the proposal to adopt the SPMA and “FOR” approval of the proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies or in the absence of a quorum.

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Q.

Who will solicit and pay the cost of soliciting proxies?

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A.

The Company has engaged Morrow Sodali, LLC which we refer to as the “proxy solicitor,” to assist in the solicitation of proxies for the special meeting. The Company will pay the proxy solicitor a fee of $[•]. The Company has also agreed to pay a fee for each incoming and outgoing stockholder telephone call and agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will also indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages, liabilities and/or judgments. The Company may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

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Q.

How are votes counted?

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A.

For the SPMA Proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions and broker non-votes will have the same effect as votes “AGAINST” approval of the proposal to adopt the SPMA.

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For the Adjournment Proposal you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions will have the same effect as votes “AGAINST” the Adjournment Proposal. Broker non-votes will have no effect on the Adjournment Proposal.

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Q.

Who will count the votes?

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A.

The votes will be counted by the inspector of elections appointed for the special meeting.

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Q.

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

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A.

Your bank, brokerage firm or other nominee will only be permitted to vote your shares of our common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of our common stock. Banks, brokerage firms or other nominees who hold shares in “street name” for customers generally have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the SPMA Proposal, and, as a result, absent specific instructions from the beneficial owner of such shares of our common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of our common stock on non-routine matters, which we refer to as broker non-votes. For the purpose of the special meeting, brokers cannot execute a “routine” vote. Therefore, if you do not instruct your bank, brokerage firm or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted, and as broker non-votes, the effect will be the same as a vote “AGAINST” approval of the proposal to adopt the SPMA, and your shares of our common stock will have no effect on the proposal to approve the Adjournment Proposal.

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Q.

What votes are required for the Company’s stockholders to adopt the SPMA Proposal and Adjournment Proposal?

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A.

The SPMA Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposals. The Adjournment Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposals that are present, in person or by proxy. The SPMA proposal cannot be completed unless holders of a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposal vote in favor of adoption of the SPMA. In addition, under the SPMA, the Stock Purchase Transaction is conditioned upon approval by a majority of the outstanding common stock held by non-affiliates which condition can be waived by Parent. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” approval of the SPMA Proposal and “AGAINST” approval of the Adjournment Proposal.

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Q.

What is the proposed Merger Transaction and what effects will it have on the Company?

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A.

The proposed Merger Transaction is the acquisition of the Company by Parent pursuant to the SPMA. If the SPMA Proposal is approved by our stockholders and the other closing conditions under the SPMA have been satisfied or waived, Merger Sub will merge with and into the Company, with the Company being the surviving corporation. We refer to this transaction as the “Merger Transaction.” As a result of the Merger Transaction, the Company will become a wholly-owned subsidiary of Parent and will no longer be a publicly held corporation, and you, as a former holder of our common stock, will no longer have any interest in our future earnings or growth, other than the right to receive contingent cash payments pursuant to the CVR Agreement upon the achievement of certain milestones, without interest and less any applicable withholding taxes. In addition, following the Merger Transaction, our common stock will be delisted from Nasdaq, the registration of our common stock under Section 12 of the Exchange Act will be terminated and we will no longer file reports with the SEC.

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Q.

What will I receive if the Merger Transaction is completed?

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A.

Upon completion of the Merger Transaction, you will be entitled to receive (i) a pro rata portion of the total merger consideration of up to $180 million, subject to certain deductions, which portion is currently expected to be approximately $13.92 per share, without interest and less any applicable withholding taxes; and (ii) one CVR, which represents the right to receive contingent cash payments pursuant to the CVR Agreement upon the achievement of certain milestones, without interest and less any applicable withholding taxes, for each share of our common stock that you own, unless you have properly exercised, and not validly withdrawn or otherwise lost, your appraisal rights under the DGCL

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with respect to such shares. For example, if you own 100 shares of our common stock, you will receive (i) an estimated $1,392.00 in cash in exchange for your shares of our common stock, without interest and less any applicable withholding taxes, and (ii) 100 CVRs (e.g., one CVR per share), which represents the right to receive contingent cash payments upon the achievement of certain milestones, without interest and less any applicable withholding taxes. You will not own any shares of the capital stock in the surviving corporation. Please do NOT return any stock certificates you hold with your proxy card.

Q.

When do you expect the Stock Purchase Transaction and the Merger Transaction to be completed?

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A.

If the SPMA Proposal receives the Company stockholder approval, the closing of the Stock Purchase Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Stock Purchase Transaction provided for in the SPMA, or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69 of this proxy statement.

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The closing of the Merger Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Merger Transaction provided for in the SPMA, or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69 of this proxy statement.

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Q.

When will stockholders receive the Merger Consideration?

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A.

At or prior to the effective time of the Merger Transaction, Parent will deposit, or cause to be deposited, a cash amount in immediately available funds necessary to pay the aggregate Merger Consideration payable to our stockholders with a paying agent mutually agreeable to the Company (at the direction of the Special Committee) and Parent, which we refer to as the “paying agent,” for the benefit of the holders of shares of our common stock.

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As soon as reasonably practicable after the effective time of the Merger Transaction, and in any event within three business days thereafter, Parent and the surviving corporation will cause the paying agent to mail to each of our stockholders of record immediately prior to the effective time of the Merger Transaction (other than holders of excluded shares) (i) a letter of transmittal specifying that delivery will be effected, and risk of loss and title will pass, only upon delivery of the certificates representing shares of our common stock (or affidavits of loss in lieu of such certificates as provided in the SPMA) or the transfer of the shares of our common stock represented by book-entry to the paying agent, and (ii) instructions advising each such holder of record how to surrender his, her or its shares of our common stock in exchange for the Merger Consideration. The paying agent will pay each holder of record the aggregate Merger Consideration to which such holder is entitled after delivery or transfer of such shares. Interest will not be paid or accrue in respect of the Merger Consideration. From the effective time of the Merger Transaction until the surrender or transfer of certificates or book-entry shares, as the case may be, each such certificate or book-entry share will represent only the right to receive in exchange therefor a cash amount (after giving effect to any required tax withholdings) equal to the Merger Consideration.

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Q.

What happens if the Merger Transaction is not completed?

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A.

If the SPMA Proposal is not approved by the stockholders of the Company, or if the Merger Transaction is not completed for any other reason, then the stockholders of the Company will not receive any payment for their shares of our common stock in connection with the Merger Transaction. Instead, we expect that the Company’s shares will continue to be registered with the SEC and quoted on Nasdaq.

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Q.

What conditions must be satisfied to complete the Stock Purchase Transaction and the Merger Transaction?

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A.

The Company, Parent and Merger Sub are not required to complete the Stock Purchase Transaction and Merger Transaction unless a number of conditions are satisfied or waived, to the extent applicable. The conditions to completion of the Stock Purchase Transaction include (i) the Company stockholder approval shall have been obtained; and (ii) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Stock Purchase Transaction. The conditions to completion of the Merger Transaction include (i) the First Stage Closing shall have occurred, and the conditions in respect thereof shall have been satisfied on or prior to the First Stage Closing; (ii) any applicable waiting period (and any extension thereof) under the HSR Act will have expired or terminated early; and (iii) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger Transaction. For a more complete summary of the conditions that must be satisfied or waived prior to the completion of the merger, see “The SPMA — Conditions to Completion of the Stock Purchase Transaction and Merger Transaction” beginning on page 69.

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Q.

Is the Merger Transaction expected to be taxable to me?

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A.

Yes. The exchange of shares of our common stock for the per share Merger Consideration of up to $180 million in cash, subject to certain deductions, pursuant to the Merger Transaction and, if certain milestones are achieved pursuant to the CVR Agreement, contingent cash payments, will both generally be taxable transactions to U.S. Holders (as defined in the section entitled “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Material U.S. Federal Income Tax Consequences of the Merger Transaction” on page 36) for U.S. federal income tax purposes. If you are a U.S. Holder and you exchange your shares of our common stock in the Merger Transaction for cash and CVRs, you will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash and the value of the CVRs received with respect to such shares and your adjusted tax basis in such shares. Additionally, milestones are achieved under the CVR Agreement, you will generally recognize income in the amount of cash received with respect to such CVR milestone payment, potentially reduced by all or part of your basis in the CVR. We encourage you to read “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction —  Material U.S. Federal Income Tax Consequences of the Merger Transaction” beginning on page 36 for a more detailed discussion of the U.S. federal income tax consequences of the Merger Transaction. You should also consult your tax advisor for a complete analysis of the effect of the Merger Transaction on your federal, state and local and/or foreign taxes.

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Q.

Do any of the Company’s directors or officers have interests in the Stock Purchase Transaction and the Merger Transaction that may differ from or be in addition to my interests as a stockholder?

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A.

In considering the recommendation of the Board with respect to the SPMA Proposal, you should be aware that our directors and executive officers have interests in the Stock Purchase Transaction and the Merger Transaction that are different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the SPMA and the Stock Purchase Transaction and the Merger Transaction, and in recommending that the SPMA be adopted by the stockholders of the Company. See “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Interests of the Company’s Directors and Executive Officers in the Stock Purchase Transaction and the Merger Transaction” beginning on page 35.

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Q.

What happens if I sell my shares of our common stock before the special meeting?

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A.

The record date for stockholders entitled to vote at the special meeting is December   , 2018. If you sell your shares of our common stock after the record date but before the special meeting, then you will retain your right to vote such shares at the special meeting but will not have the right to receive the Merger Consideration.

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Q.

What happens if I sell my shares of common stock after the special meeting but before the effective time of the Merger Transaction?

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A.

If you sell your shares after the special meeting but before the effective time of the Merger Transaction, then you will not have the right to receive the Merger Consideration. In order to receive the Merger Consideration, you must hold your shares of our common stock through the completion of the Merger Transaction.

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Q.

What do I need to do now?

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A.

We urge you to read this proxy statement carefully, including its annexes and the documents referred to as incorporated by reference in this proxy statement, and to consider how the transactions affect you. Your vote is important. If you are a stockholder of record, you can ensure that your shares are voted at the special meeting by submitting your proxy via:

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mail, using the enclosed postage-paid envelope;

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telephone, by calling 1-800-690-6903, toll-free from the United States, Canada and Puerto Rico, and following the recorded instructions; or

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the Internet, by accessing the website referenced on your proxy card and following the instructions on the website.

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If you hold your shares in “street name” through a broker, bank or other nominee you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting “AGAINST” the SPMA Proposal.

Even if you plan to attend the special meeting, to ensure that your shares of our common stock are voted, please submit a proxy to vote your shares of our common stock by marking, signing, dating and returning the enclosed proxy card or by using the telephone number printed on your proxy card or by using the Internet voting instructions printed on your proxy card.

Q.

Should I send in my stock certificates now?

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A.

No. If the SPMA Proposal is approved, after the completion of the Merger Transaction, you will promptly, and in any event within three business days, be sent a letter of transmittal, describing how you may exchange your shares of our common stock for the Merger Consideration. If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you should contact your bank, brokerage firm or other nominee for instructions as to how to effect the surrender of your “street name” shares of our common stock in exchange for the Merger Consideration. See “The SPMA — Payment of Merger Consideration and Surrender of Stock Certificates” beginning on page 59. Please do NOT return any stock certificates you hold with your proxy.

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Q.

What does it mean if I get more than one proxy card or voting instruction card?

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A.

If your shares of the Company’s common stock are registered differently or are held in more than one account, you will receive more than one proxy card or voting instruction card. Please complete and return all of the proxy cards or voting instruction cards you receive (or submit each of your proxies by telephone or the Internet, if available to you) to ensure that all of your shares are voted.

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Q.

Am I entitled to exercise appraisal rights under the DGCL instead of receiving the Merger Consideration for my shares of the Company’s common stock?

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A.

Yes. As a holder of the Company’s common stock, you are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the Merger Transaction if you take certain actions and meet certain conditions, including that you do not vote (in person or by proxy) in favor of adoption of the SPMA. See “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Rights of Appraisal” beginning on page 41.

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Q.

Who can help answer any other questions I might have?

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A.

If you have more questions about the transactions, or require assistance in submitting your proxy or voting your shares of the Company’s common stock or need additional copies of the proxy statement or the enclosed proxy card, please contact Morrow Sodali, LLC, which is acting as the proxy solicitation agent for Avenue in connection with the special meeting.

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If your broker, bank or other nominee holds your shares of the Company’s common stock in “street name”, you should also call your broker, bank or other nominee for additional information.

Our proxy solicitor may be contacted at (800) 662-5200, or via email at ATXl@morrowsodali.com.

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THE STOCK PURCHASE TRANSACTION AND THE MERGER TRANSACTION

Background of the SPMA

The Board regularly reviews and evaluates, with the Company’s management, the Company’s business strategies, operational and financial performance, industry conditions and potential opportunities and challenges, all as part of its consideration and evaluation of the Company’s prospects and its goal of enhancing stockholder value. As part of these efforts, the Board and Company management have considered and reviewed the Company’s strategic direction and business objectives.

The following chronology summarizes key events and contacts that led to the signing of the SPMA. It does not purport to catalogue every conversation among the Board, the Special Committee, members of our management or the Board and Special Committee’s representatives and other parties with respect to the transactions contemplated by the SPMA, including the Stock Purchase Transaction and the Merger Transaction.

On May 21, 2018, the Company announced positive data from the first Phase 3 study in patients undergoing bunionectomies. On June 13, 2018, the Board, Dr. Lucy Lu, Chief Executive Officer and President of Avenue, and Mr. Joseph Vazzano, Vice President, Finance and Accounting and Principal Financial Officer, met and agreed to authorize “strategic alternative” exploration.

On May 31, 2018, the Company then engaged Torreya Capital (“Torreya”) to explore both royalty funds and potential partnerships. This engagement led to the Company meeting or conducting calls with interested royalty fund and potential partnership parties throughout the summer of 2018. In all, 22 potential partners evaluated the Company. Parent made an initial indication of intent at the end of July 2018. The Company received two additional indications of intent from two other interested parties in August 2018.

On August 7, 2018, Torreya informed the Board, Dr. Lu, and Mr. Vazzano of a significant interest in purchasing a stake in the Company from Parent. The Board formed the Special Committee, consisting of independent Board members to discuss and evaluate a potential transaction with Parent (the “Special Committee”). The Special Committee consisted of Dr. Jay Kranzler, Dr. Paley and Dr. Samad. By August 20, 2018, the Company had completed its pricing study of IV Tramadol and sent reports to interested investors. Parent provided an improved term sheet and non-binding offer that same day.

On August 20, 2018, Parent provided a term sheet and non-binding proposal, which the Special Committee believed was more favorable to the Company and its stockholders than Parent’s prior proposal.

Parent’s initial offer was for 35% ownership of the Company for $35 million, followed by acquisition of the remainder of the Company for an additional $110-$200 million if IV Tramadol obtained FDA approval for moderate to moderately severe post-operative pain and was listed as a Schedule IV drug before 2021. The Company sent a counter offer on August 31, 2018.

On September 3, 2018, Parent made a new offer to the Company. The new offer was also for a two stage transaction. At the closing of the first stage, Parent would pay $35 million for shares equaling a 33.3% stake in the Company. At the closing of the second stage, Parent would pay an additional up to $165-$185 million, as well as additional payments contingent upon the achievement of certain milestones, as long as IV Tramadol received FDA approval for moderate to moderately severe post-operative pain and was listed as a Schedule IV drug by December 2020.

On September 21, 2018, the Special Committee held a meeting with Torreya. Parent was identified as the best partner for a transaction with the Company. The Special Committee discussed impending meetings with Representatives of Cipla Ltd. at the offices of Alston & Bird, LLP (“Alston”), the Company’s legal counsel, from September 25 to September 27, 2018. The parties agreed to execute the transaction as a stock purchase and merger agreement.

On September 28, 2018, the Special Committee held a meeting with Torreya. The Special Committee discussed the meetings that had taken place with the team from Parent and the then-current transaction terms. The Special Committee also discussed outstanding key issues between the parties, including the

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current timeline of IV Tramadol development and evaluation, financial terms to any agreement, and terms relating to the current management team. The economic terms of the proposed transaction stayed much the same as the most recent proposal from Parent, but were again evaluated by the Special Committee at this meeting.

The board of directors of Parent, at the recommendation of Parent’s sole stockholder, Cipla (EU) Limited, was expected to meet and approve the transaction on October 4, 2018. Parent’s board of directors conditionally approved the transaction to purchase an interest in the Company and then potentially effect a merger with respect to the Company subject to certain conditions being satisfied with terms consistent with those previously negotiated. The first stage closing would remain a $35 million purchase of 33.3% of the Company, and the second stage would be a purchase of the remainder of the Company for up to $180 million, subject to, among other things, IV Tramadol receiving FDA approval by April 2021 with label indication of moderate to moderately severe post-operative pain and being listed as a Schedule IV drug and No Risk Evaluation and Mitigation Strategy from the FDA.

From September 28, 2018 to November 10, 2018, Dr. Lu and Mr. Vazzano, along with representatives from Parent and their respective counsels, Alston and Hughes Hubbard & Reed, LLP, exchanged drafts of the SPMA and the Ancillary Agreements. The parties also discussed the terms of a contingent value rights agreement for certain sales targets and gross profits to be paid to the former stockholders of the Company following a merger with Merger Sub.

On October 19, 2018, the Special Committee along with Torreya met to discuss the SPMA. The terms of the agreement with Parent were reviewed. The estimated second stage per share price calculation was evaluated; the valuation calculation considered a 4% fee to Torreya for its services and a fully diluted share count of 11.7 million shares, and estimated the price to be $14.78 per share at the second stage closing assuming no interim financing and no new shares being granted. The Special Committee also discussed employee incentive grants aimed at aligning key employees and consultants with shareholder interests to incentivize milestone delivery and satisfy Second Stage Closing Conditions.

On November 7, 2018, the Company’s Board (including the Special Committee), Dr. Lu, and Mr. Vazzano along with Torreya met to discuss Parent’s proposed terms to the agreement. The terms and mechanics of the transaction were reviewed, with the Board (including the Special Committee), Dr. Lu, and Mr. Vazzano discussing the $35 million price for 33.3% of the Company as the first stage closing and an aggregate second stage closing price for all of the Company’s remaining shares of up to $180 million, subject to certain deductions, and subject to the Second Stage Closing Conditions being satisfied. The CVR Agreement and its terms were also discussed. The Company’s Board (including the Special Committee), Dr. Lu, and Mr. Vazzano discussed further the Company’s current and projected budget leading to the Second Stage Closing and the Second Stage Closing price. The Company’s Board (including the Special Committee) also discussed the milestones for the Revogenex License and Polpharma Manufacturing Agreement included along with the incentive plan grants.

On November 12, 2018, the Special Committee, Company’s Board, Dr. Lu, and Mr. Vazzano met.

Alston reviewed with the Special Committee and the Board fiduciary duties owed by directors under Delaware law. Following this discussion, the Special Committee members asked a number of questions of Alston. Also attending this meeting were representatives of Oppenheimer, an investment bank had been engaged by the Company to provide the Company’s Board with an opinion regarding the Merger Consideration. At this meeting, Oppenheimer reviewed with the Company’s Board its financial analysis of the Merger Consideration and rendered to the Company’s Board an opinion dated November 12, 2018, to the effect that, as of that date and based on and subject to the matters described in the opinion, the Merger Consideration to be received in the Merger by holders of our common stock (excluding Fortress, Parent, Merger Sub and any of their respective affiliates) was fair, from a financial point of view, to such holders. The Special Committee then unanimously determined that the SPMA, the Ancillary Agreements, and the transactions contemplated thereby, including, without limitation, the Stock Purchase Transaction and the Merger Transaction, were advisable, fair to and in the best interests of the Company and the holders of the shares of our common stock. For the basis of the Special Committee’s determination, please see the section entitled “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Reasons for the Stock Purchase Transaction and the Merger Transaction; Recommendation of the Special Committee;

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Recommendation of the Board; Fairness of the Stock Purchase Transaction and the Merger Transaction — Special Committee” beginning on page 25. The Special Committee further unanimously resolved to (i) authorize and approve, in all respects, the form, terms and provisions of the SPMA, the Ancillary Agreements and the consummation of the transactions contemplated thereby, including, without limitation, the Stock Purchase Transaction and the Merger Transaction, (ii) recommend that the Board approve and adopt the SPMA and the Ancillary Agreements, (iii) direct that the SPMA and the Ancillary Agreements be submitted to our stockholders for approval and adoption, and (iv) recommend to our stockholders that they approve and adopt the SPMA and the Ancillary Agreements.

The Company’s full Board then met and after discussion, based amongst other things on the unanimous recommendation of the Special Committee, unanimously determined that the SPMA and the transactions contemplated by the SPMA, including the Stock Purchase Transaction and the Merger Transaction, are fair to and in the best interests of the Company and its stockholders and approved and declared advisable the SPMA, the Ancillary Agreements, and the transactions contemplated thereby, including the Stock Purchase Transaction and the Merger Transaction. For the basis of the Board’s determination, please see the section entitled “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Reasons for the Stock Purchase Transaction and the Merger Transaction; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Stock Purchase Transaction and the Merger Transaction — Special Committee” beginning on page 25. The Board also unanimously resolved to submit the SPMA and the Ancillary Agreements for consideration by the stockholders of the Company at a special meeting of stockholders and recommended that the stockholders of the Company vote to adopt the SPMA and the Ancillary Agreements.

On November 13, 2018, the Company issued a press release announcing the execution of the SPMA. On November 14, 2018, the Company filed the press release as an exhibit to its Current Report on Form 8-K.

Reasons for the Stock Purchase Transaction and the Merger Transaction; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Stock Purchase Transaction and the Merger Transaction

Both the Special Committee and the Board believe, based on their consideration of the factors described below, that the SPMA and the transactions contemplated therein, including the Stock Purchase Transaction and the Merger Transaction, are advisable and fair to the Company’s unaffiliated stockholders.

The Special Committee

The Special Committee, with the advice and assistance of Alston and Torreya, evaluated the Stock Purchase Transaction, the Merger Transaction, the terms and conditions of the SPMA and the transactions contemplated therein. Over the course of approximately four months, the Special Committee held a number of meetings to discuss the SPMA and the Ancillary Agreements. At a meeting held on November 12, 2018, the Special Committee unanimously determined that the SPMA and the transactions contemplated thereby, including, without limitation, the Stock Purchase Transaction and the Merger Transaction, were advisable, fair to and in the best interests of the Company and the holders of the shares of our common stock. The Special Committee further unanimously resolved to (i) authorize and approve, in all respects, the form, terms and provisions of the SPMA and the consummation of the transactions contemplated thereby, including, without limitation, the Stock Purchase Transaction and the Merger Transaction, (ii) recommend that the Board approve and adopt the SPMA Proposal, (iii) direct that the SPMA and the Ancillary Agreements be submitted to the holders of the shares of our common stock for adoption, and (iv) recommend to the holders of the shares of our common stock that they adopt the SPMA Proposal.

