On behalf of the Directors, I am pleased to provide you with this Scheme Booklet to assist you in making a decision on how to vote on the Scheme. If implemented, the Scheme will result in Pfizer Australia Holdings Pty Limited (Pfizer Australia), a wholly-owned Subsidiary of global biopharmaceutical company Pfizer Inc (Pfizer), acquiring all ResApp Health Limited (ResApp) shares.

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The Scheme Consideration of A$0.208 per Scheme Share implies an equity value on a 100% fully diluted basis of approximately A$180 million.

 

The Scheme does not include any funding conditions and Pfizer Australia will fund the Scheme Consideration using funds made available by Pfizer.

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The Directors consider that the Scheme Consideration appropriately reflects the value and quality of ResApp's ability to provide accessible technology for the diagnosis and management of respiratory diseases.

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This Scheme Booklet contains detailed information about the Scheme, including reasons to vote in favour of, or against it and the risks arising in connection with the Scheme.

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RESAPP BOARD RECOMMENDATION

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Your Directors unanimously recommend[2] that you vote in favour of the Scheme, and each Director intends to vote in favour of the Scheme with respect to the ResApp Shares he holds or controls, in each case in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interest of ResApp Shareholders.

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In relation to the recommendations of the Directors, ResApp Shareholders should have regard to the fact that each of the Director Optionholders hold ResApp Options as detailed in Section 11.1 and if the Scheme is implemented, those ResApp Options are entitled to be dealt with in accordance with Section 10.19.

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For the reasons set out in Section 5.5, each Director Option holder considers that, despite these arrangements, it is appropriate for them to make a recommendation in relation to the Scheme.

 

In considering their response to the Scheme, the Directors have carefully considered ResApp’s future growth opportunities, its challenges, risks and the uncertainties of delivering value to ResApp Shareholders superior to the Scheme Consideration. I would like to take this opportunity to highlight the key reasons why the Directors believe that you should vote in favour of the Scheme:

• the Directors unanimously recommend[2] that ResApp Shareholders vote in favour of the Scheme and each Director intends to vote in favour of the Scheme with respect to the ResApp Shares he holds or controls, in each case in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interest of ResApp Shareholders;

• the Directors believe that the Scheme Consideration represents a compelling premium to the recent historical trading prices of ResApp;

• the Directors believe that the Scheme Consideration represents a compelling premium compared to precedent control premiums on completed transactions, paid by acquirers of all ASX-listed companies; 

• the Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, is in your best interests;

• no Superior Proposal has emerged and, as at the date of this Scheme Booklet, the Directors are not aware of any Superior Proposal that is likely to emerge. Given the time elapsed since the Announcement Date ResApp Shareholders should consider whether a Superior Proposal is likely to arise in the circumstances;

• if the Scheme proceeds, Scheme Shareholders will achieve a certain cash price for their investment in ResApp and will avoid the risks associated with the execution of ResApp's long term strategy, including: 

  • the need for further capital to fully develop its products, which may not be available on terms favourable to ResApp, and may be dilutive to ResApp shareholders in the case of additional equity funding;

  • uncertainty as to whether product performance will meet the regulatory requirements for approval in ResApp’s target markets;

  • the need for ResApp to secure a suitable partner or significantly expand its commercial capabilities to successfully commercialise its products;

  • the potential competition from third-party diagnostic devices, which may adversely impact the future potential value of ResApp’s products and market opportunities; 

  • the commercial opportunity for ResApp’s COVID Algorithm remains uncertain as there is no guarantee that the COVID-19 diagnostic market will remain at current levels; and 

  • the significant investment in marketing and education required by ResApp or a suitable partner to drive behaviour away from standard molecular testing toward smartphone-based testing.

• the Scheme has limited conditionality and is not subject to onerous conditions;

• the Scheme Consideration is all cash and provides certainty of value and timing to ResApp Shareholders; and 

• ResApp’s share price may fall if the Scheme does not proceed. Since 8 April 2022, being the last trading day prior to announcement of the Scheme, the All Ordinaries (XAO) index has fallen by 12.4% and the Small Ordinaries (XSO) has fallen by 18.2% as at the Last Practicable Date.

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The Directors also considered the potential disadvantages and the reasons why you may wish to vote against the Scheme including:

• you may disagree with your Directors’ unanimous recommendation[2] or the Independent Expert’s conclusion (as described below);

• you may believe that the Scheme carries risks that you consider unacceptable;

• a Superior Proposal for ResApp, if it were to continue as a stand alone entity, may materialise in the future;

• you may wish to maintain a direct investment in ResApp as an ASX listed company;

• if the Scheme proceeds, you will lose the possibility of receiving the benefit of any future, potentially more favourable, value for your Scheme Shares; and

• the potential tax consequences of the Scheme may not suit your current financial position or tax circumstances.

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In forming their unanimous recommendation[2], your Directors have carefully considered the expected advantages, potential disadvantages and risks of the Scheme and concluded that the expected advantages of the Scheme outweigh the potential disadvantages and risks. Details of the advantages and disadvantages of the Scheme are set out in Section 2 of this Scheme Booklet. 