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In evaluating the proposed SPMA, the Ancillary Agreements and the transactions contemplated thereby, including the Stock Purchase Transaction and the Merger Transaction, the Company consulted with Alston, Torreya, Dr. Lucy Lu, the Company’s Chief Executive Officer, and considered a number of factors, including, but not limited to, the following material factors (not necessarily in order of relative importance):

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the fact that, as a condition to the closing of the Stock Purchase Transaction and the Merger Transaction, the SPMA must be adopted by our stockholders, which allows for an informed vote by the stockholders on the merits of the Stock Purchase Transaction and the Merger Transaction;

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the fact that Parent’s closing of the Stock Purchase Transaction is conditioned upon obtaining the Non-Affiliate Stockholder Approval;

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the fact that the Merger Consideration consists of a cash payment payable at closing that provides our stockholders with certainty, liquidity and value upon consummation of the Merger Transaction, particularly in light of the relatively limited trading volume of our stock, and allows our stockholders to immediately realize a certain and fair value for their shares, thus eliminating any uncertainty in valuing the consideration to be received by such stockholders and allowing stockholders the ability to pursue other investment alternatives;

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recent and historical market prices for our common stock, as compared to the Stock Purchase Transaction and the Merger Transaction consideration, including the fact that the Stock Purchase Consideration of  $6.00 per share in the first stage represents an approximate premium of 44.2% over the trading price for our common stock on November 12, 2018, the last trading day before the announcement of the initial offer, and the estimated Merger Consideration of  $13.92 per share represents a premium of 234.6% over the trading price for our common stock that same day;

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the fact that Parent’s offer was the best offer relative to other offers submitted to and reviewed by the Company;

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the fact that the Company retained nationally recognized legal counsel, which has extensive experience in transactions similar to the Stock Purchase Transaction and the Merger Transaction, and that Alston, together with Torreya, were involved throughout the process and updated the Special Committee directly and regularly;

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Oppenheimer’s opinion, dated November 12, 2018, to the Company’s Board as to the fairness, from a financial point of view and as of such date, of the Merger Consideration to be received in the Merger Transaction by holders of the Company’s common stock (excluding Fortress, Parent, Merger Sub and any of their respective affiliates), which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as more fully described below under the caption “Opinion of Oppenheimer & Co. Inc.”; and

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the Special Committee’s review of the structure of the SPMA and the financial and other terms of the SPMA, including, among others, the following specific terms of the SPMA:

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the parties’ obligations to complete the Stock Purchase Transaction and the Merger Transaction, and the commitment by Parent and Merger Sub, subject to the terms of the SPMA, to use their commercially reasonable efforts to take or cause to be taken all actions to consummate the Stock Purchase Transaction and the Merger Transaction;

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the absence of a financing condition in the SPMA;

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the ability of the Board, subject to certain conditions, to change its recommendation that our stockholders adopt the SPMA;

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our ability to specifically enforce Parent and Merger Sub’s obligations under the SPMA in certain circumstances, including their obligation to consummate the Stock Purchase Transaction and the Merger Transaction, subject to certain conditions being met;

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the availability of appraisal rights under Delaware law to our stockholders who do not vote in favor of the proposal to adopt the SPMA and comply with all of the required procedures under Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the SPMA.

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The Special Committee also considered a number of factors that are discussed below relating to the procedural safeguards that it believes were and are present to ensure the fairness of the Stock Purchase Transaction and the Merger Transaction. The Special Committee believes the following factors support its determinations and recommendations and provide assurance of the advisability and fairness of the Stock Purchase Transaction and the Merger Transaction to the Company’s unaffiliated stockholders:

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the Special Committee consisted solely of independent directors not affiliated with Parent.

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other than their receipt of Board fees (which are not contingent upon the consummation of the Stock Purchase Transaction, the Merger Transaction, or the Special Committee’s or the Board’s recommendation or approval of the Stock Purchase Transaction and the Merger Transaction) and their interests described in “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Interests of the Company’s Directors and Executive Officers in the Stock Purchase Transaction and the Merger Transaction” beginning on page 35, the members of the Special Committee have no financial interest in the Stock Purchase Transaction and the Merger Transaction that is different from, or in addition to, the interests of the unaffiliated stockholders generally, was given exclusive authority to, among other things, review, evaluate and negotiate the terms of the proposed Stock Purchase Transaction and the Merger Transaction, to decide not to engage in the Stock Purchase Transaction and the Merger Transaction and to consider alternatives to the Stock Purchase Transaction and the Merger Transaction, to retain its own legal and financial advisors, to determine whether to proceed with a transaction with Parent or pursue alternatives thereto, and, if a decision was made to proceed with a transaction with Parent, to review, evaluate and negotiate any such transaction;

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the Special Committee was deliberate in its process, taking approximately four months to analyze and evaluate the Purchaser Group’s initial proposal and to negotiate the terms of the proposed Stock Purchase Transaction and Merger Transaction with the Purchaser Group; and

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the terms and conditions of the SPMA, including the Company’s ability to terminate after October 2021 if the Merger Transaction has not occurred prior to such date, which allows the Company to ensure that the Merger Transaction is consummated as negotiated by the parties.

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The Special Committee also considered a variety of potentially negative factors in its deliberations concerning the SPMA and the transactions contemplated thereby, including, but not limited to, the following (not necessarily in order of relative importance):

•

the fact that, subsequent to the consummation of the Merger Transaction, the Company will no longer exist as an independent public company and that the nature of the Merger Transaction as a cash transaction would prevent our stockholders from participating in any value creation the business could generate, as well as any future appreciation in our value, other than through the CVR Agreement;

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•

the fact that the Company will be prohibited from initiating, soliciting, or knowingly encouraging or facilitating the making of, an alternative acquisition proposal, from participating in any discussions or negotiations regarding, or providing any confidential or non-public information to any person relating to an acquisition proposal, or otherwise facilitating any effort or attempt to make an acquisition proposal, subject to certain exceptions;

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•

the fact that Parent’s and Merger Sub’s obligations to consummate the Stock Purchase Transaction and the Merger Transaction are subject to certain conditions, and the possibility that such conditions may not be satisfied, including as a result of events outside our control;

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•

the fact that if the Stock Purchase Transaction and the Merger Transaction are not consummated:

​

◦

our directors and officers will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transaction; and

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◦

the trading price of our common stock may significantly decrease;

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•

the fact that under the terms of the SPMA, we have agreed that we will conduct our business in the ordinary course and that subject to Parent’s consent, we will not take a number of specific actions related to the conduct of our business, and the possibility that these terms may limit our ability to pursue business opportunities that we would otherwise pursue;

​

•

the fact that we have incurred and will continue to incur significant transaction costs and expenses in connection with the potential transaction, regardless of whether the Stock Purchase Transaction and the Merger Transaction are consummated; and

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•

the fact that the Merger Consideration will be taxable to our taxpaying stockholders.

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The Special Committee concluded that the potential benefits that it expected the Company stockholders would achieve as a result of the Stock Purchase Transaction and the Merger Transaction outweighed the risks and potentially negative factors relevant to the Stock Purchase Transaction and the Merger Transaction.

The foregoing discussion of the information and factors considered by the Special Committee is not intended to be exhaustive but includes the material factors considered by the Special Committee. In view of the variety of factors considered in connection with its evaluation of the Stock Purchase Transaction and the Merger Transaction, the Special Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Special Committee did not undertake to make any specific determination as to whether any factor or any particular aspect of any factor supported or did not support its ultimate decision. The Special Committee based its recommendation on the totality of the information presented. Accordingly, the Special Committee has decided that it is in the best interest of the Company and the Company’s stockholders to undertake the Stock Purchase Transaction and the Merger Transaction at this time for the reasons described above.

The foregoing discussion of the information and factors considered by the Special Committee is forward-looking in nature. This information should be read in light of the factors set forth in the section entitled “Cautionary Note Concerning Forward-Looking Statements” beginning on page 46.

Recommendation of the Board

The Board consists of seven directors. On November 12, 2018, based primarily on the unanimous recommendation of the Special Committee, as well as on the basis of the other factors described above, the Board unanimously:

•

determined that the SPMA and the transactions contemplated by the SPMA, including the Stock Purchase Transaction and the Merger Transaction, are advisable, fair to and in the best interests of the Company and its stockholders;

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•

approved the SPMA and the transactions contemplated by the SPMA, including the Stock Purchase Transaction and the Merger Transaction; and

​

•

resolved to recommend that the Company’s stockholders vote “FOR” the transactions contemplated by the SPMA.

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The Board unanimously recommends that you vote “FOR” the SPMA proposal.

The Board believes, based on their considerations of the factors described above, that the SPMA and the transactions contemplated therein, including the Stock Purchase Transaction and the Merger Transaction, are advisable and fair to the Company’s unaffiliated stockholders. In accepting the Special Committee’s recommendations and concluding that the SPMA and the transactions contemplated therein, including the Stock Purchase Transaction and the Merger Transaction, are in the best interests of the

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Company and the unaffiliated stockholders, our Board consulted with outside legal advisors, considered and relied upon the same factors and considerations that the Special Committee relied upon, as described above, and adopted as its own analysis the Special Committee’s analyses and conclusions in their entirety.

Opinion of Oppenheimer & Co. Inc.

The Company engaged Oppenheimer in connection with the Merger Transaction solely to render an opinion to the Company’s Board with respect to, the fairness, from a financial point of view, of the Merger Consideration to be received in the Merger Transaction by holders of the Company’s common stock (excluding Fortress, Parent, Merger Sub and any of their respective affiliates). On November 12, 2018, at a meeting of the Company’s Board held to evaluate the Stock Purchase Transaction and the Merger Transaction, Oppenheimer rendered to the Company’s Board an opinion, dated November 12, 2018, to the effect that, as of that date and based on and subject to the matters described in its opinion, the Merger Consideration was fair, from a financial point of view, to holders of the Company’s common stock (excluding Fortress, Parent, Merger Sub and any of their respective affiliates).

The full text of Oppenheimer’s written opinion, dated November 12, 2018, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex B and is incorporated by reference in its entirety. Oppenheimer’s opinion was provided to the Company’s Board in connection with its evaluation of the Merger Consideration from a financial point of view to holders of the Company’s common stock (excluding Fortress, Parent, Merger Sub and any of their respective affiliates) and did not address any other aspect of the Merger Transaction or any related transaction (including, without limitation, the Stock Purchase Transaction). Oppenheimer’s opinion did not address the underlying business decision of the Company to effect the Merger Transaction or any related transaction, the relative merits of the Merger Transaction or any related transaction as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the Merger Transaction or any related transaction. This summary of Oppenheimer’s opinion is qualified in its entirety by reference to the full text of its opinion.

In arriving at its opinion, Oppenheimer:

•

reviewed final execution versions of the SPMA and the CVR Agreement;

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•

reviewed publicly available audited financial statements of the Company as of December 31, 2016 and December 31, 2017, for the period from February 9, 2015 (inception) through December 31, 2015, and for the fiscal years ended December 31, 2016 and December 31, 2017, and publicly available unaudited financial statements of the Company as of, and for the six months ended, June 30, 2017 and June 30, 2018;

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•

reviewed financial forecasts and estimates relating to the Company (giving effect to the achievement of the development milestones on which the closing of the Merger Transaction is conditioned) prepared by the management of the Company, including estimates of contingent value payments pursuant to the CVR Agreement;

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•

reviewed estimates of certain deductions to the $180 million of the aggregate Merger Consideration provided to or discussed with Oppenheimer by the management of the Company;

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•

held discussions with the senior management team of the Company with respect to the business and prospects of the Company, including the liquidity needs of, and capital resources available to, the Company, and the results of the Company’s solicitation of third parties regarding a possible acquisition of all or a part of the Company;

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•

reviewed and analyzed certain publicly available financial information for companies that Oppenheimer deemed relevant in evaluating the Company;

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•

analyzed the estimated present value of the future cash flows of the Company (giving effect to the achievement of the development milestones on which the closing of the Merger Transaction is conditioned) and the contingent value payments pursuant to the CVR Agreement based on financial forecasts and estimates prepared by the management of the Company;

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•

reviewed historical market prices and trading volumes for the Company’s common stock;

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•

reviewed other public information concerning the Company; and

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•

performed such other analyses, reviewed such other information and considered such other factors as Oppenheimer deemed appropriate.

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In rendering its opinion, Oppenheimer assumed and relied upon, without independent verification or investigation, the accuracy and completeness of all of the financial and other data and information provided to or discussed with Oppenheimer by the Company and its employees, representatives and affiliates or otherwise reviewed by Oppenheimer. With respect to the financial forecasts and estimates relating to the Company (including estimates of the contingent value payments pursuant to the CVR Agreement) and estimates of certain deductions to the $180 million of the aggregate Merger Consideration referred to above, Oppenheimer assumed, at the Company’s direction, and without independent verification or investigation, that such forecasts and estimates were prepared reasonably and on bases reflecting the best available information, estimates and judgments of the management of the Company as to the future financial condition and operating results of the Company (giving effect to the achievement of the development milestones on which the closing of the Merger Transaction is conditioned) and the other matters covered thereby, that the financial results reflected in the financial forecasts and estimates relating to the Company referred to above would be achieved at the times and in the amounts projected, and that any differences between the actual contingent value payments pursuant to the CVR and deductions to the aggregate Merger Consideration and the estimates thereof referred to above would not be material in any respect to Oppenheimer’s analyses or opinion. Oppenheimer expressed no view as to any of the foregoing forecasts or estimates or the assumptions or bases therefor. Among other things, the financial forecasts and estimates relating to the Company referred to above reflected assumptions regarding future equity financing transactions needed to fund projected cash shortfalls. The Company advised Oppenheimer, and Oppenheimer assumed, at the Company’s direction, and without independent verification or investigation, that, in the absence of the Stock Purchase Transaction and related debt financings to be provided by the Company, the Company would be required to pursue external financing alternatives on terms that would likely be no more favorable to the Company than those of the Stock Purchase Transaction and such related debt financings.

At the direction of the Company’s representatives, Oppenheimer also assumed that the final terms of the SPMA and the CVR Agreement would not vary materially from those set forth in the execution versions reviewed by Oppenheimer. Oppenheimer also assumed, with the consent of the Company, that the Merger Transaction and related transactions (including, without limitation, the Stock Purchase Transaction and the related debt financings to be provided by Parent) would be consummated in accordance with their respective terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the Merger Transaction or any related transaction, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the Merger Transaction. Oppenheimer neither made nor obtained any independent evaluations or appraisals of the assets or liabilities, contingent or otherwise, of the Company. In addition, Oppenheimer assumed that any further adjustments to the Merger Consideration pursuant to the SPMA (as to which further adjustments Oppenheimer expressed no opinion) would not be material in any respect to its analyses or opinion. Oppenheimer also assumed that the circumstances under which the Subsequent Period would terminate prior to December 31, 2036 pursuant to the CVR Agreement would not occur.

Oppenheimer did not express any opinion as to the underlying valuation, future performance or long term viability of the Company, the actual value of the Company’s common stock when issued in the Stock Purchase Transaction or the price at which the Company’s common stock would trade at any time. Oppenheimer was not requested to, and it did not, participate in the negotiation or structuring of the

30

Merger Transaction or any related transaction. In connection with its engagement, Oppenheimer was not requested to, and it did not, solicit third party indications of interest in the possible acquisition of all or a part of the Company. Oppenheimer expressed no view as to, and its opinion did not address, any terms or other aspects or implications of the Merger Transaction (other than the Merger Consideration to the extent expressly specified in Oppenheimer’s opinion) or any related transaction or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the Merger Transaction or any related transaction or otherwise, including, without limitation, the form or structure of the Merger Consideration (including the allocation of the Merger Consideration between the non-contingent cash portion and the CVR and the related definitions and/or calculations agreed upon by the Company and Parent), any consideration to be paid or received in, or any other terms of, the Stock Purchase Transaction, the related financings to be provided by Parent or the contemplated waiver and termination agreement, restrictive covenant agreement and indemnification agreement to be entered into by Fortress, the treatment in the Merger Transaction of Class A Preferred Shares, stock options, restricted shares, restricted share units, or Company Warrants, or the fairness of the amount or nature of the compensation resulting from the Merger Transaction to any individual officers, directors or employees of the Company, or class of such persons, relative to the Merger Consideration. Oppenheimer’s opinion was necessarily based on the information available to it and general economic, financial and stock market conditions and circumstances as they existed and could be evaluated by Oppenheimer on the date of its opinion. Although subsequent developments may affect this Opinion, Oppenheimer does not have any obligation to update, revise or reaffirm its opinion. Except as described in this summary, the Company imposed no other instructions or limitations on Oppenheimer with respect to the investigations made or the procedures followed by it in rendering its opinion.

This summary is not a complete description of Oppenheimer’s opinion or the financial analyses performed and factors considered by Oppenheimer in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Oppenheimer arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Oppenheimer believes that its analyses and this summary must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Oppenheimer’s analyses and opinion.

In performing its analyses, Oppenheimer considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the Company’s control. No company, business or transaction used in the analyses is identical to the Company or the Merger Transaction, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.

The assumptions and estimates contained in Oppenheimer’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the assumptions and estimates used in, and the results derived from, Oppenheimer’s analyses are inherently subject to substantial uncertainty.

Oppenheimer was not requested to, and it did not, recommend the specific consideration payable in the Merger Transaction. The type and amount of consideration payable in the Merger Transaction was determined through negotiation between the Company and Parent and was approved by the Board. The decision to enter into the SPMA was solely that of the Board. Oppenheimer’s opinion and financial analysis

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were only one of many factors considered by the Board in its evaluation of the Merger Transaction and should not be viewed as determinative of the views of the Board, the Special Committee or management with respect to the Merger Transaction or the consideration payable in the Merger Transaction.

The following is a summary of the material financial analyses reviewed with the Company’s Board in connection with Oppenheimer’s opinion dated November 12, 2018. The financial analyses summarized below include information presented in tabular format. In order to fully understand Oppenheimer’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables 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 Oppenheimer’s financial analyses.

For purposes of the “Selected Companies Analysis” and “Discounted Free Cash Flow to Equity Analysis” summarized below, the “illustrative net present value range of the Merger Consideration as of December 31, 2018” of  $12.12 to $13.28 refers to the range of illustrative values of the Merger Consideration discounted to December 31, 2018 by applying discount rates ranging from 21.1% to 23.1% to the following:

•

the cash portion of the Merger Consideration to be received at the closing of the Merger Transaction (assumed to occur on April 1, 2021 per the management of the Company) based on estimates provided by the management of the Company; and

​

•

the implied value of the CVR portion of the Merger Consideration based on the future contingent cash payments projected to be paid pursuant to the CVR following the closing of the Merger Transaction until December 31, 2036 using financial forecasts and estimates prepared by the management of the Company.

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Selected Companies Analysis.

Oppenheimer reviewed publicly available financial and stock market information of the Company and the following eight selected publicly traded companies with late-stage product candidates in the pain management segment of the specialty pharmaceuticals industry:

•

Pacira Pharmaceuticals, Inc.

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•

Collegium Pharmaceutical, Inc.

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•

AcelRx Pharmaceuticals, Inc.

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•

Recro Pharma, Inc.

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•

DURECT Corporation

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•

Cumberland Pharmaceuticals Inc.

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•

KemPharm, Inc.

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•

Trevena, Inc.

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Oppenheimer reviewed enterprise values of the selected companies, calculated as fully-diluted market value based on closing stock prices on November 9, 2018, plus debt and non-controlling interests, less cash, of the selected companies. Financial data for the selected companies was based on public filings. The overall low to high range of enterprise values observed for the selected companies were $4.3 million to $1,987.5 million (with a median of  $149.3 million). Oppenheimer then applied the Company’s cash as of September 30, 2018 (as provided by the Company’s management) to a selected range of enterprise values of $134.4 million to $164.2 million derived from the selected companies. Based on the fully-diluted shares of the Company’s common stock using the Company’s capitalization data set forth in the SPMA (the “SPMA Share Count”) and also based on the estimated fully-diluted shares of the Company’s common stock (as provided by the management of the Company), including estimated additional shares that would be issued by the Company in future equity financing transactions absent the Stock Purchase Transaction and the

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Merger Transaction (the “Estimated Affected Share Count”), this analysis indicated the following approximate implied per share equity reference ranges for the Company, as compared to the illustrative net present value range of the Merger Consideration as of December 31, 2018:

Discounted Free Cash Flow to Equity Analysis.

Oppenheimer performed a discounted free cash flow to equity analysis to calculate the estimated present value of the standalone after-tax free cash to equity flows that the Company was forecasted to generate during the fiscal years ending December 31, 2019 through December 31, 2036. Financial data of the Company were based on financial forecasts and estimates prepared by the management of the Company. Oppenheimer calculated terminal values for the Company by applying to the Company’s estimated fiscal year 2036 free cash flow to equity a selected range of declining perpetuity growth percentages of 4.0% to 3.0%. The free cash flows to equity and terminal values were then discounted to present value as of December 31, 2018 using discount rates ranging from 21.1% to 23.1%. Based on the estimated fully-diluted shares of the Company’s common stock (as provided by the management of the Company), including estimated additional shares that would be issued by the Company in future equity financing transactions absent the Stock Purchase Transaction and the Merger Transaction, this analysis indicated the following approximate implied per share equity reference range for the Company, as compared to the illustrative net present value range of the Merger Consideration as of December 31, 2018:

Other Factors.

Oppenheimer also reviewed, for informational purposes, historical trading prices of the Company’s common stock during the 52-week period ending November 9, 2018.

Miscellaneous

The Company agreed to pay Oppenheimer for its financial advisory services with respect to rendering its opinion in connection with the Merger Transaction a fee of  $500,000 upon delivery of Oppenheimer’s opinion. The Company also has agreed to reimburse Oppenheimer for its reasonable expenses, including reasonable fees and expenses of its legal counsel, and to indemnify Oppenheimer and related parties against liabilities, including liabilities under the federal securities laws, relating to, or arising out of, its engagement. Oppenheimer and its affiliates in the past performed investment banking and other services for the Company unrelated to the Merger Transaction, for which services Oppenheimer and its affiliates received compensation, including having acted as sole book-running manager in connection with the initial public offering of the Company in 2017. In the ordinary course of business, the Company and its affiliates may actively trade securities of the Company for its and their affiliates’ own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

The issuance of Oppenheimer’s opinion was approved by an authorized committee of Oppenheimer. The Company selected Oppenheimer to provide certain financial advisory services in connection with the Merger Transaction based on Oppenheimer’s reputation and experience and its familiarity with the Company and its business. Oppenheimer is an internationally recognized investment banking firm and, as a part of its investment banking business, is regularly engaged in valuations of businesses and securities in connection with acquisitions and mergers, underwritings, secondary distributions of securities, private placements and valuations for other purposes.

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Plans for the Company After the Merger Transaction

After the effective time of the Merger Transaction, Parent will wholly own the operations of the Company and the Company will cease to be a public company. If the Merger Transaction is consummated, the Company’s common stock will no longer be quoted on Nasdaq, the registration of the Company’s common stock under Section 12 of the Exchange Act will be terminated and the Company will no longer file reports with the SEC.

After the effective time of the Merger Transaction, the members of the board of directors of Merger Sub immediately prior to the effective time of the Merger Transaction will be appointed as the directors of the Company, and the officers of Merger Sub immediately prior to the effective time of the Merger Transaction will be appointed as the officers of the Company, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

Certain Effects of the Merger Transaction

If the SPMA is adopted by the Requisite Stockholder Approval and the other conditions to the closing of the Merger Transaction are either satisfied or waived, then Merger Sub will be merged with and into the Company, the separate company existence of Merger Sub will cease, and the Company will continue its corporate existence under Delaware law as the surviving corporation in the Merger Transaction, with all of its rights, privileges, immunities, powers and franchises continuing unaffected by the Merger Transaction.

Upon consummation of the Merger Transaction, each share of our common stock issued and outstanding immediately prior to the effective time of the Merger Transaction (other than the excluded shares) will immediately be converted into the right to receive the Merger Consideration.

Following the Merger Transaction, the entire equity in the surviving corporation will be owned by Parent. As a result, if the Merger Transaction is completed, Parent and the Purchaser Group will be the sole beneficiaries of the Company’s future earnings and growth, if any (except the Company’s stockholders’ right to receive contingent cash payments pursuant to the CVR Agreement upon the achievement of certain milestones), and will own all of the shares entitled to vote on any matter submitted to the Company’s stockholders. Likewise, the Purchaser Group will also bear the risks of ongoing operations, including the risks of any decrease in the Company’s value after the Merger Transaction.

In connection with the Merger Transaction, the Purchaser Group Members will receive benefits and be subject to obligations that are different from, or in addition to, the benefits received by the Company’s stockholders generally. The primary benefits of the Merger Transaction to the Purchaser Group Members, based on their direct or indirect ownership of all the equity interests in Parent, include their interest in the Company’s potential future earnings and growth which, if they successfully execute their business strategies, could be substantial. Subject to certain use limitations imposed by applicable law, following the Merger Transaction, the Company’s net operating losses and research and development tax credits will also inure to the benefit of the Purchaser Group. In addition, following the Merger Transaction, the Company will be a private company, and therefore, the Company and its beneficial owners will be relieved of the applicable restrictions imposed on companies with publicly traded equity.

The primary detriments of the Merger Transaction to the Purchaser Group Members include the fact that all of the risk of any possible increase in the Company’s net losses or any potential decrease in the Company’s future value following the Merger Transaction will be borne by Parent. Additionally, the investment by the Purchaser Group in the Company will not be liquid, with no public trading market for such securities.

Except as provided in the employment agreements of certain Company employees in connection with termination, if any, of employment in connection with a change of control, there are no change in control payments, transaction bonuses or other extraordinary bonuses payable to the Company’s management or employees as a result of the transactions contemplated by the SPMA. It is currently intended that Dr. Lu will continue to serve as President and Chief Executive Officer of the surviving corporation following the Merger Transaction on substantially the same terms as Dr. Lu currently serves the Company.

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Shares of our common stock are currently registered under the Exchange Act and are quoted on Nasdaq under the symbol “ATXI.” As a result of the Merger Transaction, Avenue will be a privately held corporation and there will be no public market for its shares. After the Merger Transaction, shares of our common stock will cease to be listed on Nasdaq and price quotations with respect to sales of shares of our common stock in the public market will no longer be available. In addition, registration of our common stock under the Exchange Act will be terminated.

At the effective time of the Merger Transaction, the Company’s certificate of incorporation and by-laws will be amended and restated to read as set forth in Exhibits M and N, respectively, to the SPMA, will be the certificate of incorporation and by-laws of Avenue following the Merger Transaction until thereafter amended in accordance with their respective terms and the DGCL.

Financing the Stock Purchase Transaction and the Merger Transaction

Parent and Merger Sub’s obligations under the SPMA are not subject to, or conditioned on, the receipt or availability of any funds or financing. Parent expects to pay the consideration payable in connection with the Stock Purchase Transaction out of its generally available funds or through the issuance of equity to its sole stockholder, Cipla (EU) Limited. Parent expects to pay the consideration payable in connection with the Merger Transaction out of its generally available funds, through the issuance of equity to Cipla (EU) Limited, or by borrowing from a financial institution (except for amounts payable under the CVR Agreement, if any, which are expected to be paid from generally available funds of the Company). For more information, see “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction —  Financing the Stock Purchase Transaction and the Merger Transaction” beginning on page 35.

Interests of the Company’s Directors and Executive Officers in the Stock Purchase Transaction and the Merger Transaction

In considering the recommendations of the Special Committee and of the Board with respect to the SPMA, you should be aware that, aside from their interests as stockholders of the Company, the Company’s directors and executive officers have interests in the Stock Purchase Transaction and the Merger Transaction that may be different from, or in addition to, those of other stockholders of the Company generally. The members of the Special Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the SPMA, the Stock Purchase Transaction, the Merger Transaction, and in making its recommendations to the Board, which was also aware of and took into account these interests, among other matters, when making its recommendation to the stockholders of Avenue that the SPMA be adopted. See “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Background of the SPMA” beginning on page 23 and “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Reasons for the Stock Purchase Transaction and the Merger Transaction; Recommendation of the Special Committee; Recommendation of the Board; Fairness of the Stock Purchase Transaction and the Merger Transaction” beginning on page 25.

The Company’s stockholders should take these interests into account in deciding whether to vote “FOR” the adoption of the SPMA. These interests are described in more detail below.

Indemnification and Insurance

The Company’s certificate of incorporation provides for indemnification of directors and executive officers against certain liabilities that may arise by reason of their status or service as directors or officers. In addition, pursuant to the SPMA, the Company’s directors and executive officers will be entitled to certain ongoing indemnification from Parent and the surviving corporation and coverage under directors’ and officers’ liability insurance policies. The indemnification and insurance provisions in the SPMA are further described in the section entitled “The SPMA — Indemnification; Directors’ and Officers’ Insurance” on page 67.

Interests of the Special Committee

The Special Committee consists of three members of the Board; Dr. Jay Kranzler, Dr. Jeff Paley, and Dr. Akhtar Samad. In consideration of the time and effort required of the members of the Special Committee in connection with evaluating the proposed Stock Purchase Transaction and the Merger

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Transaction and any related transactions, the Board adopted resolutions providing that the Company would pay all expenses incurred by the Special Committee, including the fees and expenses of its financial, legal and other advisers.

Voting by the Company’s Directors and Executive Officers

At the close of business on the record date for the special meeting, the Company’s directors and executive officers beneficially owned and had the right to vote [•] shares of our common stock, which represents approximately [•]% of the shares of our common stock entitled to vote at the special meeting.

The directors and officers have informed the Company that they currently intend to vote all such shares of our common stock:

•

“FOR” the SPMA Proposal; and

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“FOR” the Adjournment Proposal.

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Further, pursuant to the Voting and Support Agreement, Dr. Lu shall cause all shares beneficially held by her entitled to vote at the special meeting to be voted “FOR” the SPMA Proposal and “FOR” the Adjournment Proposal.

Golden Parachute Compensation

SEC rules would require us to disclose and conduct an advisory vote on the compensation that would be payable to our named executive officers based on or that otherwise relates to the SPMA. Consummation of the Merger Transaction, however, will not trigger any such payments. Accordingly, there are no payments to approve in connection with the SPMA and we are not asking our stockholders to conduct such vote. At our last annual meeting held on June 13, 2018, our stockholders approved, on a non-binding advisory basis, the compensation of the Company’s named executive officers.

Material U.S. Federal Income Tax Consequences of the Merger Transaction

The following discussion is a summary of the material U.S. federal income tax consequences of the Merger Transaction to U.S. Holders and Non-U.S. Holders (each as defined below) of our common stock whose shares are converted into the right to receive cash and CVRs pursuant to the Merger Transaction and the post-merger ownership and disposition of the CVRs, but it does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” Treasury regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, which we refer to as the “IRS,” in each case in effect as of the date hereof.

These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder or Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the U.S. federal income tax consequences of the Merger Transaction and the ownership and disposition of the CVRs.

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This discussion is limited to holders who hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income or the alternative minimum tax. In addition, it does not address consequences relevant to holders subject to special rules, including, without limitation:

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tax-exempt organizations or governmental organizations;

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S-corporations, partnerships or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes (and investors therein);

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banks, insurance companies and other financial institutions;

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brokers, dealers or traders in securities;

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regulated investment companies or real estate investment trusts;

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U.S. expatriates and former citizens or long-term residents of the United States;

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persons holding our common stock as part of a hedge, straddle or other risk reduction transaction or as part of a conversion transaction or other integrated investment;

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persons deemed to sell our common stock under the constructive sale provisions of the Code;

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persons who received our common stock in a compensatory transaction;

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U.S. Holders whose “functional currency” is not the U.S. dollar;

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“controlled foreign corporations,” “passive foreign investment companies” or corporations that accumulate earnings to avoid U.S. federal income tax;

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tax-qualified retirement plans; and

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persons who do not vote in favor of the Merger Transaction and who properly demand appraisal of their shares under Delaware law.

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If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships holding our common stock and partners therein should consult their tax advisors regarding the U.S. federal income tax consequences of the Merger Transaction and the ownership and disposition of the CVRs. This discussion does not address the Purchaser Group or any of their affiliates.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER TRANSACTION AND THE OWNERSHIP AND DISPOSITION OF THE CVRS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER OTHER U.S. FEDERAL TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as any of the following:

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an individual who is a citizen or resident of the United States;

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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.

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The receipt of cash and the CVRs by a U.S. Holder in exchange for our common stock pursuant to the Merger Transaction will be treated as a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder’s gain or loss will be equal to the difference, if any, between (i) the amount of cash received and the fair market value of the CVRs received (measured at the effective time of the Merger Transaction), and (ii) such U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger Transaction. Such gain or loss will be a capital gain or loss, and will be a long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the Merger Transaction. A preferential tax rate generally will apply to long-term capital gains recognized by certain non-corporate U.S. Holders. The deductibility of capital losses is subject to limitations.

If a U.S. Holder acquired different blocks of our common stock at different times or different prices, such U.S. Holder must determine its tax basis, holding period and gain or loss separately with respect to each block of our common stock. The initial tax basis of the CVRs received in the Merger Transaction by a U.S. Holder will generally be equal to their fair market value and a U.S. Holder’s holding period in the CVRs will begin the day after the effective time of the Merger Transaction.

There is no legal authority directly addressing the U.S. federal income tax treatment of CVRs. Section 483 of the Code, which we refer to as the “Section 483 rules,” is expected to apply to payments under the CVRs. These rules require a portion of the payments made pursuant to a CVR be treated as interest, which will be ordinary income to the U.S. Holder. The interest amount will equal the excess of the amount received over its present value at the consummation of the Merger Transaction, calculated using the applicable federal rate as the discount rate. The U.S. Holder of a CVR must include such interest under the Section 483 rules in its taxable income using such U.S. Holder’s regular method of accounting. The portion of the CVR payment not treated as interest under the Section 483 rules, less the U.S. Holder’s basis in the CVR, is generally expected to be treated as capital gain. A U.S. Holder would generally be entitled to a loss (which would likely be a capital loss) if, at the time the CVRs terminate, such U.S. Holder has any remaining tax basis in the CVRs.

There is no authority directly on point addressing how contingent value rights with characteristics similar to the CVRs should be treated for U.S. federal income tax purposes. It is possible that the IRS might successfully assert that payments with respect to, or sales or other dispositions of, the CVRs should be treated other than described above, in which case all or part of the CVR payment (or payment in exchange for a CVR) could be treated as ordinary income and could be required to be included in income prior to receipt. U.S. Holders are urged to consult their tax advisors with respect to the proper characterization of the receipt of the CVRs and any payments made thereon.

Non-U.S. Holders

For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of our common stock that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. Except as discussed below, payments of cash and CVRs made to a Non-U.S. Holder in exchange for shares of our common stock pursuant to the Merger Transaction generally will not be subject to U.S. federal income tax unless:

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The gain, if any, on such shares is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to the Non-U.S. Holder’s permanent establishment in the United States); or

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The Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the exchange of shares of our common stock for cash pursuant to the Merger Transaction and certain other conditions are met.

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A Non-U.S. Holder described in the first bullet point immediately above will be subject to regular U.S. federal income tax on any gain realized as if the Non-U.S. Holder were a U.S. Holder, subject to any applicable income tax treaty providing otherwise. If such Non-U.S. Holder is a foreign corporation for U.S. federal income tax purposes, then any gain described in the first bullet above may also be subject to an additional “branch profits tax” at a 30% rate (or a lower treaty rate). A Non-U.S. Holder described in the second bullet point immediately above will be subject to tax at a rate of 30% (or a lower treaty rate) on any capital gain realized, which may be offset by certain U.S.-source capital losses recognized in the same taxable year, even though the individual is not considered a resident of the United States.

Information Reporting and Backup Withholding

Payments made in exchange for shares of our common stock or in respect of the CVRs generally will be subject to information reporting unless the holder is an “exempt recipient” and may also be subject to backup withholding at a rate of 24%. To avoid backup withholding, U.S. Holders that do not otherwise establish an exemption should complete and return Internal Revenue Service Form W-9, certifying under penalty of perjury that such U.S. Holder is a U.S. person, the taxpayer identification number provided is correct and such U.S. Holder is not subject to backup withholding. A Non-U.S. Holder that provides the applicable withholding agent with the appropriate Internal Revenue Service Form W-8 will generally establish an exemption from backup withholding. Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against a holder’s U.S. federal income tax liability, provided that the holder files a U.S. federal income tax return with the Internal Revenue Service. You are urged to consult your tax advisor with respect to the application of U.S. federal income tax laws to your particular circumstances as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under any state, local or foreign tax laws.

Withholding with Respect to Certain Foreign Investors

Payments made to a Non-U.S. Holder under the CVRs treated as interest could potentially be subject to U.S. withholding tax. Such withholding tax may not apply to the extent such Non-U.S. Holder complies to the extent necessary with certain identification requirements (including delivery of a statement, signed by the Non-U.S. Holder under penalties of perjury, certifying that such Non-U.S. Holder is not a United States person and providing the name and address of such Non-U.S. Holder), with such statement generally made on IRS Form W-8BEN or IRS Form W-8BEN-E. It is possible that the IRS may assert that the foregoing tax exemption should not apply with respect to payments under the CVRs and that U.S. withholding taxes should be applied. If the Non-U.S. Holder does not qualify for a withholding tax exemption, payments may be subject to a tax rate of 30%, subject to reduction under any applicable tax treaty.

FATCA Regime

The Foreign Account Tax Compliance Act (“FATCA”) tax regime requires tax reporting and compliance with respect to direct and indirect ownership by United States persons of assets through foreign accounts. Under FATCA, U.S. withholding tax will apply on interest payments made, and the gross proceeds of sale of interest-bearing obligations for payments made after December 31, 2018, to certain foreign financial institutions and non-financial foreign entities if certain disclosure requirements related to U.S. accounts or ownership are not satisfied. It is unclear whether and to what extent FATCA may apply to potential payments made to Non-U.S. Holders pursuant to the CVRs. Prospective investors should consult their own tax advisors regarding FATCA to their particular situation.

Regulatory Approvals Required for the Merger Transaction

Under the HSR Act, certain merger transactions may not be consummated unless various information and documentary materials have been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the Federal Trade Commission (the “FTC”) and certain waiting period requirements have been satisfied. The requirements of the HSR Act apply to the Merger Transaction, and the Merger Transaction is conditioned on expiration or termination of the applicable waiting period under the HSR Act. Under the terms of the SPMA, the Merger Transaction cannot be completed until the

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waiting period (and any extension thereof) applicable to the Merger Transaction has expired or been terminated. To complete the Merger Transaction, the parties must make filings with and obtain authorizations, approvals or consents from certain antitrust authorities.

The FTC and the Antitrust Division will consider the legality under the antitrust laws of the Merger Transaction, and the transactions contemplated by the SPMA. At any time before consummation of the Merger Transaction, if the Antitrust Division or the FTC believes that the Merger Transaction would violate the U.S. federal antitrust laws by substantially lessening competition in any line of commerce affecting U.S. consumers, the FTC and the Antitrust Division have the authority to challenge the Merger Transaction by seeking a federal court order enjoining the Merger Transaction or, if the Merger Transaction has already been consummated, requiring disposition of the Avenue ordinary shares or the divestiture of substantial assets of Parent, Avenue or any of their respective subsidiaries or affiliates. U.S. state attorneys general and private persons may also bring legal action under the antitrust laws seeking similar relief or seeking conditions to the completion of the Merger Transaction. While Avenue believes that the consummation of the Merger Transaction will not violate any antitrust laws, there can be no assurance that a challenge to the Merger Transaction on antitrust grounds will not be made or, if a challenge is made, what the result will be. If any such action is threatened or commenced by the FTC, the Antitrust Division or any state or any other person, Parent may not be obligated to consummate the Merger Transaction.

Antitrust Approvals.   After the First Stage Closing and before the Second Stage Closing, the Company and Parent will use their reasonable best efforts to obtain all authorizations, consents, orders, actions, and approvals required to consummate the Merger Transaction and the transactions contemplated by the SPMA. The Merger Transaction cannot be completed until all applicable waiting periods under the HSR Act have expired or been terminated following the submission of complete filings with the Antitrust Division and FTC. Under the provisions of the HSR Act applicable to the Merger Transaction, the waiting period will expire at 11:59 p.m., Eastern Time, 30 calendar days following the filing of a Premerger Notification and Report Form by both the Parent and the Company with the FTC and Antitrust Division, unless such 30th day is a Saturday, Sunday or other legal public holiday, in which case the waiting period will expire at 11:59 p.m., Eastern Time, on the next business day. Before such time, however, either the FTC or Antitrust Division may terminate the waiting period or extend the waiting period by issuing a Request for Additional Information (a “Second Request”) to Parent and the Company. If a Second Request is made, the waiting period will expire at 11:59 p.m. Eastern Time, on the 30th calendar day after Parent or its affiliate certifies substantial compliance with such request, unless again otherwise extended by agreement or court order.

The consummation of the Merger Transaction is not conditioned on any antitrust-law-related regulatory filings in the United States or in any other jurisdiction, other than those described above.

Delisting and Deregistration of Common Stock

If the Merger Transaction is completed, Avenue will be a privately owned company and there will be no public market for our common stock. Upon completion of the Merger Transaction, our common stock will be delisted from Nasdaq. In addition, the registration of our common stock under Section 12 of the Exchange Act will be terminated and we will no longer file reports with the SEC.

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Fees and Expenses

Whether or not the Stock Purchase Transaction and the Merger Transaction are consummated, all fees and expenses incurred in connection with the Stock Purchase Transaction and the Merger Transaction will be paid by the party incurring those fees and expenses. Avenue will pay the costs of proxy solicitation and printing and mailing this proxy statement and all SEC filing fees with respect to the Stock Purchase Transaction and the Merger Transaction. Total fees and expenses incurred or to be incurred by Avenue in connection with the Stock Purchase Transaction and the Merger Transaction are estimated at this time to be as follows:

Anticipated Accounting Treatment of the Merger Transaction

The Merger Transaction will be accounted for in accordance with U.S. generally accepted accounting principles.

Rights of Appraisal

If the Merger Transaction is completed, the Company’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL, provided that they comply with the conditions set forth in that statute.

Pursuant to Section 262 of the DGCL, if you do not wish to accept the Merger Consideration provided for in the SPMA, you have the right to seek appraisal of your shares of our common stock and to receive payment in cash for the fair value of your shares of our common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger Transaction, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The “fair value” of your shares of our common stock as determined by the Delaware Court of Chancery may be less than, equal to or more than the estimated $13.92 per share in cash that you may otherwise be entitled to receive as part of the Merger Consideration under the terms of the SPMA, in addition to contingent cash payments pursuant to the CVR Agreement upon the achievement of certain milestones, without interest and less any applicable withholding taxes. These rights are known as “appraisal rights.” The Company’s stockholders who do not vote in favor of the SPMA Proposal and who properly demand appraisal for their shares in compliance with the provisions of Section 262 of the DGCL will be entitled to appraisal rights. Strict compliance with the statutory procedures set forth in Section 262 of the DGCL is required. Failure to follow precisely any of the statutory requirements will result in the loss of your appraisal rights.

This section is intended only as a brief summary of certain provisions of the statutory procedures that a stockholder must follow under the DGCL in order to seek and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL.

Pursuant to Section 262 of the DGCL, when a merger agreement will be submitted for adoption at a meeting of stockholders, the Company must notify the stockholders who were stockholders of record on the record date for notice of such meeting, not less than 20 days before the meeting to vote on the merger, that appraisal rights will be available. A copy of Section 262 of the DGCL must be included with the notice.

This proxy statement constitutes the Company’s notice to our stockholders that appraisal rights are available in connection with the Merger Transaction, and the full text of Section 262 of the DGCL is

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attached to this proxy statement as Annex C and incorporated herein by reference, in compliance with the requirements of Section 262 of the DGCL. If you wish to exercise your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex C. Failure to comply timely and properly with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of our common stock, the Company believes that a stockholder considering the exercise of such rights should seek the advice of legal counsel.

If you wish to demand appraisal of your shares of our common stock, you must satisfy each of the following conditions: (i) you must deliver to the Company a written demand for appraisal of your shares of our common stock before the vote is taken to approve the SPMA Proposal; (ii) the written demand must reasonably inform us of the identity of the holder of record of shares of our common stock who intends to demand appraisal of his, her or its shares of our common stock; and (iii) you must not vote or submit a proxy in favor of the SPMA Proposal.

If you fail to comply with any of these conditions and the Merger Transaction is completed, you will be entitled to receive payment for your shares of our common stock as provided in the SPMA, in addition to receiving contingent cash payments pursuant to the CVR Agreement upon the achievement of certain milestones, but you will not have appraisal rights with respect to your shares of our common stock. A holder of shares of our common stock wishing to exercise appraisal rights must hold of record the shares of our common stock on the date the written demand for appraisal is made and must continue to hold the shares of our common stock of record through the effective time of the Merger Transaction. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted “FOR” the SPMA Proposal, and it will result in the loss of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote “AGAINST” the SPMA Proposal or “ABSTAIN” from voting on the SPMA Proposal. Voting against or failing to vote for the SPMA Proposal by itself does not constitute a demand for appraisal within the meaning 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 SPMA Proposal.

All demands for appraisal should be addressed to the Company’s legal counsel at Alston & Bird LLP, Attention: Matthew Mamak, 90 Park Avenue, 12th Floor, New York, New York 10016 and must be delivered to the Company before the vote is taken to approve the SPMA Proposal at the special meeting, and must be executed by, or on behalf of, the record holder of the shares of our common stock. The demand will be sufficient if it reasonably informs the Company of the identity of the stockholder and the intention of the stockholder to demand appraisal of the “fair value” of his, her or its shares of our common stock. A stockholder’s failure to deliver to the Company the written demand for appraisal prior to the taking of the vote on the SPMA Proposal at the special meeting of stockholders will result in the loss of appraisal rights.

Only a holder of record of shares of our common stock is entitled to demand an appraisal of the shares registered in that holder’s name. Accordingly, to be effective, a demand for appraisal by a holder of our common stock must be made by, or on behalf of, the record stockholder. The demand should set forth, fully and correctly, the record stockholder’s name as it appears on the stockholder’s stock certificate(s) or in the transfer agent’s records, and in the case of uncertificated shares, should specify the stockholder’s mailing address and the number of shares registered in the stockholder’s name. The demand must state that the person intends thereby to demand appraisal of the stockholder’s shares in connection with the Merger Transaction. The demand cannot be made by the beneficial owner if he or she does not also hold the shares of our common stock of record. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares of our common stock. If you hold your shares of our common stock through a bank, brokerage firm or other nominee and you wish to exercise your appraisal rights, you should consult with your bank, brokerage firm or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee and obtaining notice of the effective date of the Merger Transaction.

If shares of our common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal must be made in that capacity. If the shares of

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our common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner or owners. A record owner, such as a bank, brokerage firm or other nominee, who holds shares of our common stock as a nominee for others, may exercise his or her right of appraisal with respect to shares of our common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of our common stock as to which appraisal is sought. Where no number of shares of our common stock is expressly mentioned, the demand will be presumed to cover all shares of our common stock held in the name of the record owner. If a stockholder holds shares of our common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record owner.

Within 10 days after the effective time of the Merger Transaction, the surviving corporation in the Merger Transaction must give notice of the date that the Merger Transaction became effective to each of the Company’s record stockholders who has complied with Section 262 of the DGCL and who did not vote in favor of the SPMA Proposal. At any time within 60 days after the effective time of the Merger Transaction, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the stockholder’s demand and accept the Merger Consideration specified by the SPMA for that holder’s shares of our common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective time of the Merger Transaction will require written approval of the surviving corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, with such approval conditioned upon such terms as the Delaware Court of Chancery deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the second sentence of this paragraph, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value of his, her or its shares of our common stock determined in any such appraisal proceeding, which value may be less than, equal to or more than the Merger Consideration offered pursuant to the SPMA.

Within 120 days after the effective time of the Merger Transaction, but not thereafter, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of our common stock held by all such stockholders. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation to file such a petition, has no present intention to file a petition and holders should not assume that the surviving corporation will file a petition. Accordingly, it is the obligation of the holders of our common stock to initiate all necessary petitions to perfect their appraisal rights in respect of shares of our common stock within the time prescribed in Section 262 of the DGCL and the failure of a stockholder to file such a petition within the period specified in Section 262 of the DGCL could nullify the stockholder’s previous written demand for appraisal. In addition, within 120 days after the effective time of the Merger Transaction, any stockholder who has properly complied with the requirements of Section 262 of the DGCL and who did not vote in favor of the SPMA Proposal will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares of our common stock not voted in favor of the SPMA Proposal and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within 10 days after such written request has been received by the surviving corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A person who is the beneficial owner of shares of our common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the surviving corporation such statement.