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INDEPENDENT EXPERT

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ResApp has engaged BDO Corporate Finance (WA) Pty Ltd (BDO) as the Independent Expert to provide an opinion on whether the Scheme is in the best interests of ResApp Shareholders.

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On 30 May 2022, the Independent Expert provided a draft independent expert's report to the ResApp Board (Draft IER) which determined that the value of a ResApp Share (on a controlling interest basis) was $0.146 to $0.277, with a preferred value of $0.207 per ResApp Share.

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Given that the Initial Consideration of $0.115 per Scheme Share was below the range set out in the Draft IER, following receipt of the Draft IER, ResApp and Pfizer Australia engaged in a period of consultation and negotiation and ultimately agreed to revise the scheme implementation deed to, among other things, increase the consideration payable by Pfizer Australia under the Scheme.

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On 14 July 2022, the Independent Expert provided the final independent expert’s report to the ResApp Board (Independent Expert’s Report) which determined that the value of a ResApp Share (on a controlling interest basis) was $0.146 to $0.279, with a preferred value of $0.208 per ResApp Share. A complete copy of the Independent Expert's Report is included in Schedule 2 of this Scheme Booklet.

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On the basis of the Scheme Consideration as set out in the revised scheme implementation deed, the Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, is in the best interests of ResApp Shareholders. As such, the Directors unanimously recommend[1] that ResApp Shareholders vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ResApp Shareholders. Subject to those same qualifications, each Director intends to vote all the ResApp Shares held or controlled by them in favour of the Scheme.

 

IMPLEMENTATION OF THE SCHEME

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Implementation of the Scheme is subject to satisfaction of a number of conditions, including ACCC approval, ResApp Shareholder and Court approval, no ResApp Material Adverse Change or ResApp Regulated Event occurring and certain other conditions summarised in Section 10.14. Pfizer Australia and ResApp have termination rights under the Scheme Implementation Deed in certain circumstances which are summarised in Section 10.16. Details of risks of the Scheme, risks if the Scheme does not proceed and risks relating to ResApp can be found in Section 8.

 

YOUR VOTE IS IMPORTANT

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Your vote is important and I encourage you to vote on the Scheme. In considering your vote I urge you to read this Scheme Booklet (including the Independent Expert's Report) carefully in full, and if required, to seek your own legal, financial, taxation or other professional advice. 

 

The Scheme Booklet will be dispatched to ResApp shareholders shortly after its release to ASX. ResApp shareholders who have elected to receive electronic communications will receive an email containing instructions about how to view or download a copy of the Scheme booklet, as well as instructions on how to lodge their proxies for the Scheme Meeting online. ResApp shareholders who have elected to receive communications via post will receive a printed copy of the Scheme Booklet together with a personalised proxy form. All other ResApp shareholders will receive a letter, together with a personalised proxy form, with instructions about how to view or download a copy of the Scheme Booklet.

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Due to the ongoing coronavirus (COVID-19) pandemic, in the interests of the health and safety of ResApp Shareholders and staff, and uncertainty and disruption associated with Government restrictions on travel and large gatherings, the Scheme Meeting will be held as a hybrid meeting which can be attended virtually or in person. Please refer to Section 4 for information setting out how to participate in and vote at the Scheme Meeting. The Scheme Meeting is being arranged to ensure all ResApp Shareholders can participate, question the Board and have their voices heard on this important decision for ResApp Shareholders.

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If you wish for the Scheme to proceed, it is important that you vote in favour of the Scheme.

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If you require further information or have questions in relation to the Scheme, please visit the Scheme website at www.resappscheme.com contact the contact the ResApp Shareholder Information Line on 1300 620 649 (within Australia) or +61 3 9415 4326 (outside Australia), Monday to Friday between 8:30am and 5:00pm (AEST). 

 

CONCLUSION

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On behalf of the ResApp Board I would like to thank you for your ongoing support of ResApp. We believe the Scheme is an exciting opportunity for ResApp Shareholders. We look forward to your participation at the Scheme Meeting and strongly encourage you to vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ResApp Shareholders.

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Dr Roger Aston
Non-Executive Chairman
ResApp Health Limited

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[1] See section 4.2 for further information.

[2] In relation to the unanimous recommendation of the ResApp Directors refer to Section 5.5 for further details.

[3] The Directors will not receive any money benefit if the Scheme is implemented other than the result of being a holder of ResApp Shares as detailed in Section 11.1(a) and as consideration for the cancellation of ResApp Options held by Director Optionholders as detailed in Section 11.1(b). The cash consideration payable on cancellation of the ResApp Options held by Director Optionholders if the Scheme is implemented is in respect of Dr Anthony Keating an amount of $90,821, Dr Michael Stein an amount of $37,703 and each of Dr Roger Aston and Mr Christopher Ntoumenopoulos an amount of $5,301.

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