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If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, then the surviving corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares of our common stock and with whom agreements as to the value of their shares of our common stock have not been reached. After notice to stockholders who have demanded appraisal from the Register in Chancery, if such notice is ordered by the Delaware Court of Chancery, the Delaware Court of Chancery will conduct a hearing upon the petition and determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided by Section 262 of the DGCL. The Delaware Court of Chancery may require stockholders who have demanded payment for their shares of our common stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

After determination of the stockholders entitled to appraisal of their shares of our common stock, the Delaware Court of Chancery will appraise the shares of our common stock, determining their fair value as of the effective time of the Merger Transaction after taking into account all relevant factors exclusive of any element of value arising from the accomplishment or expectation of the Merger Transaction, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those stockholders of the certificates representing their shares of our common stock. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger Transaction through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the Merger Transaction and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter only upon the sum of  (1) the difference, if any, between the amount paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

You should be aware that an investment banking opinion as to the fairness from a financial point of view of the consideration to be received in a sale transaction, such as the Merger Transaction, is not an opinion as to, and does not in any way address, fair value under Section 262 of the DGCL. Although we believe that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery and stockholders should recognize that such an appraisal could result in a determination of a value that may be less than, equal to or more than the Merger Consideration. Moreover, we do not anticipate offering more than the Merger Consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of our common stock is less than the Merger Consideration. In determining “fair value”, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the Merger Transaction which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger”. In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value”, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered”.

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Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Delaware Court of Chancery, as it deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of our common stock entitled to appraisal. Any stockholder who demanded appraisal rights will not, after the effective time of the Merger Transaction, be entitled to vote shares of our common stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of our common stock, other than with respect to payment as of a record date prior to the effective time of the Merger Transaction. If no petition for appraisal is filed within 120 days after the effective time of the Merger Transaction, or if the stockholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and each of the shares of our common stock owned by that stockholder will be deemed to have been converted at the effective time of the Merger Transaction into the right to receive approximately $13.92 per share in cash (without interest) pursuant to the SPMA, in addition to certain milestone payments pursuant to the CVR Agreement. Inasmuch as the Company has no obligation to file such a petition, and the Company has no present intention to do so, any holder of shares of our common stock who desires such a petition to be filed is advised to file it on a timely basis. A stockholder will fail to perfect or effectively lose the right to appraisal if no petition for appraisal is filed within 120 days after the effective date of the Merger Transaction. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL and accept the Merger Consideration offered pursuant to the SPMA.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s statutory appraisal rights.

In view of the complexity of Section 262 of the DGCL, the Company’s stockholders who may wish to pursue appraisal rights should consult their own legal and financial advisors.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Any statements in this proxy statement and the other documents referenced herein, whether written or oral, about future events, expectations, plans or prospects for the Company, or about the Company’s future expectations, beliefs, goals, plans or prospects, constitute forward-looking statements within the meaning of Section 21E of the Exchange Act. All statements other than statements of historical fact, including statements containing the words “will,” “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions, are forward-looking statements.

A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to: (1) the conditions to the completion of the Stock Purchase Transaction and the Merger Transaction, including the required approval by the Company’s stockholders, may not be satisfied on the terms expected or on the anticipated schedule; (2) the parties’ ability to meet expectations regarding the timing and completion of the Stock Purchase Transaction and the Merger Transaction; (3) the occurrence of any event, change or other circumstance that could give rise to the termination of the SPMA; (4) the effect of the announcement or pendency of the Stock Purchase Transaction and the Merger Transaction on our business relationships, operating results, and business generally; (5) risks that the proposed Stock Purchase Transaction and the Merger Transaction disrupt the Company’s current plans and operations; (6) risks related to diverting management’s attention from the Company’s ongoing business operations; (7) the outcome of any legal proceedings that may be instituted against the Company related to the Stock Purchase Transaction and the Merger Transaction or the SPMA; (8) the amount of the costs, fees, expenses and other charges related to the Stock Purchase Transaction and the Merger Transaction; and (9) other factors discussed from time to time in our reports filed with the SEC, including the factors discussed in Item 1A of the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2018, and subsequent SEC filings, which are available at http://www.sec.gov. The Company assumes no obligation to update the information in this proxy statement, except as otherwise required by law. Readers are cautioned not to place undue reliance on forward-looking statements.

Forward-looking statements reflect the views and assumptions of management as of the date of this proxy statement (unless specified otherwise) with respect to future events. The Company does not undertake, and hereby disclaims, any obligation, unless required to do so by applicable securities laws, to update any forward-looking statements, whether as a result of new information, future events or other factors. The inclusion of any statement in this proxy statement does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this proxy statement (unless specified otherwise) or, in the case of documents referred to or incorporated by reference, the dates of those documents.

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THE PARTIES TO THE SPMA

Avenue Therapeutics, Inc.

Avenue Therapeutics, Inc., a Fortress Biotech company, is a specialty pharmaceutical company focused on the development and commercialization of intravenous (IV) Tramadol for the management of moderate to moderately severe post-operative pain. Avenue’s common stock is quoted on Nasdaq under the symbol “ATXI.”

Additional information about Avenue is contained in our public filings with the SEC that are incorporated by reference herein. See “Where You Can Find Additional Information” beginning on page 87 of this proxy statement.

InvaGen Pharmaceuticals Inc.

InvaGen is an indirect wholly-owned subsidiary of Cipla Limited (“Cipla”). Established in 1935, Cipla is a global pharmaceutical company focused on agile and sustainable growth, complex generics, and deepening portfolio in its home markets of India, South Africa, North America, and key regulated and emerging markets. Cipla’s strengths in the respiratory, anti-retroviral, urology, cardiology and CNS segments are well-known. Cipla’s 44 manufacturing sites around the world produce 50+ dosage forms and 1,500+ products using cutting-edge technology platforms to cater to our 80+ markets. Cipla is ranked 3rd largest in pharma in India, 3rd largest in the pharma private market in South Africa, and is among the most dispensed generic players in the US. For over eight decades, making a difference to patients has inspired every aspect of Cipla’s work. Cipla’s paradigm-changing offer of a triple anti-retroviral therapy in HIV/AIDS at less than a dollar a day in Africa in 2001 is widely acknowledged as having contributed to bringing inclusiveness, accessibility and affordability to the centre of the movement. A responsible corporate citizen, Cipla’s humanitarian approach to healthcare in pursuit of its purpose of  ‘Caring for Life’ and deep-rooted community links wherever it is present make it a partner of choice to global health bodies, peers and all stakeholders. For more, please visit www.cipla.com.

Madison Pharmaceuticals Inc.

Madison Pharmaceuticals Inc., a Delaware corporation and a wholly-owned subsidiary of Parent, which we refer to as “Merger Sub,” was formed for the purpose of doing any lawful act or activity for which a corporation may be organized under the DGCL. As of the date of this proxy Merger Sub has not conducted any activities other than those incidental to its incorporation, and the negotiation and execution of the SPMA and the transactions contemplated by the SPMA.

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THE SPECIAL MEETING

We are furnishing this proxy statement to Avenue stockholders as part of the solicitation of proxies by the Board for use at the special meeting and at any adjournment or postponement thereof.

Date, Time and Place of the Special Meeting

The special meeting will be held on January   , 2019 at 10:00 a.m., Eastern Time, at the offices of our legal counsel, Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016, or at any adjournment or postponement thereof.

Purpose of the Special Meeting

The SPMA provides that at the effective time of the Merger Transaction, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent. At the special meeting, you will be asked to consider and vote upon the following proposals:

•

the proposal to approve and adopt the SPMA and the Ancillary Agreements, and the consummation of the transactions contemplated thereby, including the Stock Purchase Transaction and the Merger Transaction, and the appointment of a rights agent (the “Rights Agent”) in connection with the CVR Agreement, which we refer to as the “SPMA Proposal,” as described in the section entitled “Proposal 1: SPMA Proposal” beginning on page 54 of this proxy statement;

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•

the proposal to approve the adjournment of the special meeting from time to time, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the SPMA or in the absence of a quorum, which we refer to as the “Adjournment Proposal,” as described in the section entitled “Proposal 2: Adjournment Proposal” beginning on page 55 of this proxy statement; and

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•

to transact any other business that may properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the Board of Directors of the Company.

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The Board unanimously recommends that you vote “FOR” each of the above proposals.

Our stockholders must approve the SPMA Proposal in order for the Stock Purchase Transaction and the Merger Transaction to occur. If the Company stockholder approval is not obtained to approve the SPMA Proposal, then the Stock Purchase Transaction and the Merger Transaction will not occur. If the Company stockholder approval is obtained, but the Non-Affiliate Stockholder Approval (as defined below) of the SPMA Proposal is not obtained, Parent may terminate the SPMA prior to the consummation of the Stock Purchase Transaction. For further information see the section entitled “The Special Meeting — Vote Required” beginning on page 49.

Record Date and Quorum

The Board has fixed the close of business on December   , 2018 as the record date for determination of stockholders entitled to receive notice of, and to vote at, the special meeting, and any adjournments or postponements thereof. Only holders of record of our common stock as of the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof.

As of the close of business on the record date, there were [•] shares of our common stock outstanding. Each holder of our common stock is entitled to cast one vote per such share on each matter properly brought before the special meeting for each share of our common stock that such holder owned as of the record date.

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The presence at the special meeting, in person or represented by proxy, of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business at the special meeting. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting. Shares of our common stock represented at the special meeting but not voted, including shares of our common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. Broker non-votes are deemed to be “present” at the meeting for quorum purposes. Your vote is very important, regardless of the number of shares of our common stock you own. Because stockholders cannot take any action at the meeting unless a majority of our common stock issued and outstanding and entitled to vote thereat is represented, it is important that you attend the meeting in person or are represented by proxy at the meeting.

In the event that a quorum is not present at the special meeting, we expect to adjourn or postpone the special meeting until we solicit enough proxies to obtain a quorum.

Attendance

Only stockholders of record, their duly appointed proxy holders and our guests may attend the special meeting. If you plan to attend the special meeting in person, please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the system. If you are a stockholder of record, you should bring the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of Avenue stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to vote at the special meeting. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are the representative of such stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.

Vote Required

SPMA Proposal

Approval of the SPMA Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposal, which we refer to as the “Company stockholder approval.” However, in addition to the Company stockholder approval, which is required under Delaware law, under the SPMA Parent’s obligation to consummate the Stock Purchase Transaction is subject to approval of the SPMA proposal by a majority of our common stock held by stockholders who are not affiliates of the Company, which we refer to as the “Non-Affiliate Stockholder Approval.” For further information see the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69.

Adjournment Proposal

Approval of the Adjournment Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote present, in person or by proxy, on such proposal at the special meeting.

Record Ownership; Beneficial Ownership

If your shares of our common stock are registered directly in your name with our transfer agent, VStock Transfer LLC, then you are considered, with respect to those shares of our common stock, the “stockholder of record.” This proxy statement and proxy card have been sent directly to you by the Company. As the stockholder of record, you have the right to vote in person at the meeting or to grant your voting rights directly to the Company or to a third party by a proxy duly executed or transmitted in a

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manner in accordance with applicable law. To gain admittance, please bring either (i) the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting or, (ii) if your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of the Company’s stock. For more information, please follow the instructions under “The Special Meeting — Attendance” beginning on page 49 of this proxy statement.

If your shares of our common stock are held through a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of those shares. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of our common stock, the stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares of our common stock by following their instructions for voting. Your bank, brokerage firm or other nominee should send you, as the beneficial owner, a package describing the procedure for voting your shares.

Effects of Failing to Vote and Abstentions; Broker Non-Votes

For each of the SPMA Proposal and the Adjournment Proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN.”

If you fail to submit a proxy or to vote in person at the special meeting, then your shares will not be included in the calculation of the number of shares of our common stock represented at the special meeting for purposes of determining whether a quorum has been achieved. Failing to vote either in person or by proxy at the special meeting will have the same effect as a vote “AGAINST” the SPMA Proposal. Such failure to vote (assuming a quorum is present for the special meeting) will have no effect on the Adjournment Proposal.

An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting on one or more proposals. Abstaining stockholders will be considered present and entitled to vote and the special meeting, and those shares will count towards determining whether a quorum has been achieved. Abstaining from voting on any proposal at the special meeting will have the same effect as a vote “AGAINST” such proposal.

Under applicable rules, brokers, banks or other nominees who hold shares of our common stock in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers, banks or other nominees are not allowed to exercise their voting discretion with respect to the approval of matters that are “non-routine” without specific instructions from the beneficial owner. All proposals to be voted on by you at the special meeting are “non-routine” matters, and therefore brokers do not have discretionary authority to vote on any of the proposals. Broker non-votes occur when a broker, bank or other nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power. Shares that are subject to broker non-votes are considered not entitled to vote, and therefore will not count toward determining whether or not a quorum is present at the meeting and will be ignored for purposes of determining the outcome of any vote on the SPMA Proposal or the Adjournment Proposal. However, if you do not instruct your bank, brokerage firm or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted, and as broker non-votes, the effect will be the same as a vote “AGAINST” approval of the SPMA Proposal.

Voting

This proxy statement is accompanied by a proxy card with instructions for submitting voting instructions. If you are a stockholder of record and your shares are registered directly in your name, you may have your shares of our common stock voted on matters presented at the special meeting in any of the following ways:

•

In Person.   You may attend the special meeting and cast your vote there. To gain admittance, please bring either (i) the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting or, (ii) if your shares are held in street name (by

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a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of the Company’s stock. Even if you plan to attend the meeting, it is desirable that you vote in advance of the meeting.

•

By Proxy.   Stockholders of record have a choice of voting by proxy:

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◦

Over the Internet:   Go to the website referenced on your proxy card and follow the instructions on the website. You must specify how you want your shares voted or your Internet vote cannot be completed and you will receive an error message. Your shares will be voted according to your instructions in the same manner as if you had completed, signed, dated and returned your proxy card, as described below. You must submit your Internet proxy before 11:59 p.m., Eastern Time, on January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count.

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By Telephone:   Call 1-800-690-6903, toll-free from the United States, Canada and Puerto Rico, and follow the recorded instructions. You must specify how you want your shares voted and confirm your vote at the end of the call or your telephone vote cannot be completed. Your shares will be voted according to your instructions in the same manner as if you had completed, signed, dated and returned your proxy card, as described below. You must submit your telephonic proxy before 11:59 p.m., Eastern Time, on January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count; or

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By Mail:   Complete and sign your enclosed proxy card and mail it in the enclosed postage-paid envelope to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your shares will be voted according to your instructions. Broadridge must receive the proxy card by January   , 2019, the day before the special meeting, for your proxy to be valid and your vote to count.

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If you are a beneficial owner of our common stock and your shares are held in “street name”, you should receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of our common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, please bring either (i) the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting or, (ii) if your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of the Company’s stock. A legal proxy is not the form of proxy enclosed with this proxy statement. You will not be able to vote shares you hold in “street name” through a bank, broker or other nominee in person at the special meeting unless you have a “legal proxy” from that bank, broker or other nominee issued in your name giving you the right to vote your shares.

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of our common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of our common stock should be voted “FOR” or “AGAINST” or to “ABSTAIN” from voting on all, some or none of the specific items of business to come before the special meeting.

If you are a holder of record and you properly sign your proxy card but do not mark the boxes showing how your shares of our common stock should be voted on a matter, the shares of our common stock represented by your properly signed proxy will be voted “FOR” approval of the SPMA Proposal and “FOR” the Adjournment Proposal.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF OUR COMMON STOCK YOU OWN. BECAUSE, UNDER THE SPMA, STOCKHOLDERS CANNOT APPROVE THE SPMA PROPOSAL UNLESS A MAJORITY OF THE SHARES OF OUR COMMON STOCK ISSUED AND OUTSTANDING AND ENTITLED TO VOTE THEREAT IS REPRESENTED, IT IS IMPORTANT THAT YOU ATTEND THE MEETING IN PERSON OR ARE

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REPRESENTED BY PROXY AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE PAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU WILL ATTEND THE SPECIAL MEETING AND VOTE IN PERSON, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.

Proxies and Revocation

Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet or by returning the enclosed proxy card in the accompanying postage-paid reply envelope, or may vote in person by appearing at the special meeting. If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of our common stock using the instructions provided by your bank, brokerage firm or other nominee. If you are a beneficial owner and wish to vote in person at the special meeting, you must provide a “legal proxy” from the bank, brokerage firm or other nominee that is the stockholder of record for your shares of our common stock giving you the right to vote the shares at the special meeting. If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy by telephone or the Internet, or if your shares are held in “street name” by your bank, brokerage firm or other nominee and you fail to instruct your bank, brokerage firm or other nominee to vote, your shares of our common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” approval of the SPMA Proposal. If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy by telephone or the Internet, your shares of our common stock will not have an effect on the Adjournment Proposal.

You have the right to revoke a proxy. If your shares are registered directly in your name, you may revoke your proxy or change your vote before the special meeting. To do so, you must do one of the following:

•

Vote over the Internet or by telephone as instructed above. Only your latest Internet or telephone vote is counted. You may not change your vote over the Internet or by telephone after 11:59 p.m., Eastern Time, on January   , 2019.

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Sign a new proxy and mail it as instructed above. Only your latest dated, valid proxy received by Broadridge not later than January   , 2019 will be counted.

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Attend the special meeting, request that your proxy be revoked and vote in person as instructed above. Attending the special meeting will not revoke your Internet vote, telephone vote or proxy, as the case may be, unless you specifically request it. Please note, to gain admittance, please bring either (i) the bottom half of the enclosed proxy card as your admission card and present the card upon entering the special meeting or, (ii) if your shares are held in street name (by a bank or broker, for example), you should ask the record owner for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your ownership of the Company’s stock.

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Anticipated Date of Completion of the Stock Purchase Transaction and the Merger Transaction

If the SPMA Proposal receives the Company stockholder approval, the closing of the Stock Purchase Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Stock Purchase Transaction provided for in the SPMA, or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA—Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69 of this proxy statement.

The closing of the Merger Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Merger Transaction provided for in the SPMA, which we refer to as the or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA—Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 70 of this proxy statement.

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Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed. We are submitting the Adjournment Proposal for your consideration to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the SPMA Proposal or in the absence of a quorum (Proposal 2 on your proxy card). Notwithstanding the Adjournment Proposal, the Company retains full authority to the extent set forth in its by-laws and/or permitted under Delaware law to adjourn the special meeting for any purpose, or to postpone the special meeting before it is convened, without the consent of any stockholder of the Company, provided that the SPMA includes certain limitations on the Company’s ability to postpone or adjourn the meeting, as described in the section entitled “Proposal 2: Adjournment Proposal” beginning on page 55 of this proxy statement.

If the special meeting is adjourned, we are not required to give notice of the time and place of the adjourned meeting if announced at the meeting at which the adjournment is taken, unless the adjournment is for more than 30 days or the Board fixes a new record date for the adjourned meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

Solicitation of Proxies; Payment of Solicitation Expenses

The Company has engaged Morrow Sodali, LLC as the proxy solicitor to assist in the solicitation of proxies for the special meeting. The Company will pay the proxy solicitor a fee of  $[•]. The Company has also agreed to pay a fee for each incoming and outgoing stockholder telephone call and agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will also indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages, liabilities and/or judgments. The Company may also reimburse banks and brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Questions and Additional Information

If you have questions about the SPMA Proposal, including the Stock Purchase Transaction and the Merger Transaction, or the Adjournment Proposal, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact Morrow Sodali, LLC, our proxy solicitor, by calling toll-free at (800) 662-5200 or using the contact information below. Please do NOT send in any stock certificates you hold with your proxy card. After the completion of the Merger Transaction, a separate letter of transmittal will be mailed to you promptly, and in any event within five business days, that will enable you to receive the Merger Consideration in exchange for your shares of our common stock. If your shares of our common stock are held in “street name” through a bank, brokerage firm or other nominee, you should contact your bank, brokerage firm or other nominee for instructions as to how to effect the surrender of your “street name” shares of our common stock in exchange for the Merger Consideration. See “The SPMA — Payment of Merger Consideration and Surrender of Stock Certificates” beginning on page 56.

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PROPOSAL 1: THE SPMA PROPOSAL

The Proposal

The Company’s stockholders are being asked to approve a proposal to

•

approve and adopt the SPMA and the Ancillary Agreements, and the consummation of the transactions contemplated thereby, including the Stock Purchase Transaction and the Merger Transaction, and to approve and authorize the appointment of, and direction to, a Rights Agent in connection with CVR Agreement.

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For a summary of the SPMA, see “The SPMA” beginning on page 56 of this proxy statement. A copy of the SPMA is attached as Annex A to this proxy statement. For a summary of the CVR Agreement, see “The Contingent Value Rights Agreement” beginning on page 77 of this proxy statement. A copy of the CVR Agreement is attached as Annex D to this proxy statement.

If the special meeting is adjourned for the purpose of soliciting additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time before their use. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you sign and return a proxy and you indicate that you wish to vote in favor of the Adjournment Proposal but do not indicate a choice on the SPMA Proposal, your shares of the Company’s common stock will be voted in favor of the SPMA Proposal. The vote on the SPMA Proposal is a vote separate and apart from the vote on the Adjournment Proposal. Accordingly, you may vote to approve the Adjournment Proposal and vote not to approve the SPMA Proposal and vice versa.

Required Vote

Approval of the SPMA Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote on such proposal. However, in addition to the Company stockholder approval, which is required under Delaware law, under the SPMA Parent’s obligation to consummate the Stock Purchase Transaction is subject to approval of the SPMA proposal by a majority of our common stock held by Persons who are not affiliates of the Company. For further information see the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69.

The Board unanimously recommends that you vote “FOR” the SPMA Proposal.

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PROPOSAL 2: THE ADJOURNMENT PROPOSAL

The Proposal

The Company’s stockholders are being asked to approve a proposal to

•

adjourn the special meeting from time to time, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the SPMA or in the absence of a quorum.

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If this Adjournment Proposal is approved, then the special meeting could be adjourned by the Board to any date, and the Board could postpone the special meeting before it commences, in each case subject to the provisions of the SPMA set forth below.

Pursuant to the SPMA, the Company is permitted to postpone or adjourn the special meeting: (i) with the written consent of Parent, or (ii) if the Company, acting in good faith after consulting with its outside legal counsel, determines that (a) such postponement or adjournment is necessary to ensure that any required supplement or amendment to this Proxy Statement is provided to the Company’s stockholders within a reasonable amount of time in advance of the special meeting, (b) (x) it will not receive proxies sufficient to approve the SPMA Proposal, whether or not a quorum will be present, or (y) it will not have sufficient shares of capital stock of the Company represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the special meeting, or (c) such postponement or adjournment is required to comply with applicable legal requirements; provided, that in the case of any postponement or adjournment under clause (ii) above, the date of the special meeting shall not be postponed or adjourned by more than an aggregate of 15 calendar days other than with Parent’s prior written consent. For further information see “The SPMA — Change of Recommendation; Superior Proposals” beginning on page 65.

Vote Instructions

If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you sign and return a proxy and you indicate that you wish to vote in favor of the SPMA Proposal but do not indicate a choice on the Adjournment Proposal, your shares of our common stock will be voted in favor of the Adjournment Proposal. The vote on the Adjournment Proposal is a vote separate and apart from the vote on the SPMA Proposal. Accordingly, you may vote to approve the SPMA Proposal and vote not to approve the Adjournment Proposal and vice versa.

Required Vote

Approval of the Adjournment Proposal requires the affirmative vote of stockholders holding a majority of the aggregate voting power of the shares outstanding and entitled to vote present, in person or by proxy, on such proposal at the special meeting.

The Board unanimously recommends that you vote “FOR” the Adjournment Proposal.

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THE SPMA

This section describes the material terms of the SPMA. The description of the SPMA in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the SPMA, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the SPMA that is important to you. We encourage you to read the SPMA carefully and in its entirety.

Explanatory Note Regarding the SPMA

The SPMA, a copy of which is attached as Annex A, and this summary of its terms are included in this proxy statement to provide you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the SPMA. The representations, warranties and covenants made in the SPMA by the Company, Parent and Merger Sub were made solely to the parties to, and solely for the purposes of, the SPMA and as of specific dates and were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the SPMA. In particular, in your review of the representations and warranties contained in the SPMA and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the SPMA may have the right not to consummate the Stock Purchase Transaction and the Merger Transaction if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the SPMA, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the SPMA. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates.

Additional information about the Company may be found elsewhere in this document and the Company’s other public filings. See the section entitled “Where You Can Find Additional Information” beginning on page 87 of this proxy statement.

Structure of the SPMA

The SPMA provides for the acquisition of the Company by Parent, through a two-stage transaction. The first stage will be the consummation of the Stock Purchase Transaction. The second stage will be the consummation of the Merger Transaction.

The Stock Purchase Transaction

At the First Stage Closing, subject to prior satisfaction of the First Stage Closing Conditions, Parent will acquire common stock representing 33.3% of the fully diluted capitalization of the Company for $35 million (currently expected to be 5,833,333 shares at $6.00 per share). The First Stage Closing shall take place, and the Stock Purchase Transaction shall become effective, no later than five business days after the satisfaction or waiver of the First Stage Closing Conditions, or at such later time as may be agreed by Parent and the Company in writing.

The Merger Transaction

At the Second Stage Closing, subject to prior satisfaction of the Second Stage Closing Conditions, Parent will acquire the remaining issued and outstanding capital stock of the Company for up to $180 million, subject to certain deductions, by way of a reverse subsidiary merger transaction, in which Merger Sub will merge with and into the Company and the Company will be the surviving corporation in the Merger Transaction and will be Delaware corporation wholly-owned subsidiary of Parent, and the separate corporate existence of Merger Sub will cease.

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Upon consummation of the Merger Transaction, the certificate of incorporation and the by-laws of the Company shall be amended in their entirety as set forth in Exhibits M and N to the SPMA, respectively, and, as so amended, shall be the certificate of incorporation and by-laws of the surviving corporation until thereafter amended in accordance with applicable legal requirements.

The members of the board of directors of Merger Sub immediately prior to the effective time of the Merger Transaction will be the initial directors of the surviving corporation and will serve until their successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and the bylaws of the surviving corporation. The officers of Merger Sub immediately prior to the effective time will be the initial officers of the surviving corporation and will serve until their successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and the bylaws of the surviving corporation.

When the Stock Purchase Transaction and the Merger Transaction Become Effective

If the SPMA Proposal receives the Company Stockholder Approval, the closing of the Stock Purchase Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Stock Purchase Transaction provided for in the SPMA, or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69 of this proxy statement.

The closing of the Merger Transaction shall take place no later than five business days after the satisfaction or waiver of the conditions to the closing of the Merger Transaction provided for in the SPMA, or at such later time as may be agreed by Parent and the Company in writing, as described in the section entitled “The SPMA — Conditions to Completion of the Stock Purchase Transaction and the Merger Transaction” beginning on page 69 of this proxy statement.

Effect of the Merger Transaction on the Common Stock of the Company and Merger Sub

At the effective time of the Merger Transaction, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger Transaction (other than the Cancelled Shares and Dissenting Shares, each as defined below) will be converted into the right to receive (i) a pro rata portion, based on the fully diluted capitalization of the Company immediately prior to the effective time of the Merger Transaction, of the total merger consideration of up to $180 million, subject to certain deductions, which portion is currently expected to be approximately $13.92 per share; and (ii) a CVR which represents the right to receive a contingent cash payment upon the achievement of certain milestones relating to annual net sales and gross profit targets of IV Tramadol, pursuant to the CVR Agreement.

Each share of common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to the effective time of the Merger Transaction shall be converted into and become one newly issued, fully paid, and non-assessable share of common stock, par value $0.0001 per share, of the surviving corporation with the same rights, powers, and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the surviving corporation.

Cancelled Shares

At the effective time of the Merger Transaction, as a result of the Merger Transaction and without any action on the part of the Company, Parent Merger Sub or any holder of capital stock thereof, each common share, Class A Preferred Share or share of any other class or series of shares of capital stock of the Company that is owned by the Company, Parent or Merger Sub (as treasury stock or otherwise) or any of their respective direct or indirect wholly-owned subsidiaries as of immediately prior to the effective time of the Merger Transaction will automatically be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor.

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Dissenting Shares

Shares of our common stock issued and outstanding immediately prior to the effective time of the Merger Transaction and held by a holder who has properly exercised appraisal rights of such shares in accordance with Section 262 of the DGCL and has not subsequently failed to perfect or otherwise waived, withdrawn, or lost such holder’s appraisal rights under the DGCL with respect to such shares, which we refer to as the “Dissenting Shares,” (until such time as such holder fails to perfect or otherwise waives, withdraws, or loses such holder’s appraisal rights under the DGCL with respect to such shares) will be canceled without payment of any form of consideration and cease to exist, subject to certain rights of the dissenting stockholders as described below.

No person who has timely and properly demanded appraisal of his, her or its shares of the Company’s common stock pursuant to and in accordance with Section 262 of the DGCL shall be entitled to receive the Merger Consideration with respect to the Dissenting Shares owned by such person, but instead such holder will be entitled to receive such consideration as may be determined to be due to such dissenting holder pursuant to Section 262 of the DGCL (or any successor provision), unless and until such holder has failed to perfect or has effectively withdrawn such demand or lost its, his or her rights to appraisal under the DGCL or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL.

If, after the effective time, any holder of Dissenting Shares has failed to perfect or has effectively withdrawn or lost such right, such holder’s shares of the Company’s common stock will thereupon be treated as if they had been converted into and become exchangeable for the right to receive, as of the effective time, the Merger Consideration for each such share of our common stock owned by such holder, without interest and less any applicable withholding taxes. A summary of the appraisal rights available to the holders of shares of the Company common stock is provided in the section entitled “The Special Meeting and the Stock Purchase Transaction and the Merger Transaction — Rights of Appraisal,” beginning on page 41 and a copy of Section 262 of the DGCL is included with this proxy statement as Annex C.

Treatment of the Company’s Preferred Stock

Fortress owns all of the issued and outstanding shares of the Company’s Class A Preferred Stock. Pursuant to the Waiver Agreement, at or prior to the Second Stage Closing, all issued and outstanding Class A Preferred Stock owned by Fortress will be converted into shares of the Company’s common stock.

Treatment of Stock Options, Other Stock-Based Compensation and Warrants

Company Stock Options

The Company shall take all requisite action so that, prior to the effective time of the Merger Transaction, each option to acquire our common stock, each of which we refer to as a “Company stock option,” that is then-outstanding under any Company incentive plan shall become vested and exercisable and, if the fair market value of a share of common stock is then in excess of the per share exercise price of the Company stock option, such Company stock option shall be exercised pursuant to the terms and conditions of the applicable Company stock option award agreement, with any taxes withheld with respect to such exercise, and each share of common stock received by the former holder of a Company stock option in connection with such exercise shall be cancelled and converted automatically into the right to receive the Merger Consideration.

Company Restricted Shares

The Company shall take all requisite action so that, immediately prior to the effective time of the Merger Transaction, each share of our common stock subject to vesting, repurchase, or other lapse of restrictions, each of which we refer to as a “Company restricted share,” that is then-outstanding under any Company incentive plan shall vest in full and become free of restrictions, with any taxes withheld with respect to the fair market value of such Company restricted share, and shall be cancelled and converted automatically into the right to receive the Merger Consideration.

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Company Restricted Share Units

The Company shall take all requisite action so that, immediately prior to the effective time of the Merger Transaction, each unit of Company restricted shares, which we refer to as a “Company restricted share units,” that is outstanding immediately prior to the effective time of the Merger Transaction, shall be accelerated in full and, in exchange therefor, each former holder of any such Company restricted share units shall be entitled to receive a number of our common stock as is equal to (i) the total number of our common stock subject to such Company restricted share units, less (ii) a number of our common stock to be withheld by the surviving corporation in satisfaction of the tax withholding obligations arising as a result of the vesting and settlement of such Company restricted share units, and each such common stock shall be cancelled and converted automatically into the right to receive the Merger Consideration.

Warrants

The Company shall take all requisite action so that any Company Warrants (as defined below) outstanding immediately prior to the effective time of the Merger Transaction, shall have been amended to provide that such Company Warrant shall, immediately prior to the effective time of the Merger Transaction, automatically be converted into our common stock, and each such common stock shall be cancelled and converted automatically into the right to receive the Merger Consideration.

Deductions

The deductions that apply to the total consideration of up to $180 million are as follows:

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the Interim Financing Balance;

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the Indebtedness of the Company (excluding the Interim Financing Balance) upon the Second Stage Closing Date;

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the Merger Fees;

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the $3.0 million milestone payable under the Revogenex License upon FDA approval of IV Tramadol;

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the Section 5.15 Amount;

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the $2.0 million milestone payable under the Manufacturing Agreement upon FDA approval of IV Tramadol;

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any Outstanding Indemnification Amount (as defined in the Indemnification Agreement); and

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the Fortress Amount, which amount shall be the sum of  (i) any amount actually paid by Fortress to any Buyer Indemnified Party pursuant to the Indemnification Agreement prior to the Second Stage Closing and (ii) if none of Buyer, the Company or their respective affiliates shall have obtained the representations and warranties insurance coverage prior to the Second Stage Closing, $500,000.

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Capitalized terms and calculation of deductions listed above shall have the respective meanings ascribed to them in the SPMA.

Payment of the Merger Consideration and Surrender of Stock Certificates

At or promptly following the effective time of the Merger Transaction, Parent will deposit, or the surviving corporation will cause to be deposited, with a paying agent, for the benefit of holders of shares of the Company’s common stock immediately prior to the effective time of the Merger Transaction (other than the Cancelled Shares and the Dissenting Shares), a cash amount in immediately available funds necessary for the paying agent to make all payments of the Merger Consideration (we refer to such cash amount as the “payment fund”).

Promptly after the effective time of the Merger Transaction, Parent shall send or shall cause the paying agent to send to each holder of record of shares of the Company’s common stock immediately prior to the effective time of the Merger Transaction (other than the Cancelled Shares or the Dissenting Shares): (i) a

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letter of transmittal in specifying that delivery will be effected, and risk of loss and title to the shares of our common stock will pass, only upon delivery to the paying agent of  (A) in the case of certificated shares of our common stock, the certificates (or affidavits of loss in lieu of the certificates as provided in the SPMA), or (B) in the case of book-entry shares of our common stock, the book-entry shares (such letter of transmittal will be in such form and have such other provisions as Parent and the Company may reasonably agree); and (ii) instructions for use in effecting the surrender of the certificates (or affidavits of loss in lieu of the certificates as provided in the SPMA) or book-entry shares in exchange for the Merger Consideration.

Upon surrender of certificates (or affidavits of loss in lieu of the certificates as provided in the SPMA) or book-entry shares of our common stock for cancellation to the paying agent in accordance with the terms of a letter of transmittal that has been duly completed and validly executed in accordance with the instructions thereto, or in the case of a Book-Entry Share, receipt of an “agent’s message” by the Paying Agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request), the holder of such certificate or book-entry share of our common stock will be entitled to receive in exchange therefor a cash amount in immediately available funds less any required tax withholdings equal to (x) the number of shares of our common stock represented by such certificate (or affidavit of loss in lieu of the certificate as provided in the SPMA) or the number of book-entry shares of our common stock, as the case may be, multiplied by (y) the Merger Consideration, and any certificate or book-entry shares so surrendered will forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the certificates (or affidavits of loss in lieu thereof) or book-entry shares of our common stock.

In the event any certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent or the paying agent may direct, the paying agent or the surviving corporation will issue a check in the amount (after giving effect to any required tax withholdings) equal to the number of shares of our common stock represented by such lost, stolen or destroyed certificate multiplied by the Merger Consideration.

Each of the paying agent, Parent, Merger Sub and the surviving corporation will be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to the SPMA to any holder of shares of the Company’s common stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any other applicable state, local or foreign tax law. To the extent that amounts are so withheld by the paying agent, Parent, Merger Sub or the surviving corporation, as the case may be, such withheld amounts will be treated for all purposes of the SPMA as having been paid to the holder of shares of the Company’s common stock in respect of which such deduction and withholding was made by the paying agent, Parent, Merger Sub or the surviving corporation, as the case may be.

Representations and Warranties

Representations and Warranties of the Company

The Company made representations and warranties in the SPMA that are subject, in some cases, to specified exceptions and qualifications contained in the SPMA (including exceptions and qualifications based on a material adverse effect, as defined in the section entitled “Material Adverse Effect,” beginning on page 61, or other standards of materiality), and the reports and other filings by the Company with the SEC. These representations and warranties relate to, among other things:

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corporate matters related to the Company, such as organization, good standing and qualification, capitalization, and required votes and corporate authority to approve and enter into the SPMA, the Ancillary Agreement and the transactions contemplated thereby;

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resolutions adopted by the Board (i) determining that the SPMA, the Ancillary Agreements, the Stock Purchase Transaction, the Merger Transaction and the other transactions contemplated by the SPMA and the Ancillary Agreements are advisable and fair to, and in the best interests of, the Company and its stockholders, (ii) approving the SPMA, the Ancillary Agreements, the Stock

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Purchase Transaction, the Merger Transaction, and the other transactions contemplated by the SPMA and the Ancillary Agreements, and (iii) recommending that the stockholders of the Company approve and adopt the SPMA and the Ancillary Agreements (including the Appointment);

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governmental and third-party required consents and approvals, and no violations of laws, governance documents or agreements;

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the Company’s financial statements and absence of undisclosed liabilities;

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contracts;

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insurance coverage;

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real property and personal property matters;

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tax matters;

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the absence of litigation;

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the absence of a material adverse effect;

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the possession of required licenses and permits;

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environmental matters;

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governmental filings and approvals relating to the execution, delivery and performance of the SPMA, the Ancillary Agreements and the transactions contemplated thereby;

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intellectual property matters;

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employee benefits and personnel matters;

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compliance with applicable laws, including anti-corruption laws;

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the Company’s SEC filings;

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the receipt by the Board of a fairness opinion from Oppenheimer & Co. Inc.;

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brokers’ and other similar fees;

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the inapplicability of anti-takeover statutes; and

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the accuracy of information included in this proxy statement, or any amendment or supplement thereto.

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Material Adverse Effect

Some of the representations and warranties in the SPMA are qualified by materiality qualifications or a “material adverse effect” qualification with respect to the Company, as discussed below.

For purposes of the SPMA, a “material adverse effect” means any event, circumstance, occurrence, state of facts or matters, action, omission, condition, development, change in or result or effect on the Company that, individually or in the aggregate, could become materially adverse to (a) the assets, liabilities, capitalization, results of operations or the condition (financial or otherwise) of the Company, its business or prospects, taken as a whole or (b) the ability of the Company to perform and carry out any of its obligations under the SPMA or any of the Ancillary Agreements, and to consummate on a timely basis the Stock Purchase Transaction, the Merger Transaction or any of the other transactions contemplated by the SPMA or any of the Ancillary Agreements; provided, however, that, in the case of clause (a), the following shall not be taken into account when determining the occurrence of a “Material Adverse Effect”:

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changes or developments caused by, arising out of or attributable to the general political or economic environment or affecting the global securities markets generally;

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changes or developments generally affecting the industries in which the Company operates (including legal and regulatory changes applicable to the Company after the signing date of the SPMA); or

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changes or developments caused by, arising out of or attributable to acts of terrorism or warfare between two or more countries in which the Company operates (whether or not declared);

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except, with respect to any of the above, to the extent such event has a materially disproportionate effect on the Company compared to other participants in the industries in which the Company operates.

Representations and Warranties of Parent and Merger Sub

Each of Parent and Merger Sub has made representations and warranties to the Company with respect to, among other matters, organization, good standing and qualification, corporate authority, required consents and approvals, and no violations of laws, governance documents or agreements, the absence of litigation, brokers and finders and sufficiency of funds.

Interim Operations

The SPMA requires the Company, from the date of the SPMA to the consummation of the Merger Transaction, to (i) conduct its business in the ordinary course of business consistent with past practice; (ii) fully comply with its covenants and obligations under any contract to which it is a party and enforce its rights thereunder; (iii) use its reasonable best efforts to preserve intact its business organization, to keep available the services of its current officers and employees, to preserve its present goodwill and satisfactory relationships with governmental authorities, suppliers, licensors, and other persons having business relationships with it; (iv) comply with the Company’s Budget; and (v) take the actions set forth on Schedule 8.1(v) to the SPMA.

In addition, promptly after the date of signing of the SPMA, the Company shall take all requisite action so that, prior to the First Stage Closing, each warrant to issue any Company securities, each of which we refer to as a “Company Warrant,” that is outstanding shall be (i) exercised by the holder thereof, and converted into our common stock, and such Company Warrant shall be cancelled without any liability to the Company, or (ii) amended in writing to provide that such Company Warrant shall, immediately prior to the effective time of the Merger Transaction, automatically, and without any action of the holder thereof or the Company, be converted into our common stock, and that such Company Warrant shall be cancelled without any liability to the Company.

The SPMA also contains specific restrictive covenants as to certain activities of the Company, which provide that the Company will not take the following actions without the prior written consent of the Parent (in Parent’s sole discretion) from the date of the signing of the SPMA until the consummation of the Merger Transaction:

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amend or propose to amend its certificate of incorporation (including any certificate of designations) or by-laws;

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establish any subsidiary or enter into any new line of business or division;

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(i) split, combine, or reclassify any Company securities or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for, any Company securities, (ii) repurchase, redeem, or otherwise acquire, or offer to repurchase, redeem, or otherwise acquire, directly or indirectly, any Company securities, or (iii) declare, set aside, or pay any dividend or distribution (whether in cash, stock, property, or otherwise) in respect of, or enter into any contract with respect to the voting of, the Company securities;

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issue, offer, sell, pledge, dispose of, or encumber any Company securities, other than (i) issue common stock upon the exercise of any equity award granted as of the signing date of the SPMA under any company plan outstanding as of the signing date of the SPMA in accordance with its terms; (ii) issue common stock immediately prior to the effective time of the Merger Transaction upon the exercise of any equity award in accordance with Section 8.7(c)(1) of the SPMA; or (iii) issue common stock upon exercise of any warrant that is outstanding as of the signing date of the SPMA and disclosed on Schedule 5.3 to the SPMA;

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accelerate or waive any restrictions pertaining to the vesting of any equity awards under any Company Plan;

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except as required by applicable Legal Requirement or by any Company Employee Plan or Company Contract in effect as of the signing date of the SPMA (i) increase the compensation payable or that could become payable by the Company to directors, officers, or employees, other than increases in compensation made to non-officer employees in the ordinary course of business consistent with past practice; (ii) promote any officers or employees, except in connection with the Company’s annual or quarterly compensation review cycle or as the result of the termination or resignation of any officer or employee; or (iii) establish, adopt, enter into, amend, terminate, exercise any discretion under, or take any action to accelerate rights under any Company Employee Plans or any plan, agreement, program, policy, trust, fund, or other arrangement that would be a Company Employee Plan if it were in existence as of the date of the SPMA, or make any contribution to any Company Employee Plan, other than contributions required by legal requirement, the terms of such Company Employee Plans as in effect on the date hereof, or that are made in the ordinary course of business consistent with past practice;

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acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or person or division thereof;

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merge or consolidate with any other person, adopt or effect a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, or other reorganization (other than the Merger Transaction), or commence or file any petition seeking liquidation, protection or other relief under any U.S. federal, state or foreign bankruptcy, insolvency, receivership or similar legal requirement or the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official;

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transfer, license, sell, lease, or otherwise dispose of  (whether by way of merger, consolidation, sale of stock or assets, or otherwise) or pledge, encumber, or otherwise subject to any encumbrance, any assets of the Company;

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incur, assume or otherwise become directly or indirectly liable for, or modify, any indebtedness other than trade account payables incurred in the ordinary course of business consistent with past practice, or lend any money to any director, officer or employee of the Company;

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renew or extend, amend or modify, or waive any rights under, any Company Contract in any material respect, or consent to or initiate the termination of any Company Contract (provided, however, that no renewal or extension, amendment or modification, termination of, or waiver of any rights under the Revogenex License, the Manufacturing Agreement or the Company Contracts listed on Schedule 8.1(k) to the SPMA shall be made without Parent’s prior written consent (in Parent’s sole discretion)) or (ii) enter into any Company Contract; provided that in connection with Section 8.1(k) of the SPMA, the Company shall provide a copy of any renewal or extension of, amendment or modification to, termination of, or waiver of any rights under, or entry into, any Company Contract within two days after the execution thereof;

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institute, settle, or waive its rights under or compromise any proceeding other than (i) any proceeding brought by the Company against Parent or Merger Sub arising out of a breach or alleged breach of the SPMA by Parent or Merger Sub; (ii) the settlement of claims, liabilities, or obligations reserved against in the Company’s financial statements, and (iii) proceedings involving the payment by the Company of an amount less than or equal to $100,000 in the aggregate; provided, that without the prior written consent of Parent, the Company shall not settle or agree to settle any proceeding (i) which involves a conduct remedy or injunctive or similar relief or has a restrictive impact on the Company or its business, or that involves the admission of wrongdoing by the Company or (ii) relating to the Revogenex License Assets or any Manufacturing Agreement Assets or otherwise involving Revogenex, Polpharma or Fortress;

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make any change in any method of financial accounting principles or practices, in each case except for any such change required by a change in GAAP or applicable legal requirement;

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(i) settle or compromise any tax claim, audit, or assessment for an amount in excess of the amount reserved or accrued in the Company’s financial statements; (ii) make or change any tax election, change any annual tax accounting period, or adopt or change any method of tax accounting;

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(iii) amend any tax returns or file claims for tax refunds; or (iv) 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 the Company;

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enter into any agreement, agreement in principle, letter of intent, memorandum of understanding, or similar contract with respect to any joint venture, strategic partnership, or alliance;

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except in connection with actions permitted by Section 8.3 of the SPMA, take any action to exempt any person from, or make any acquisition of securities of the Company by any person not subject to, any state takeover statute or similar statute or regulation that applies to the Company with respect to a Takeover Proposal or otherwise, including the restrictions on “business combinations” set forth in Section 203 of the DGCL, except for Parent, Merger Sub, or any of their respective subsidiaries or affiliates, or the transactions contemplated by the SPMA;

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abandon, allow to lapse, sell, assign, transfer, grant any security interest in, otherwise encumber or dispose of any Company Intellectual Property, or grant any right or license to any Company Intellectual Property;

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terminate or modify in any respect, or fail to exercise renewal rights with respect to, any insurance policy;

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take any action that would cause the representations and warranties in Section 5.15(g) or Section 5.15(h) of the SPMA to be inaccurate disregarding any disclosure contained in and SEC documents filed from and after the signing date of the SPMA;

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disclose to another person, or facilitate the use or transfer by or to another person, of any Investigational New Drug, NDA, “regulatory documents”, “essential documents” or any amendments thereto, any data or information contained in the files submitted to the FDA, or any other information or data, in each case, related to IV Tramadol or improvements thereon; or

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agree or commit to do any of the foregoing.

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Restrictions on Solicitation; Takeover Proposals

The Company has agreed it shall not (and shall cause its affiliates not to), and shall not authorize or permit its representatives to, and shall instruct each of its Representatives not to, directly or indirectly:

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initiate, solicit or knowingly encourage or facilitate the submission of any Takeover Proposal (as defined below) or the making of any proposal that could reasonably be expected to lead to any Takeover Proposal;

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engage in, continue or otherwise participate in any discussions or negotiations with, disclose any non-public information relating to the Company to, afford access to the business, properties, assets, books, or records of the Company to, or knowingly assist, participate in, facilitate, or encourage any effort by, any third party that is seeking to make, or has made, any Takeover Proposal;

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amend or grant any waiver under any standstill or similar agreement with the party providing such Takeover Proposal with respect to the applicable class of equity securities of the Company;

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approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL; or

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enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, or other Contract relating to any Takeover Proposal.

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Notwithstanding the foregoing, the Board of Directors of the Company is permitted to:

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participate in negotiations or discussions with any third party that has made (and not withdrawn) a bona fide, unsolicited Takeover Proposal in writing that the Board determines in good faith, after consultation with its outside legal counsel and independent financial advisor, constitutes or could reasonably be expected to result in a superior proposal; and

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thereafter furnish to such third party non-public information relating to the Company pursuant to an executed confidentiality and standstill agreement (a copy of which confidentiality and standstill agreement shall be promptly (in all events within 24 hours) provided for informational purposes only to Parent) no less favorable to the Company than the confidentiality agreement between the Parent and the Company,

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only if the Board determines in good faith, after consultation with its outside legal counsel and independent financial advisor, that the failure to take such action in connection with such written (and not withdrawn) Takeover Proposal would reasonably be expected to result in the Board breaching its fiduciary duties under applicable legal requirements. Such activities shall be terminated immediately in connection with any withdrawal of such Takeover Proposal or, in the case of any changes to such Takeover Proposal, if such changes would have not led to such determination had those changes been in effect at the time of the original determination.

The Board shall not take any of the above actions unless the Company shall have delivered to Parent a prior written notice advising Parent that it intends to take such action.

Under the SPMA, a “Takeover Proposal” means an inquiry, proposal, or offer from, or indication of interest in making a proposal or offer by, any Person or group (other than Parent and its Affiliates, including Merger Sub), written or oral, binding or non-binding, relating to any transaction or series of transactions, involving any direct or indirect: (a) acquisition, purchase, assignment, lease, license or transfer (including the granting or provision of any waiver, covenant not to sue, agreement to refrain from any conduct, or rights to proceeds, sue, or collect or retain damages or other payments with respect to) of (i) any Revogenex License Assets or Manufacturing Agreement Assets or (ii) assets of the Company equal to 15% or more of the fair market value of the Company’s assets or to which 15% or more of the Company’s net revenues or net income are attributable; (b) acquisition or purchase of equity which would result in any Person or group (other than Parent and its Affiliates, including Merger Sub) together with all Affiliates thereof, beneficially owning 15% or more of the voting equity interests of the Company; (c) tender offer or exchange offer that if consummated would result in any Person or group (as defined in Section 13(d) of the Exchange Act) beneficially owning (within the meaning of Section 13(d) of the Exchange Act) 15% or more of the voting power of the Company or the surviving entity, as applicable; (d) merger, consolidation, other business combination, liquidation, dissolution (or the adoption of a plan of liquidation or dissolution), share exchange, recapitalization or other corporate reorganization or similar transaction to any of the foregoing involving the Company, pursuant to which such Person or group (as defined in Section 13(d) of the Exchange Act) would (A) own any Revogenex License Assets or any Manufacturing Agreement Assets, (B) own assets of the Company equal to 15% or more of the fair market value of the Company’s assets or to which 15% or more of the Company’s (or the surviving entity’s, as applicable) net revenues or net income are attributable, or (C) beneficially own 15% or more of the voting equity interests of the Company (or the surviving entity, as applicable; (e) incurrence or assumption by the Company, or the Company otherwise becoming directly or indirectly liable for, any Indebtedness (including any security convertible or exercisable for or exchangeable into any capital stock of, or other equity interest in, the Company) in excess of  $20 million in the aggregate; or (f) any combination of the foregoing.

Change of Recommendation; Superior Proposals

The SPMA provides that the Board is not permitted to:

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withhold, withdraw or modify (or publicly propose to resolve to withhold, withdraw or modify), in a manner adverse to Parent, the Board recommendation;

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fail to include the Board recommendation in this proxy statement;

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•

approve, adopt or recommend, or propose to approve, adopt or recommend, any Takeover Proposal.

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fail to recommend against acceptance of any tender offer or exchange offer for our common stock within ten business days after the commencement of such offer;

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fail to reaffirm (publicly, if so requested by Parent) the Board recommendation within ten business days after the date any Takeover Proposal (or material modification thereto) or after any announcement of an intention (whether or not conditional) to make a Takeover Proposal is first publicly disclosed by the Company or the Person making such Takeover Proposal (or is otherwise made public or sent to stockholders of the Company)

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make any public statement inconsistent with the Board recommendation;

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agree to take any of the foregoing actions, which we refer to together as the “Company Adverse Recommendation Change;” or

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enter into a Company Acquisition Agreement.

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Despite the foregoing restrictions, at any time prior to the receipt of the Company stockholder approval, and subject to compliance with the SPMA’s requirements with respect to the Company’s stockholder meeting and the proxy statement, and the SPMA’s restrictions with respect to solicitation and acquisition proposals, the SPMA permits the Board to make a Company Adverse Recommendation Change or enter into a Company Acquisition Agreement, if:

•

the Company has given Parent written notice of its intention to make a Company Adverse Recommendation Change or enter into a Company Acquisition Agreement at least five (5) business days prior to its taking such action, which we refer to as the “Superior Proposal Notice Period;”

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such notice states expressly that the Company has received a Takeover Proposal that the Board intends to declare a superior proposal and that the Company Board intends to effect a Company Adverse Recommendation Change and/or the Company intends to enter into a Company Acquisition Agreement;

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the Company attaches to such notice the most current version of the proposed agreement and any related documents (which version(s) shall be updated on a prompt basis) and the identity of the third party making such superior proposal;

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during such Superior Proposal Notice Period, the Company shall, and shall cause its representatives to, negotiate with Parent in good faith to make such adjustments in the terms and conditions of the SPMA so that such Takeover Proposal ceases to constitute a superior proposal (taking into account any termination fee and expense reimbursement provisions applicable), if Parent, in its discretion, proposes to make such adjustments;

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the Board determines in good faith, after consulting with its outside legal counsel and independent financial advisor, that such Takeover Proposal that was a superior proposal continues to be a superior proposal after taking into account any adjustments made by Parent during such five (5) business day period; and

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prior to or simultaneously with entering into any Company Acquisition Agreement, the Company shall have terminated the SPMA and paid the $10.0 million termination fee to Parent.

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The SPMA defines the term “superior proposal” as a bona fide written proposal made by a third party to acquire, directly or indirectly, all of the Company securities then outstanding or all or substantially all of the assets of the Company, which, taking into account all legal, financial, regulatory, financing, conditionality, timing and other aspects of such proposal (including any termination fee and expense reimbursement provisions applicable, including the termination fee), satisfies all of the following requirements: (i) such superior proposal is reasonably expected by the Board to be consummated on the terms proposed; (ii) to the extent financing is required, such financing is then fully committed by creditworthy financial institutions of nationally recognized reputation; and (iii) such superior proposal is on

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terms that the Board determines in its good faith judgment (based on the advice of the Company’s outside legal counsel and independent financial advisor) to be more favorable to the Company and the holders of the common stock from a financial point of view than the transactions with the Parent.

Upon any material revision to the terms of a Superior Proposal after commencement of the Superior Proposal Notice Period, including any revision in price, the Superior Proposal Notice Period shall be extended, if applicable, to ensure that at least five business days remain in the Superior Proposal Notice Period subsequent to the time the Company notifies Parent of any such material revision (there may be multiple extensions).

Commercially Reasonable Efforts

Each of the parties to the SPMA agrees to use commercially reasonable 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 the SPMA, the Ancillary Agreements and applicable legal requirements to consummate and make effective the transactions contemplated by the SPMA and the Ancillary Agreements.

Fees and Expenses

Except as otherwise provided in the SPMA, each party will bear its own costs and expenses in connection with the SPMA and the transactions contemplated therein.

Indemnification; Directors’ and Officers’ Insurance

Under the terms of the SPMA, Parent and Merger Sub agree that all rights to indemnification, advancement of expenses and exculpation by the Company in favor of each person who is, or was been at any time prior to the signing date of the SPMA or who becomes prior to the consummation of the Merger Transaction, an officer or director of the Company, each of which we refer to as an “Indemnified Party,” as provided in the certificate of incorporation (including any certificate of designations) or by-laws of the Company, in each case as in effect on the signing date of the SPMA, or pursuant to any other contracts in effect on the date hereof, shall be assumed by the surviving corporation and shall remain in full force and effect in accordance with their terms, and, in the event that any proceeding is pending or asserted or any claim made during such period, until the final disposition of such proceeding or claim.

For a period of six years from the consummation of the Merger Transaction, Parent and the surviving corporation shall indemnify and hold harmless each Indemnified Party against all losses, claims, damages, liabilities, fees, expenses, judgments, and fines arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the consummation of the Merger Transaction (including in connection with the transactions contemplated by the SPMA), and shall reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such losses, claims, damages, liabilities, fees, expenses, judgments, and fines as such expenses are incurred, subject to the surviving corporation’s receipt of an undertaking by such Indemnified Party to repay such legal and other fees and expenses paid in advance if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such Indemnified Party is not entitled to be indemnified under applicable legal requirements; provided, however, that the surviving corporation will not be liable for any settlement effected without the surviving corporation’s prior written consent (which consent shall not be unreasonably withheld, conditioned, or delayed).

The surviving corporation shall, and Parent shall cause the surviving corporation to: (i) maintain in effect for a period of six years after the effective time of the Merger Transaction, if available, the current policies of directors’ and officers’ liability insurance maintained by the Company immediately prior to the effective time of the Merger Transaction (provided, that the surviving corporation may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Company when compared to the insurance maintained by the Company as of the date hereof); or (ii) obtain as of the effective time of the Merger Transaction “tail” insurance policies with a claims period of six years from the effective time of the Merger Transaction effective time of the Merger Transaction with at least the same coverage and amounts and containing terms

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and conditions that are not less advantageous to the directors and officers of the Company, in each case with respect to claims arising out of or relating to events which occurred before or at the effective time of the Merger Transaction effective time of the Merger Transaction (including in connection with the transactions contemplated by the SPMA); provided, however, that in no event will the surviving corporation be required to expend an annual premium for such coverage in excess of 200 percent of the last annual premium paid by the Company for such insurance prior to the date of the SPMA, which amount is determined in accordance with Schedule 8.9 of the SPMA (the “Maximum Premium”). If such insurance coverage cannot be obtained at an annual premium equal to or less than the Maximum Premium, the surviving corporation will obtain, and Parent will cause the surviving corporation to obtain, that amount of directors’ and officers’ insurance (or “tail” coverage) obtainable for an annual premium equal to the Maximum Premium.

Concurrently with the execution and delivery of the SPMA, the Parent and Fortress entered into the Indemnification Agreement, pursuant to which Fortress agreed to indemnify and hold harmless the Parent from and against all losses arising out of any breach or inaccuracy of any representation or warranty of the Company contained in the SPMA or any ancillary agreement. Pursuant to the Indemnification Agreement, except in the case of fraud or intentional misrepresentation, the maximum liability of Fortress (other than with respect to any breach or inaccuracy of any Fundamental Representation) is limited to $7 million. Except in the case of fraud or intentional misrepresentation, the maximum liability of Fortress solely with respect to any breach or inaccuracy of any Fundamental Representation is limited to $35 million. Claims agreed to or adjudicated prior to the Merger Transaction will be reduced from the Merger Consideration. Claims surviving the Merger Transaction and agreed to or adjudicated after the Merger Transaction will be reduced from amounts payable under the CVR Agreement.

Regulatory and Other Authorizations

Under the SPMA, the Company and Parent will (i) use their reasonable best efforts to obtain as promptly as reasonably practicable all authorizations, consents, orders, actions and approvals, and to make all filings with and to give all notices to all Governmental Authorities required to consummate the transactions contemplated by the SPMA, (ii) cooperate fully with the other parties hereto in promptly seeking to obtain all such authorizations, consents, orders, actions and approvals and to make all such filings and give such notices and (iii) provide such other information to any Governmental Authority as such Governmental Authority may reasonably request in connection therewith. Following the First Stage Closing, the Company and Parent agreed to make, upon the earlier of  (A) January 1, 2021, and (B) the satisfaction of the conditions set forth in Section 10.3(a) of the SPMA, any required filings under the HSR Act with respect to the Merger Transaction and to supply as promptly as reasonably practicable to the appropriate Governmental Authorities any information and documentary material that may be reasonably requested in connection with such HSR Act filings, provided, neither Parent nor any of its Affiliated shall be required to avoid or eliminate any impediment under any antitrust, competition or trade regulation Legal Requirement that may be asserted by any antitrust or competition Governmental Authority in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, including (i) negotiating, committing to and effecting by consent decree, hold separate orders, or otherwise, the sale, divestiture or disposition of the assets, properties or businesses of Parent or its Affiliates (or after the Second Stage Closing, the Company), or (ii) entering into such other arrangements as are necessary in order to avoid the entry of, and the commencement of litigation seeking the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any suit or proceeding, which would otherwise have the effect of materially delaying or preventing the consummation of the transactions contemplated by this Agreement. Each of the Company and Parent will pay half of any fees associated with any filings under the HSR Act in connection with the SPMA. The Company will pay all fees or make other payments provided for under legal requirements to any Governmental Authority in order to obtain any such authorizations, consents, orders or approvals.

Product Development

Under the SPMA, the Company undertakes to pursue the development and approval of the Product, including in accordance with the Revogenex License. The Company shall promptly inform Parent of any written communications it receives in connection with the Revogenex License, including from Revogenex

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Ireland Limited or any of its Affiliates, or the Manufacturing Agreement, including from Polpharma or any of its Affiliates, and promptly provide Parent with copies of any such communications. Without limiting the foregoing, the Company shall promptly notify Parent (and in any event within 24 hours) of any Proceeding relating to, involving or otherwise affecting the Revogenex License or the Manufacturing Agreement. Parent shall have the right to participate in the defense of any such Proceeding. The Company shall keep Parent informed on a timely basis and in detail of the status of such Proceeding, and shall provide Parent with copies of agreements and such other information and documentation relating thereto as shall be reasonably necessary or proper to allow Parent to monitor the progress of such Proceeding. The Company shall consult with Parent regarding the defense of any such Proceeding, and the Company may not settle, compromise, come to an arrangement regarding or cease defending against (or agree or consent to any of the foregoing with respect to) any such Proceeding without the prior written consent of Parent. In addition, the Company shall use its reasonable best efforts to achieve the goals set forth on Schedule 8.14 of the SPMA.

FDA Filings

Under the SPMA, Parent and the Company will, or will cause their respective Affiliates to, notify their respective employees in respect of whom notification is required under applicable legal requirements or by contract of the transactions contemplated by the SPMA and the Ancillary Agreements.

The Company shall use its reasonable best efforts to prepare the material required to file an NDA for the Product with the FDA as promptly as reasonably practicable, and obtain FDA approval for the Product as promptly as reasonably practicable. The Company shall keep Parent informed about the status and activities with respect to the development of the Product, and the Company will consider Parent’s input with respect to the forgoing in good faith. The Company shall (i) provide Parent with advance notice of the Company’s intent to submit an NDA, any amendment thereto, or any other filing or written communication with any Healthcare Regulatory Authority (the “HRA Communications”), (ii) provide Parent with copies of any draft HRA Communications prior to submission to the applicable Healthcare Regulatory Authority, and (iii) grant Parent with reasonable opportunity to review and comment on such HRA Communications, which comments will be considered and addressed in good faith by the Company.

Other Covenants

The SPMA contains additional agreements between the parties relating to, among other matters:

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the notice, defense and settlement of stockholders litigation against the Company or any of its directors, officers or affiliates;

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the coordination of press releases and other public announcements relating to the SPMA and the transactions contemplated therein, including the Merger Transaction;

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any antitakeover statutes or regulations that become applicable to the transactions contemplated by the SPMA, including the Merger Transaction;

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the de-listing of the shares of our common stock from Nasdaq and the deregistration of such shares under the Exchange Act after the effective time of the Merger Transaction;

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a lockup period from the signing date of the SPMA to the effective time of the Merger Transaction, applicable to Parent and the Company, with respect to the Company’s shares, subject to certain exceptions;

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a standstill agreement between Parent and the Company with respect to the shares of the Company’s common stock; and

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the sharing of information between the parties relating to completion of the transactions contemplated by the SPMA.

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Conditions to Completion of the Stock Purchase Transaction

The Company, Parent and Merger Sub are not required to complete the Stock Purchase Transaction unless a number of conditions are satisfied: (i) the Company stockholder approval shall have been obtained; and (ii) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Stock Purchase Transaction.

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In addition, the obligations of the parties to the SPMA to consummate the Stock Purchase Transaction are subject to certain other closing conditions, including (i) the accuracy of the representations and warranties of Parent and Merger Sub, in the case of the Company, and of the Company, in the case of Parent and Merger Sub, as contained in the SPMA (subject to certain materiality qualifiers, as applicable); and (ii) compliance by Parent and Merger Sub, in the case of the Company, and by the Company, in the case of Parent and Merger Sub, in all material respects with its or their obligations required to be performed by it or them under the SPMA on or prior to the closing date of the Stock Purchase Transaction.

The obligation of Parent and Merger Sub to consummate the Stock Purchase Transaction is further subject certain additional closing conditions, including:

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the absence of any material adverse effect with respect to the Company from the date of the signing of the SPMA to the closing date of the Stock Purchase Transaction;

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the Non-Affiliate Stockholder Approval shall have been obtained;

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the Registration Rights Agreement shall have been fully executed by all of the parties thereto and delivered to Parent;

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the Ancillary Agreements containing rights or obligations surviving the First Stage Closing shall be in full force and effect;

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the Revogenex License shall be in full force and effect, and there shall not have occurred any event that, with or without notice or lapse of time or both, would permit Revogenex Ireland Limited (or any successor, Affiliate, assignee or transferee thereof) to terminate the Revogenex License or any rights of the Company thereunder;

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the Manufacturing Agreement shall be in full force and effect, and there shall not have occurred any event that, with or without notice or lapse of time or both, would permit Polpharma (or any successor, Affiliate, assignee or transferee thereof) to terminate the Manufacturing Agreement or any rights of the Company thereunder;

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the Parent Directors shall have been appointed to the Company Board effective as of the First Stage Closing;

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each Company Warrant shall have been (i) exercised and converted into shares of common stock and cancelled without liability to the Company or (ii) amended in accordance with Section 4.7(d) of the SPMA; and

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the Dissenting Shares shall not exceed 5% of the shares of common stock issued and outstanding on the signing date of the SPMA.

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Conditions to Completion of the Merger Transaction

The Company, Parent and Merger Sub are not required to complete the Merger Transaction unless a number of conditions are satisfied: (i) the First Stage Closing shall have occurred, and the conditions in respect thereof shall have been satisfied on or prior to the First Stage Closing; (ii) any applicable waiting period (and any extension thereof) under the HSR Act will have expired or terminated early; and (iii) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger Transaction.

In addition, the obligations of the parties to the SPMA to consummate the Merger Transaction are subject to certain other closing conditions, including (i) the accuracy of the representations and warranties of Parent and Merger Sub, in the case of the Company, and of the Company, in the case of Parent and Merger Sub, as contained in the SPMA (subject to certain materiality qualifiers, as applicable); (ii) compliance by Parent and Merger Sub, in the case of the Company, and by the Company, in the case of Parent and Merger Sub, in all material respects with its or their obligations required to be performed by it or them under the SPMA on or prior to the closing date of the Merger Transaction;

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The obligation of Parent to consummate the Stock Purchase Transaction is further subject to certain additional closing conditions, including:

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final approval from the FDA of IV Tramadol on or before December 1, 2020, if as of such date there are no pending queries from the FDA with respect to such Product approval, but if there are such pending queries from the FDA as of such date, then such FDA approval shall have been obtained on or before April 30, 2021;

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Labelling for the Product containing an indication as moderate to moderately severe (post-operative) pain, not restricted to any specific type of surgery;

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classification of the Product by the U.S. Drug Enforcement Agency as a Schedule IV Drug under applicable legal requirements;

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no Risk Evaluation and Mitigation Strategy from the FDA or similar restrictions are determined to be applicable to IV Tramadol;

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conversion of all outstanding Class A Preferred Shares of the Company to common stock;

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the absence of any material adverse effect with respect to the Company from the signing date of the SPMA to the closing date of the Merger Transaction;

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full execution of the CVR Agreement;

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the Ancillary Agreements containing rights or obligations surviving the Second Stage Closing shall be in full force and effect;

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the Revogenex License shall be in full force and effect, and there shall not have occurred any event that, with or without notice or lapse of time or both, would permit Revogenex Ireland Limited to terminate it or any rights of the Company thereunder;

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the Manufacturing Agreement shall be in full force and effect, and there shall not have occurred any event that, with or without notice or lapse of time or both, would permit Polpharma to terminate it or any rights of the Company thereunder;

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the Company shall have delivered to Parent evidence of the director resignations;

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the termination of certain agreements between the Company and Fortress pursuant to the terms of the Waiver Agreement;

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each outstanding Company Warrant shall have been exercised and converted into shares of common stock; and

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the General Release was duly executed by Fortress and the Company and delivered to Parent.

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Termination Prior to the Stock Purchase Transaction

The Company and Parent may terminate the SPMA and abandon the Stock Purchase Transaction at any time prior to the effective time of the Stock Purchase Transaction by mutual written consent.

Either the Company or Parent may also terminate the SPMA and abandon the Stock Purchase Transaction at any time prior to the effective time of the Stock Purchase Transaction if:

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if the First Stage Closing has not occurred by June 30, 2019; provided, however, that such right to terminate will not be available to any party whose failure to fulfill any obligation under the SPMA has been the cause of, or has resulted in, the failure of the First Stage Closing to occur by June 30, 2019;

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a governmental authority has enacted, issued, promulgated, enforced or entered any final and non-appealable law, regulation or other order that restrains, enjoins or otherwise prohibits the Stock Purchase Transaction; or

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if an Event of Insolvency occurs with respect to the other party.

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Parent may also terminate the SPMA and abandon the Stock Purchase Transaction at any time prior to the effective time of the Stock Purchase Transaction if:

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either the Company stockholder approval or the Non-Affiliate Stockholder Approval is not obtained at the special meeting or any adjournment or postponement thereof; or

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there shall have been a breach of any representation, warranty, covenant, or agreement on the part of the Company set forth in the SPMA such that the conditions to the First Stage Closing set forth in Section 9.3(b) or Section 9.3(c) of the SPMA, as applicable, would not be satisfied and, in either such case, such breach is incapable of being cured by June 30, 2019;

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at any time prior to the Company stockholder approval or Non-Affiliate Stockholder Approval if (i) a Company Adverse Recommendation Change shall have occurred; or (ii) the Company shall have breached or failed to perform in any respect any of its covenants and agreements set forth in Sections 7.1, 7.2 or 8.3 of the SPMA.

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The Company may also terminate the SPMA and abandon the Stock Purchase Transaction at any time prior to the Company stockholder approval being obtained at a meeting of the Company’s stockholders in connection with entering into a Company Acquisition Agreement with respect to a Superior Proposal, subject to compliance with applicable restrictions and obligations under the SPMA.

Termination Prior to the Merger Transaction

The Company and Parent may terminate the SPMA and abandon the Merger Transaction at any time prior to the effective time of the Merger Transaction by mutual written consent.

Either the Company or Parent may also terminate the SPMA and abandon the Merger Transaction at any time prior to the effective time of the Merger Transaction if:

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if the Second Stage Closing has not occurred by ten business days after the Merger Transaction Closing Conditions have been met, provided that this termination right will not be available to any party if a breach by such party of the SPMA materially contributed to the failure of the closing of the Merger Transaction to occur;

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the Merger Transaction has not been consummated by each party’s respective outside date (April 30, 2021 for termination by Parent and October 31, 2021 for termination by the Company), provided that this termination right will not be available to any party if a breach by such party of the SPMA materially contributed to the failure of the closing of the Merger Transaction to occur;

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a governmental authority has enacted, issued, promulgated, enforced or entered any final and non-appealable law, regulation or other order that restrains, enjoins or otherwise prohibits the Stock Purchase Transaction; or

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if an Event of Insolvency occurs with respect to the other party.

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Parent may also terminate the SPMA and abandon the Merger Transaction at any time prior to the effective time of the Merger Transaction, provided that Parent is not then in breach in any material respect of any of its obligations under the SPMA, if  (A) there is any continuing inaccuracy in the representations and warranties of any other party set forth in the SPMA, or (B) any other party is then failing to perform any of its covenants or other agreements set forth in the SPMA.

Effect of Termination

If the SPMA is terminated prior to the consummation of the Stock Purchase Transaction or the Merger Transaction, subject to certain exceptions described in the SPMA, the SPMA will become void and of no effect with no liability to any person on the part of any party thereto; provided, however, that no termination will relieve any party thereto from liability or damages to the other party resulting from any willful or intentional material breach of the SPMA.

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The Company will be obligated to pay to Buyer a termination fee of  $10 million (the “Termination Fee”):

(a) in the event that the SPMA is terminated by (1) Buyer or the Company if the First Stage Closing has not occurred by June 30, 2019 or (2) Buyer if there shall have been a breach of any representation, warranty, covenant, or agreement on the part of the Company, within two (2) Business Days of such termination;

(b) in the event that the SPMA is terminated and a bona fide Takeover Proposal is not clearly withdrawn or terminated in good faith prior to (i) the special meeting in the case of termination due to either the Requisite Stockholder Approval or the Non-Affiliate Stockholder Approval not being obtained at the special meeting; (ii) prior to the termination date in the case of termination due to the First Stage Closing not occurring by June 30, 2019; or (iii) prior to the breach giving rise to the right of termination in the case of termination due to a breach of any representation, warranty, covenant, or agreement on the part of the Company, within two (2) Business Days of such termination;

(c) in the event that the SPMA is terminated and within 12 months of the date the SPMA is terminated, the Company enters into a definitive agreement with respect to any Takeover Proposal or consummates the transactions contemplated by any Takeover Proposal, on the date of entry into such agreement or, if earlier, consummation of such Takeover Proposal (provided that for purposes of this clause, the references to “15%” in the definition of Takeover Proposal in the SPMA shall be deemed to be references to “50%”);

(d) in the event that the SPMA is terminated by Buyer at any time prior to the Requisite Stockholder Approval or the Non-Affiliate Stockholder Approval, if  (i) a Company Adverse Recommendation Change shall have occurred; or (ii) the Company shall have breached or failed to perform in any respect any of its covenants and Ancillary Agreements, within two (2) Business Days of such termination; and

(e) in the event that the SPMA is terminated by the Company at any time prior to the Requisite Stockholder Approval being obtained at the special meeting in connection with entering into a Company Acquisition Agreement with respect to a Superior Proposal prior to or concurrently with such termination.

The payment of the Termination Fee shall be the sole and exclusive remedy available to Buyer and Merger Sub with respect to SPMA, the Stock Purchase Transaction and the Merger Transaction and, upon payment of the Termination Fee, the Company (and the Company’s Affiliates and its and their respective Representatives) shall have no further liability to Buyer and Merger Sub under the SPMA.

In the event that the SPMA is terminated by Buyer if either the Requisite Stockholder Approval or the Non-Affiliate Stockholder Approval is not obtained at the special meeting, then the Company shall reimburse Buyer for up to $500,000 in Buyer’s and its Affiliates’ documented aggregate out-of-pocket costs, fees and expenses incurred in connection with the Stock Purchase Transaction and the Merger Transaction; provided, that any such amounts paid by the Company shall be deducted from any Termination Fee that may subsequently become payable.

In the event that the SPMA is terminated prior to the consummation of the Merger Transaction but (i) the First Stage Closing shall have occurred, and (ii) there is no law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger Transaction, then, then upon written notice from Parent to the Company, the Company shall negotiate with Parent in good faith, on an exclusive basis and for a period of up to 21 days from receipt of such notice, the entry into an alternative Takeover Proposal or similar transaction, provided that in no event shall such 21-day period extend beyond October 31, 2021.

Amendment

Subject to applicable law, at any time prior to the effective time, the parties to the SPMA can modify or amend the SPMA by written instrument executed and delivered by duly authorized officers of the respective parties.

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Governing Law

The SPMA is and will be interpreted, construed and governed by and in accordance with the law of the State of Delaware, without regard to the conflict of law principles thereof.

Remedies

No termination of the SPMA will relieve any party to the SPMA of any liability or damages to the other party resulting from any willful and material breach of the SPMA.

Each party to the SPMA is entitled to seek equitable relief, including an injunction or injunctions to prevent breaches of the SPMA or to enforce specifically the terms and provisions of the SPMA, without any requirement for the posting of a bond or other security, in addition to any other remedy to which such party is entitled at law or in equity.

Each party has waived any right to a jury trial with respect to any litigation arising out of or relating to SPMA or the transactions contemplated therein.

Assignment

The SPMA is not assignable without the written consent of the other party. Any purported assignment in violation of the SPMA is void. Notwithstanding the foregoing, Parent is entitled to (a) assign its rights under the SPMA to any one of its Affiliates and (b) assign any or all of its rights and obligations under the SPMA (in whole or in part) as collateral security in a financing transaction; provided that no such assignment shall release Parent from its obligations under the SPMA.

The following agreements were simultaneously executed in conjunction with the SPMA:

Stockholders Agreement

Concurrently with the execution and delivery of the SPMA, the Company, certain stockholders of the Company, including Fortress, and the Parent entered into the Stockholders Agreement, pursuant to which, among other things, the Parent obtained the right to appoint the Parent Directors, upon the closing of the Stock Purchase Transaction. The Stockholders Agreement also entitles the Parent to veto rights over certain Company actions in the event the Merger Transaction fails to close. A copy of the Stockholders Agreement is attached in Appendix A to this proxy statement.

Credit Agreement and Guaranty

Concurrently with the execution and delivery of the SPMA, the Company and Parent entered into the Credit Agreement, pursuant to which Parent agreed to provide Initial Financing to the Company, up to the closing of the Stock Purchase Transaction. Any amounts drawn on the line of credit will be deducted from the aggregate consideration payable to the Company pursuant to the Stock Purchase Transaction. Subject to the terms and conditions described in the SPMA, the Parent may also provide interim financing to the Company in an amount of up to $7 million during the period between the Stock Purchase Transaction and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable by Parent to Company stockholders upon the consummation of the Merger Transaction. A copy of the Credit Agreement is attached in Appendix A to this proxy statement.

Concurrently with the execution and delivery of the Credit Agreement, Fortress and the Parent entered into a Guaranty, pursuant to which Fortress guaranteed the full payment to the Parent, when due, of all amounts of  (x) all obligations of the Company to the Parent under the Credit Agreement, whether for principal interest, fees, charges, expenses or otherwise, and (y) any and all costs and expenses incurred by the Parent in enforcing any of its rights under the Guaranty. A copy of the Credit Agreement is attached in Appendix A to this proxy statement.

Voting and Support Agreement

Concurrently with the execution and delivery of the SPMA, the Company, Fortress, Dr. Lu and Parent entered into the Voting Agreement, pursuant to which, among other things, Fortress and Dr. Lu agreed to (i) be present at any meeting of the Company’s stockholders, in person or represented by proxy, or

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otherwise cause all of their voting securities (including the Class A Preferred Stock) to be counted as present for purposes of calculating a quorum, and (ii) vote or cause to be voted (including by proxy or written consent, if applicable) all of their securities in favor of the Proposals (as defined in the SPMA), adjourning or postponing the stockholders meeting to a later date if there are not sufficient votes for the Requisite Stockholder Approval, electing the Buyer Directors (as defined in the Stockholders Agreement) as members of the board of directors of the Company or any other matter necessary for the consummation of the Stock Purchase Transaction, Merger Transaction and any other transactions contemplated by the SPMA or the ancillary agreements at the First Stage Closing, the Company’s by-laws will be amended to reflect this change in the composition of the Board. further, pursuant to the Voting Agreement, Fortress and Dr. Lu will vote against any Takeover Proposal, any other action made in opposition to adoption of the SPMA or the Ancillary Agreements, any action reasonably expected to materially impede any of the transactions contemplated by the SPMA or the Ancillary Agreements or any action reasonably expected to result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the SPMA, or of the stockholders contained in the Voting Agreement. In addition, Fortress and Dr. Lu agreed not to transfer any Company securities held by them until the earlier of the Merger Transaction and the termination of the SPMA. A copy of the Voting Agreement is attached in Appendix A to this proxy statement.

Indemnification Agreement

Concurrently with the execution and delivery of the SPMA, the Parent and Fortress entered into the Indemnification Agreement, pursuant to which Fortress agreed to indemnify and hold harmless the Parent from and against all losses arising out of any breach or inaccuracy of any representation or warranty of the Company contained in the SPMA or any ancillary agreement. Pursuant to the Indemnification Agreement, except in the case of fraud or intentional misrepresentation, the maximum liability of Fortress (other than with respect to any breach or inaccuracy of certain fundamental representations, as defined therein) is limited to $7 million, and $35 million in the aggregate. Except in the case of fraud or intentional misrepresentation, the maximum liability of Fortress solely with respect to any breach or inaccuracy of any fundamental representation is limited to $35 million. Claims agreed to or adjudicated prior to the Merger Transaction will be reduced from the Merger Consideration. Claims surviving the Merger Transaction and agreed to or adjudicated after the Merger Transaction will be reduced from amounts payable under the CVR Agreement. A copy of the Indemnification Agreement is attached in Appendix A to this proxy statement.

Waiver Agreement

Concurrently with the execution and delivery of the SPMA, the Company, the Parent and Fortress entered into a waiver agreement (the “Waiver Agreement”), pursuant to which, among other things, Fortress irrevocably waived its right to receive dividends of the Company’s common stock under the terms of the Class A Preferred Stock and any fees, payments, reimbursements or other distributions under a certain management services agreement between the Company and Fortress and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of Parent’s rights under Section 4 of the Stockholders Agreement. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction, Fortress will convert all of its preferred shares into common stock pursuant to the terms of the certificate of incorporation of the Company, as amended from time to time.

Restrictive Covenant Agreements

Concurrently with the execution and delivery of the SPMA, each of Dr. Lu and Fortress entered into a restrictive covenant agreement with the Parent under which, among other things, each of Dr. Lu and Fortress respectively agrees not to engage or participate in, or render services to any person engaged in, the business of hospital administered pain management anywhere in the world other than Canada, Central America, or South America, or solicit certain employees, during the pendency of the SPMA and for a period of five years after the Merger Transaction.

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Registration Rights Agreement

Upon the consummation of the First Stage Closing, the Company and Parent will enter into a registration rights agreement pursuant to which, among other things, Parent has the right to deliver to the Company a written notice requiring the Company to prepare and file with the SEC a registration statement with respect to resales of some or all registrable securities by the Parent. The Parent cannot conduct an offering pertaining to the registrable securities unless the SPMA is terminated after the First Stage Closing.

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THE CONTINGENT VALUE RIGHTS AGREEMENT

This section describes the material terms of the form of CVR Agreement. The description in this section and elsewhere in this proxy statement, including, without limitation, in “Certain Effects of the Merger Transaction” beginning on page 34, is qualified in its entirety by reference to the complete text of the form of CVR Agreement, a copy of which is attached as Annex D and is incorporated by reference into this proxy statement. This summary does not purport to be complete and might not contain all of the information about the form of CVR Agreement that is important to you. We encourage you to read the form of CVR Agreement carefully and in its entirety. This section is not intended to provide you with any factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information” beginning on page 87.

The CVR Agreement may be subject to any reasonable revisions that are requested by the Rights Agent (provided that such revisions are not, individually or in the aggregate, detrimental or adverse, taken as a whole, to any person in whose name a CVR is registered in the CVR register (a “CVR Holder”). Avenue will cooperate, including by making changes to the form of CVR Agreement, as necessary to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws.

Capitalized terms used but not defined in this portion of the proxy statement shall have the respective meanings ascribed to them in the CVR Agreement.

Appointment of Rights Agent

Under the SPMA, the Company shall coordinate with Parent, sufficiently in advance of the Second Stage Closing, to find a reasonably suitable Rights Agent with respect to the CVR Agreement, and shall cooperate with Parent to finalize the CVR Agreement and have it fully executed and delivered on or prior to the Second Stage Closing.

The CVR Agreement

The CVRs will be governed by the terms of the CVR Agreement, which will be entered into at, or prior to, the effective time of the Merger Transaction by Avenue and the Rights Agent.

As provided in the SPMA, each share of common stock, par value $0.0001, of the Company issued and outstanding immediately prior to the effective time of the Merger Transaction (other than the Cancelled Shares and the Dissenting Shares) will be converted into the right to receive, in addition to the per share cash consideration, one CVR.

As provided in the SPMA, the Company will take all requisite action to ensure that, prior to the effective time of the Merger Transaction, each Company stock option, restricted share, restricted share unit and Company warrant will vest and become exercisable, entitling (i) holders of Company stock options the right to receive, in respect of each Company stock option held at the effective time of the Merger Transaction, and subject to exercise pursuant to the terms and conditions of the applicable Company stock option award agreement, one CVR multiplied by the total number of common stock of the Company subject to such Company stock option; (ii) holders of Company restricted shares the right to receive, in respect of each Company restricted share held at the effective time of the Merger Transaction, and subject to taxes withheld with respect to the fair market value of such Company restricted share, one CVR multiplied by the total number of Company restricted shares held; (iii) holders of Company restricted share units the right to receive, in respect of each Company restricted share unit held at the effective time of the Merger Transaction, and subject to taxes withheld with respect to the fair market value of such Company restricted share unit, one CVR multiplied by the total number of Company restricted share units held; and (iv) holders of Company Warrants the right to receive, in respect of each Company Warrant held at the effective time of the Merger Transaction, outstanding immediately prior to the effective time of the Merger Transaction, our one CVR multiplied by the total number of Company Warrants held.

In this proxy statement,

•

the “Initial Period” means the period commencing on the day following the Second Stage Closing Date and ending on December 31, 2028;

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•

the “Subsequent Period” means the period commencing on January 1, 2029 and ending on the earlier of  (i) December 31, 2036, and (ii) the date on which any person (other than the Company or its affiliates) has filed and received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) New Drug Application, or NDA, using IV Tramadol; provided, that the date referred to in the foregoing clause (ii) shall be extended by up to six months to the extent that during such extension period there continues to remain only one person (other than the Company or its affiliates) that has filed and received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) NDA using IV Tramadol; and

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•

the “Milestone Period” means the Initial Period or the Subsequent Period, as applicable.

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There is no assurance that any payment will be made under the CVRs. There are numerous risks and uncertainties associated with receiving payment under the CVRs. In addition, the CVRs are not freely transferable and will not be registered with the SEC or listed on any securities exchange. Tax consequences regarding the receipt of the CVRs are uncertain. See the section entitled “Material U.S. Federal Income Tax Consequences of the Merger Transaction” beginning on page 36.

Indemnity

Claims made under the SPMA and agreed to or adjudicated prior to the Merger Transaction will be reduced from the Merger Consideration. Claims surviving the Merger Transaction and agreed to or adjudicated after the Merger Transaction will be reduced from amounts payable under the CVR Agreement.

Milestone Events

Upon the occurrence of any of the following events listed below (the “Milestone” or “Milestones”), each person entitled to receive Merger Consideration, or any person (each a “Holder”) in whose name a CVR is registered in the CVR register which the Rights Agent shall keep for the purpose of registering CVRs and transfers of CVRs as provided under the CVR Agreement (the “CVR Register”), shall be entitled to certain payments in respect of their CVRs as follows:

1.

During the Initial Period, upon IV Tramadol generating $325 million or more in net sales in a calendar year, each CVR Holder shall be entitled to receive her, his or its applicable CVR percentage (the quotient of  (i) the number of CVRs held by such Holder, divided by (ii) the fully diluted capitalization (the Cancelled Shares) as of immediately prior to the Merger Transaction) multiplied by an aggregate amount equal to the applicable percentage ((i) if IV Tramadol generated less than $400 million in net sales during such calendar year, 10% of gross profit generated by IV Tramadol during the such calendar year; (ii) if IV Tramadol generated between $400 million and $500 million in net sales during such calendar year, 12.5% of gross profit generated by IV Tramadol during the such calendar year; or (iii) if IV Tramadol generated more than $500 million in net sales during such calendar year, 15% of gross profit generated by IV Tramadol during the such calendar year) multiplied by the gross profit generated by IV Tramadol during such calendar year.

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2.

If  $1.5 billion in aggregate net sales of IV Tramadol generated from and after the Initial Period is achieved during the Subsequent Period, which we refer to as the Subsequent Period Net Sales Target, then (x) with respect to the calendar year in which the Subsequent Period Net Sales Target is achieved, if during the Stub Period (the period during the year in which the Subsequent Period Net Sales Target was achieved commencing one day after the date on which the Subsequent Period Net Sales Target was achieved and ending on December 31 of such calendar year), IV Tramadol generates $100 million or more in annualized net sales, then each CVR Holder shall be entitled to receive her, his or its CVR Percentage (with respect to a CVR Holder as of the applicable date of determination, the quotient of  (i) the number of CVRs held by such Holder, divided by (ii) the fully diluted capitalization (excluding shares to be cancelled and retired) multiplied by an aggregate amount equal to 20% of the gross profit generated by IV Tramadol with respect to such Stub Period and (y) during the remainder of the Subsequent Period, with respect to each calendar year after the calendar year in which the Subsequent Period Net Sales Target was achieved, upon

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IV Tramadol generating $100 million or more in Net Sales in such calendar year, each CVR Holder shall be entitled to receive her, his or its CVR Percentage multiplied by an aggregate amount equal to 20% of the gross profit generated by IV Tramadol during such calendar year. If the Subsequent Period Net Sales Target is achieved during the Initial Period, then, during the Subsequent Period, upon IV Tramadol generating $100 million or more in net sales in a calendar year, each CVR Holder shall be entitled to receive her, his or its CVR Percentage multiplied by an aggregate amount equal to 20% of the gross profit generated by IV Tramadol during such calendar year.

Milestone Payments

Upon achievement of a Milestone at any time prior to the expiration of its applicable Milestone period, then on or prior to, but in any event and no later than, May 31 of the calendar year following the calendar year triggering the Milestone, which we refer to as the “Milestone Payment Date,” the Company shall deliver or cause to be delivered to the Rights Agent: (i) written notice indicating that the Milestone has been achieved and that the Holders are entitled to receive the applicable Milestone payment; and (ii) a wire transfer of immediately available funds to an account designated by the Rights Agent, in the aggregate amount equal to the Milestone payment payable to all of the Holders with respect to such Milestone. After receipt of the wire transfer described in the foregoing sentence, the Rights Agent will promptly (and, in any event, within five business days) pay (x) by one lump sum wire payment to The Depository Trust Company, which we refer to as DTC, for any Holder who is a former street name holder of common stock of the Company; and (y) for all other Holders, by check mailed, first-class postage prepaid, to the address of each Holder set forth in the CVR register or by other method of delivery as specified by the applicable Holder in writing to the Rights Agent (we refer to the amount each Holder is entitled to receive in respect to such Milestone as a “Milestone Payment,” and to such aggregate cash amounts in (x) and (y) together as the “Aggregate Milestone Payment”). The Rights Agent shall hold the Aggregate Milestone Payment in a non-interest bearing account until such payment is made in accordance with the foregoing sentence. However, in no event shall the Company be required to pay a Milestone payment more than once, and the Company shall not be required to pay a Milestone Payment if the Milestone occurs after the expiration of the Milestone Period.

Any portion of any Aggregate Milestone Payment that remains undistributed to the Holders six months after the date of the Milestone Payment Date shall be delivered by the Rights Agent to the Company, upon demand, and any Holder may thereafter look only to the Company for payment of such Milestone payment, without interest, but such Holder shall have no greater rights against the Company than those accorded to general unsecured creditors of the Company under applicable law.

Representatives

The Company shall deploy, within 12 months after the initial commercial supply of the Product in the United States, 80 or more sales representatives whose aggregate time devotion to sales of the Product shall be at least the equivalent of 80 Reps devoting at least 75% of their time (on an aggregate basis) to sales of the Product. The Company shall maintain such level of sales representatives (to be measured at 24 and 36 months after the initial commercial supply of the Product in the United States) until the date that is 36 months after the initial commercial supply of the Product in the United States. During the Milestone Periods, neither the Company nor any of its Affiliates shall take any action the sole purpose of which is to avoid the achievement of the Milestone or the payment of the Milestone payments.

Characteristics of the CVRs; Restrictions on Transfer

The CVRs will not be evidenced by a certificate or other instrument. The CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable on the CVRs to any CVR Holder. The CVRs will not represent any equity or ownership interest in the Company or in any constituent company to the Merger Transaction or any of their respective affiliates.

The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than pursuant to any of the following permitted transfers: (a) upon death of a CVR Holder by will or intestacy; (b) by instrument to an inter vivos or

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testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (c) pursuant to a court order; (d) by operation of law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (e) in the case of CVRs payable to a nominee, from a nominee to a beneficial owner (and, if applicable, through an intermediary) or from such nominee to another nominee for the same beneficial owner, in each case to the extent allowable by DTC. Any attempted transfer, in whole or in part (other than a permitted transfer as set forth in the immediately preceding sentence), other than pursuant to the foregoing permitted transfers, will be void and of no effect.

Amendment and Termination of the CVR Agreement

Amendments Without Consent of Holders

Without the consent of any CVR Holder or the Rights Agent, the Company, at any time and from time to time, may enter into one or more amendments to the CVR Agreement, for any of the following purposes, so long as, in the cases of clauses (ii) through (iv), such amendments do not, individually or in the aggregate, adversely affect the interests of the Holders, or adversely affect the rights, duties, responsibilities or protections of the Rights Agent to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the CVR Agreement;

(i)

to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Company shall determine to be for the protection of the Holders;

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(ii)

to cure any ambiguity, to correct or supplement any provision of the CVR Agreement that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under the CVR Agreement;

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(iii)

as may be necessary or appropriate to ensure that the CVRs are not subject to registration under any applicable state securities or “blue sky” laws, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

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(iv)

to evidence the succession of another person as a successor rights agent and the assumption by any such successor of the covenants and obligations of the Rights Agent in accordance with the provisions of the CVR Agreement;

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(v)

any other amendment hereto that does not adversely affect the legal rights under the CVR Agreement of any Holder; or

​

(vi)

to reduce the number of CVRs, in the event any CVR Holder agrees to transfer or renounce such CVR Holder’s rights under the CVR Agreement.

​

Notwithstanding anything to the contrary contained herein, the Company and the Rights Agent may enter into any amendment that adversely affects, in any material respect, the Rights Agent’s own rights, duties, responsibilities or protections (whether for consideration or otherwise).

Promptly after the execution by the Company and the Rights Agent of any amendment, the Company will mail (or cause the Rights Agent to mail) a notice by first-class mail to the CVR Holders at their addresses as they appear on the CVR Register, setting forth such in general terms the substance of such amendment.

Amendments with Consent of Holders

Subject to the terms summarized in the section entitled “Amendment and Termination of CVR Agreement — Amendments Without Consent of Holders” beginning on page 80, with the prior consent of CVR Holders of at least a majority of the outstanding CVRs at the time of determination, whether evidenced in writing or taken at a meeting of the CVR Holders, the Company and the Rights Agent may enter into one or more amendments to the CVR Agreement for the purpose of adding, eliminating or changing any provisions of the CVR Agreement, even if such addition, elimination or change is materially adverse to the interest of the CVR Holders. Promptly after the execution by the Company and the Rights

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Agent of any amendment pursuant to the provisions of the CVR Agreement, the Company will mail (or cause the Rights Agent to mail) a notice thereof by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth in general terms the substance of such amendment.

Termination

The CVR Agreement will be terminated upon the expiration of the Subsequent Period, provided however that if a Milestone has been achieved on or prior to such termination date, but the Milestone Payment has not been paid on or prior to such date, the CVR Agreement shall not terminate until such Milestone Payment has been paid in full in accordance with the terms of the SPMA.

Renouncement

Any CVR Holder may, at any time, agree to renounce, in whole or in part, his, her or its rights under the CVR Agreement by written notice to the Rights Agent and the Company, which notice, if given, will be irrevocable. A Holder may also at any time, at such CVR Holder’s option, abandon all of such CVR Holder’s remaining rights in a CVR by transferring such CVR to the Company or any of its Affiliates without consideration therefor. The Company or any of its Affiliates may offer to acquire or acquiring any CVRs for consideration from the CVR Holders, in private transactions or otherwise, in its sole discretion.

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IMPORTANT ADDITIONAL INFORMATION REGARDING AVENUE

Executive Officers and Directors

Set forth below is information regarding our executive officers and directors, including their principal occupations for the past five years and their ages as of  [December   ], 2018. There are no family relationships between any of our executive officers and any other executive officer or board member. Our Board elects our executive officers, who serve at the discretion of our Board. Neither Avenue, our executive officers nor our directors have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors), and neither of these persons have been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws.

The business address of each of our executive offices and directors is c/o Avenue Therapeutics, Inc., 2 Gansevoort Street, 9th Floor, New York, New York 10014, and their business telephone number is (781) 652-4500.

Lindsay A. Rosenwald, M.D. — Executive Chairman of the Board of Directors

Dr. Rosenwald has served as our Executive Chairman of the Board of Directors since inception. Dr. Rosenwald also serves as Chairman, President and Chief Executive Officer of Fortress Biotech, Inc., a director of Mustang Bio, Inc., and a director of Checkpoint Therapeutics, Inc. Since November 2008, Dr. Rosenwald has served as Co-Portfolio Manager and Partner of Opus Point Partners Management, LLC (“Opus Point”), an asset management firm in the life sciences industry, which he joined in 2009. Prior to that, from 1991 to 2008, he served as the Chairman of Paramount BioCapital, Inc. Over the last 23 years, Dr. Rosenwald has acted as a biotechnology entrepreneur and has been involved in the founding and recapitalization of numerous public and private biotechnology and life sciences companies. Dr. Rosenwald received his B.S. in finance from Pennsylvania State University and his M.D. from Temple University School of Medicine.

Lucy Lu, M.D. — President, Chief Executive Officer and Director

Dr. Lu has been our President and Chief Executive Officer since inception. From February 2012 to June 2017, Dr. Lu was the Executive Vice President and Chief Financial Officer of Fortress Biotech, Inc. Prior to working in the biotech industry, Dr. Lu had 10 years of experience in healthcare-related equity research and investment banking. From February 2007 through January 2012, Dr. Lu was a senior biotechnology equity analyst with Citigroup Investment Research. From 2004 until joining Citigroup, she was with First Albany Capital, serving as Vice President from April 2004 until becoming a Principal of the firm in February 2006. Dr. Lu holds an M.D. degree from the New York University School of Medicine and an M.B.A. from the Leonard N. Stern School of Business at New York University. Dr. Lu obtained a B.A. from the University of Tennessee’s College of Arts and Science.

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Joseph Vazzano — Vice President, Finance and Accounting and Principal Financial Officer

Mr. Vazzano joined the Company in August 2017 from Intercept Pharmaceuticals, Inc., a publicly-traded biotechnology company, which he joined in 2016, and where he served as Assistant Corporate Controller, helping grow the finance and accounting department during Intercept’s transition from a development-stage company to a fully integrated commercial organization. Prior to joining Intercept, Mr. Vazzano served as the Assistant Controller at Pernix Therapeutics, a publicly-traded specialty pharmaceutical company, where he successfully built an accounting and finance team after the closure of the South Carolina office location. From 2010 to 2015, he held various roles of increasing responsibility in finance and accounting at NPS Pharmaceuticals, a publicly-traded biotechnology company acquired by Shire Pharmaceuticals in 2015. He began his professional career with KPMG, LLP, where he served as a senior auditor. Mr. Vazzano has a Bachelor of Science degree in Accounting from Lehigh University and is a Certified Public Accountant in the State of New Jersey.

Scott A. Reines, M.D., Ph.D. — Interim Chief Medical Officer

Dr. Reines has served as our Interim Chief Medical Officer since January 2016. Dr. Reines been an independent consultant to the pharmaceutical industry since 2008. As Senior Vice President for CNS, Pain, and Translational Medicine at Johnson & Johnson from 2003 to 2008, he oversaw the development and approval of INVEGA and INVEGA SUSTENNA for schizophrenia, NUCYNTA for moderate to severe pain, REMINYL ER for Alzheimer’s disease, RISPERDAL CONSTA for schizophrenia and bipolar disorder, RISPERDAL for treatment of the autism, and TOPAMAX for prevention of migraine and seizures. At Johnson & Johnson, he was responsible for all CNS and Pain products, as well as for Clinical Pharmacology and Pharmacogenomics, and was a member of the Johnson & Johnson Pharmaceutical R&D Board of Directors.

Previously, Dr. Reines was Vice President, Clinical Research at Merck from 1988 to 2003, with responsibilities for Psychopharmacology, Neuropharmacology, Gastroenterology, and Ophthalmology. There he led the development of EMEND for prevention of chemotherapy-induced nausea and vomiting, MAXALT for treatment of migraine headache, SINEMET-CR for Parkinson’s disease, and TRUSOPT, COSOPT, and TIMOPTIC-XE for prevention of glaucoma. Currently, Dr. Reines consults for biotech, pharmaceutical, and venture firms, is a member of two Scientific Advisory Boards, and Chair of a Data Safety Monitoring Board. He is also a member of two non-profit boards, serving as Vice Chair of the Board of Directors of KidsPeace, a large children’s psychiatric healthcare provider, and as a member of the Board of Directors of Heritage Conservancy, which is directed toward land preservation. Dr. Reines also served for two years as co-chair of the Neuroscience Steering Committee, Foundation for NIH Biomarkers Consortium, and spent five years on the National Drug Abuse Advisory Council. He holds a bachelor’s degree in chemistry from Cornell University, a PhD in chemistry/molecular biology from Columbia University, and an MD from Albert Einstein College of Medicine. He is Board Certified in Psychiatry and Neurology.

Neil Herskowitz

Mr. Herskowitz joined our Board of Directors in August 2015 and has served as the Chairman of our Audit Committee since September 2016. Mr. Herskowitz has served as the managing member of the ReGen Group of companies, located in New York, since 1998, which include ReGen Capital Investments LLC and Riverside Claims Investments LLC. He has also served as the President of its affiliate, Riverside Claims LLC, since June 2004. Mr. Herskowitz received a B.B.A. in Finance from Bernard M. Baruch College in 1978.

Jay Kranzler, M.D., PhD

Dr. Kranzler joined our Board of Directors in February 2017. Dr. Kranzler has been a Founder, CEO, Board Member, and Advisor to leading life science companies for over 30 years. He is currently acting as Chief Executive Officer of Regenovation, a regenerative medicine company, and is a Board Member of Methylation Sciences, Pastorus, and ImmunoBrain Checkpoint, all companies focused on developing therapeutics for psychiatric or neurological disorders. Dr. Kranzler started his career at McKinsey & Company where he established the Firm’s pharmaceutical practice. He served as Chief Executive Officer

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(CEO) of Cytel Corporation, a company focused on the development of immunomodulatory drugs. Following Cytel, Dr. Kranzler became the CEO of Cypress Bioscience, where he was credited for the development of Savella™ (milnacipran) for the treatment of fibromyalgia. Dr. Kranzler was also Vice President, Head of External R&D Innovation and Worldwide R&D Strategic Investments at Pfizer. During his career, Dr. Kranzler has developed drugs, medical devices, as well as diagnostics, and is the inventor on over 30 patents. Dr. Kranzler graduated from Yale University School of Medicine with MD and PhD degrees with a focus in psychopharmacology.

Jeffrey Paley, M.D.

Dr. Paley joined our Board of Directors in December 2015. Dr. Jeffrey Paley has been an Active Clinician and Consultant in the healthcare industry for the past 18 years, during which time Dr. Paley has consulted for over 30 analysts and portfolio managers in the biotechnology, pharmaceutical, specialty pharmaceutical and medical technology arenas, reviewing the clinical, preclinical and regulatory pedigrees of numerous therapeutics and devices. Prior to his work for the buy-side, Dr. Paley consulted directly for several biotechnology and specialty pharmaceutical companies. Dr. Paley founded Access Medical Associates in 2003, after spending five years on the full-time academic faculty of Weill Cornell Medical College, where he served as a Director of Clinical Research at the Cornell Internal Medicine Associates. At Weill Cornell, Dr. Paley was a Principal or Co-Principal Investigator on several studies of diabetes, hypertension, and cholesterol disorders, including the landmark ACCORD study of intensive hyperglycemia, hypertension and hyperlipidemia management. He has served as a Director of Kellbenx, Retrophin and Remote Radiology Inc., and currently serves as a Director of Caelum Biosciences, Immune Pharmaceuticals and Kalytera Therapeutics. Dr. Paley trained at Harvard Medical School and completed a residency in Internal Medicine at Massachusetts General Hospital.

Akhtar Samad, M.D., PhD

Dr. Samad joined our Board of Directors in December 2015. Dr. Samad established Symbios Partners in 2008 to address what he perceived as an unmet need in the advisory space — a hybrid strategic advisory and IR consultancy, offering a variety of proprietary services across such areas as clinical and business development, investment thesis and positioning, market intelligence, investor/analyst outreach and financing strategies. He works closely with senior members of client management teams, including CEO, CBO, CMO/CSO, CFO and Director of Communications, to formulate and revise client corporate strategy. Prior to launching Symbios, Dr. Samad was a Managing Director at Bear Stearns where he directed the small/mid-cap biotechnology equity research team from 2000 – 2008. He is a former academic cancer and genomics researcher, who trained with the co-discoverer of VEGF at Harvard, and completed his medical residency and fellowship at Cornell and the National Cancer Institute. He has been an invited moderator at the Annual Cancer Progress Conferences, and has moderated other oncology and genomics conferences. He received his MD/PhD training at NYU Medical School.

Michael S. Weiss

Mr. Weiss has served as a member of our Board of Directors since February 2015. Mr. Weiss also serves as a director and Executive Vice Chairman, Strategic Development of Fortress Biotech, Inc., Chairman of the Board of Directors and Executive Chairman of Mustang Bio, Inc., and Chairman of the Board of Directors of Checkpoint Therapeutics, Inc. Additionally, he serves as Executive Chairman, President and Chief Executive Officer of TG Therapeutics, Inc., a company he founded in 2011. Mr. Weiss is currently Co-Portfolio Manager and Partner of Opus Point Partners, LLC, which he co-founded in 2009. From 2002 to 2009, Mr. Weiss was the Chairman and Chief Executive Officer of Keryx Biopharmaceuticals, Inc., where he helped the company acquire and develop its lead drug, Auryxia, as well as executed a strategic alliance for Auryxia with Japan Tobacco, Inc. and Torii Pharmaceutical Co., Ltd. worth more than $100 million. Mr. Weiss served as Chairman of the board of directors of National Holdings Corporation from 2011 to 2012. Mr. Weiss began his professional career as a lawyer with Cravath, Swaine & Moore LLP. He earned his J.D. from Columbia Law School and his B.S. in Finance from The University at Albany.

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Prior Public Offerings

On June 26, 2017, the Company completed an initial public offering (“IPO”) of its common stock, which resulted in the issuance of 6,325,000 shares of its common stock, inclusive of 825,000 shares which were subject to an underwriter over-allotment. The shares were issued at $6.00 per share, resulting in net proceeds of approximately $34.2 million after deducting underwriting discounts, and other offering costs.

In conjunction with the closing of the IPO, the Company issued warrants in connection with its NSC Debt and its Convertible Notes.

Historical Consolidated Financial Information

The Company’s audited financial statements for the fiscal years ended December 31, 2017 and December 31, 2016, and the notes thereto, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, are incorporated by reference in this proxy statement.

As of December 29, 2017, the book value per share of our common stock was $3.62.

For additional information, see “Where You Can Find Additional Information” beginning on page 87. Historical results are not necessarily indicative of results to be expected in any future period.

Market Price of the Common Stock

Our common stock has been trading on Nasdaq since June 26, 2017, under the symbol “ATXI.” Prior to this, there was no public market for our common stock.

The following table sets forth for the periods indicated the high and low sales prices for our common stock for each of the identified calendar quarters.

The closing price of our common stock on Nasdaq on November 12, 2018, the last trading day prior to the public announcement of the execution of the SPMA, was $4.16 per share. If the Merger Transaction is completed, you will be entitled to receive (i) a pro rata portion, based on the fully diluted capitalization of the Company immediately prior to the effective time of the Merger Transaction, of the total merger consideration of up to $180 million, subject to certain deductions, which portion is currently expected to be approximately $13.92 per share, which represents a premium of approximately 234.6% over the closing price as of November 12, 2018; and (ii) a CVR which represents the right to receive a contingent cash payment upon the achievement of certain milestones relating to annual net sales and gross profit targets of IV Tramadol, pursuant to the CVR Agreement, without interest and less any applicable withholding taxes, for each share of our common stock owned by you (unless you have properly exercised, and not lost, your appraisal rights with respect to such shares).

On December   , 2018, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on Nasdaq was $[•] per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of our common stock.

As of the record date, Avenue had approximately [•] stockholders of record.

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Dividends

We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

Avenue Purchases of Equity Securities

Avenue has not purchased any shares of its common stock during the past two years.

Security Ownership of Management and Certain Beneficial Owners

The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 9, 2018, with respect to (i) each person known by the Company to be the beneficial owner of more than 5% of our common stock, (ii) each of the Company’s directors, (iii) each of the Company’s named executive officers and (iv) all directors and executive officers as a group. All information is based upon ownership filings made by such persons with the SEC or upon information provided by such persons to the Company. Applicable percentage ownership is based on 10,662,398 shares of our common stock outstanding on December 9, 2018.

Unless otherwise indicated, the address for each director and executive officer listed is: c/o Avenue Therapeutics, Inc., 2 Gansevoort Street, 9th Floor, New York, NY 10014.

*

Less than one percent

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(1)

Dr. Rosenwald and Mr. Weiss each have warrants convertible into 166,667 shares of our common stock. These warrants were issued by Fortress and are convertible into shares of our common stock that are owned by Fortress. These do not represent equity compensation by us to either Dr. Rosenwald or Mr. Weiss.

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(2)

The total calculation for all executive officers and directors as a group does not include Dr. Rosenwald’s and Mr. Weiss’ warrants, which have not yet been exercised.

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(3)

Excludes 250,000 Class A Preferred shares owned by Fortress.

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OTHER BUSINESS

As of the date of this proxy statement, the Board knows of no matters that will be presented for consideration at the special meeting other than the matters described in this proxy statement. The persons named as proxies will vote the proxies, insofar as they are not otherwise instructed, regarding such other matters and the transaction of such other business as may be properly brought before the meeting, as seems to them to be in the best interest of our company and our stockholders.

PROVISIONS FOR UNAFFILIATED STOCKHOLDERS

The Company has not made any provision (i) to grant the Company’s unaffiliated stockholders access to the corporate files of the Company, any other party to the SPMA or any of their respective affiliates, or (ii) to obtain counsel or appraisal services at the expense of the Company, any other such party or affiliate.

HOUSEHOLDING OF PROXY MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and 2017 Annual Report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you contact us at: Avenue Therapeutics, Inc., 2 Gansevoort Street, New York, New York 10014, Attn: Joseph Vazzano. You may also contact us at (781) 652-4500.

If you want to receive separate copies of the proxy statement and annual report in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address or phone number.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file reports with the SEC on an annual basis using Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. You may read and copy any such reports and amendments thereto at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov. You can also obtain copies of materials we file with the SEC from our Internet website found at www.avenuetx.com. Our stock is quoted on the Nasdaq Capital Market under the symbol “ATXI”. We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of this prospectus.

The SEC allows the Company to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information contained directly in this proxy statement. This proxy statement incorporates by reference the documents described below that the Company has previously filed with the SEC, as well as the annexes to this proxy statement. These documents contain important information about the Company and its financial condition.

The following documents listed below that the Company has previously filed with the SEC are incorporated by reference:

•

Annual Report on Form 10-K for the Fiscal Year ended December 31, 2017, filed with the SEC on March 1, 2018;

​

•

Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 2018, filed with the SEC on May 3, 2018;

​

•

Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 2018, filed with the SEC on August 14, 2018;

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•

Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2018, filed with the SEC on November 14, 2018;

​

•

Current Reports on Form 8-K (only to the extent “filed” and not “furnished”), filed with the SEC on March 28, 2018, May 3, 2018, May 21, 2018, May 25, 2018, June 14, 2018, August 14, 2018 and November 14, 2018; and

​

•

The portions of our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 30, 2018 that are incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

​

All documents that the Company files pursuant to Sections 13(a), 13(c), 14 or 15(d) under the Exchange Act from the date of this proxy statement to the date on which the special meeting is held, including any adjournments or postponements, shall also be deemed to be incorporated by reference in this proxy statement. Notwithstanding anything herein to the contrary, any information furnished under Item 2.02 or Item 7.01 of the Company’s Current Reports on Form 8-K and any other information which is furnished, but not filed with the SEC, is not incorporated herein by reference.

You may obtain any of the documents incorporated by reference from the SEC’s public reference room or the SEC’s Internet website described above. Documents incorporated by reference in this proxy statement are also available from the Company without charge, excluding all exhibits unless specifically incorporated by reference in such documents. Stockholders may obtain documents incorporated by reference in this proxy statement upon written request to the Company’s legal counsel at Alston & Bird LLP, Attention: Matthew Mamak, 90 Park Avenue, New York, New York 10016. If you would like to request documents, please do so no later than five business days prior to the date of the special meeting, or no later than [January   ], 2019 to receive them before the special meeting. If you request any incorporated documents, the Company will strive to mail them to you by first-class mail, or another equally prompt means, within one business day of receipt of your request.

You should rely only on the information contained in this proxy statement, including the annexes attached hereto or the information incorporated by reference herein, to vote your shares at the special meeting of Company stockholders. The Company has not authorized anyone to provide you with information that differs from that contained in this proxy statement. This proxy statement is dated [December   ], 2018. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders shall not create any implication to the contrary.

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Annex A​

EXECUTION COPY​

STOCK PURCHASE AND MERGER AGREEMENT

BY AND AMONG

AVENUE THERAPEUTICS, INC.,

INVAGEN PHARMACEUTICALS INC.

AND

MADISON PHARMACEUTICALS INC.

DATED AS OF NOVEMBER 12, 2018

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STOCK PURCHASE AND MERGER AGREEMENT

This STOCK PURCHASE AND MERGER AGREEMENT (this “Agreement”) is made and entered into as of November 12, 2018, by and among InvaGen Pharmaceuticals Inc., a New York Corporation (“Buyer”), Madison Pharmaceuticals Inc., a Delaware corporation and a wholly-owned Subsidiary of Buyer (“Merger Sub”), and Avenue Therapeutics, Inc., a Delaware corporation (the “Company”).

RECITALS

A. Buyer desires to purchase from the Company and the Company desires to issue to Buyer Common Shares representing 33.3% of the Fully Diluted Capitalization for $35.0 million and on the terms and subject to the conditions of this Agreement (the “Stock Purchase Transaction”).

B. Following the Stock Purchase Transaction, Buyer desires to acquire the remaining issued and outstanding capital stock of the Company in a reverse subsidiary merger transaction on the terms and subject to the conditions of this Agreement (the “Merger Transaction”).

C. Concurrently with the execution and delivery of this Agreement, Buyer, the Company and certain stockholders of the Company are entering into a stockholders agreement, effective as of the date hereof  (as amended from time to time, the “Stockholders Agreement”) and attached as Exhibit A hereto, providing for certain agreements between Buyer, the Company and such stockholders.

D. The Company desires and Buyer is willing to provide initial financing to the Company in an amount of up to $3.0 million in the form of a line of credit (the “Initial Financing”), up to the First Stage Closing, subject to and governed by the terms of that certain (1) Credit Agreement between the Company and Buyer, to be executed concurrently with the execution and delivery of this Agreement, attached as Exhibit B hereto (the “Credit Agreement”), and (2) Guaranty between Fortress and Buyer, to be executed concurrently with the execution and delivery of this Agreement, attached as Exhibit C hereto (the “Guaranty”), and interim financing to the Company in an amount not to exceed $7.0 million during the time period between the Stock Purchase Transaction and the Merger Transaction, on the terms and conditions described in this Agreement (the “Interim Financing,” and together with the Initial Financing, the Stock Purchase Transaction, the Merger Transaction and the other transactions contemplated by this Agreement and the Ancillary Agreements, the “Transactions”).

E. Concurrently with the execution and delivery of this Agreement, Buyer, the Company and certain stockholders of the Company, have entered into a voting and support agreement, effective as of the date hereof  (as amended from time to time, the “Voting and Support Agreement”) and attached as Exhibit D hereto, pursuant to which such stockholders have agreed, among other things, to vote all of their shares of the Company in favor of the approval and adoption of the Transactions.

F. Concurrently with the execution and delivery of this Agreement, Buyer, the Company and Fortress Biotech, Inc. (“Fortress”), have entered into a waiver and termination agreement, effective as of the date hereof  (as amended from time to time, the “Waiver Agreement”) and attached as Exhibit E hereto, pursuant to which Fortress has agreed to irrevocably waive, subject to the terms of the Waiver Agreement, certain payments otherwise due to it under that certain Amended and Restated Founders Agreement by and between the Company and Fortress dated September 13, 2016 (the “Founders Agreement”) and that certain Management Services Agreement by and between the Company and Fortress dated February 17, 2015, as amended by Amendment No. 1 on May 15, 2017 (the “MSA”), and any and all dividends, payable in cash or equity, under the terms of the Series A Preferred Stock of the Company.

G. Concurrently with the execution and delivery of this Agreement, Buyer and Fortress have entered into a restrictive covenant agreement, effective as of the date hereof  (as amended from time to time, the “Fortress Restrictive Covenant Agreement”), attached as Exhibit F hereto.

H. Concurrently with the execution and delivery of this Agreement, Buyer and Fortress have entered into an indemnification agreement, effective as of the date hereof  (as amended from time to time, the “Indemnification Agreement”), attached as Exhibit G hereto.

I. Concurrently with the execution and delivery of this Agreement, Buyer and Lucy Lu, M.D., have entered into a restrictive covenant agreement, effective as of the date hereof  (as amended from time to time, the “Lu Restrictive Covenant Agreement”), attached as Exhibit H hereto.

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J. Concurrently with the execution and delivery of this Agreement, the Company and Lucy Lu, M.D. have entered into an amendment to an executive employment agreement dated as of June 10, 2015, effective as of the date hereof  (as amended from time to time, the “Amendment to Lu Agreement”), attached as Exhibit I hereto.

K. The respective boards of directors of Buyer, Merger Sub and the Company have unanimously approved and declared advisable the Transactions, including the merger of Merger Sub with and into the Company (the “Merger”), pursuant to which the Company shall continue as the surviving corporation and as a wholly-owned Subsidiary of Buyer, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (“DGCL”), and the board of directors of the Company has resolved to recommend that the Company’s stockholders approve and adopt this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including the Merger.

L. The respective boards of directors of Buyer, Merger Sub and Company have determined that the Transactions are advisable and in the best interest of the stockholders of their respective companies, and accordingly have approved and declared advisable this Agreement and all of the Transactions, including the Merger.

M. The parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also to prescribe various conditions to the Stock Purchase Transaction and the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective representations and warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1.
DEFINITIONS

For purposes of this Agreement, including the recitals, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

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