What was announced today?

Today, we announced that Dermira has entered into a definitive agreement to be acquired by Lilly, a century-old global healthcare leader whose goal is to create medicines that make life better for people around the world. The company is headquartered in Indianapolis, Indiana.

Under the agreement, Lilly will acquire Dermira for $18.75 per share in cash representing a total transaction value of approximately $1.1 billion.

Why does Lilly want to acquire Dermira?

The acquisition will expand Lilly’s immunology pipeline with the addition of lebri and will also expand Lilly’s portfolio of marketed dermatology medicines with the addition of QBREXZA.

Lilly has stated that this transaction provides an opportunity to add both a promising investigational immunology compound in Phase 3 for atopic dermatitis, and an approved dermatology treatment for primary axillary hyperhidrosis.

Did Dermira put itself up for sale or was the company approached by Lilly?

The process of this transaction will be spelled out in detail in the filings we will be making with the SEC and we are not able to comment on it until then. What’s important to know is that our Board has determined that this transaction is in the best interest of the company and stockholders, and that we believe it will provide the resources to advance our programs and offer a chance for our therapies to reach more patients around the world.

How does Lilly see Dermira’s portfolio fitting in with theirs?

Lilly has a vast portfolio of products both currently available to patients and in clinical development. Their intended acquisition of Dermira will help to strengthen their immunology franchise as well as expand their dermatology portfolio.

Will Lilly change or cancel any programs?

Lilly has stated that the acquisition of Dermira provides an opportunity to add both a promising investigational immunology compound in Phase 3 for atopic dermatitis, and an approved dermatology treatment for primary axillary hyperhidrosis.

The integration planning is just beginning. We expect to have more information in the coming days and weeks ahead.

We will communicate information as quickly and as transparently as possible.

What are the next steps in the transaction and when is it expected to close?

Following today’s announcement, Lilly will commence a tender offer to acquire all outstanding shares of Dermira. This process will commence with a public filing of a tender offer document, and Dermira will make its own public filing at the same time. Please review these documents for additional background to the transaction. The close of the transaction is also subject to customary closing conditions and regulatory approvals, which, once cleared, we will announce publicly.

We anticipate the deal to close by the end of 1Q 2020.

Between now and the close of the transaction, Dermira will be an independent company and will continue to run its business as usual.

Is the deal final or could this change?

Today we announced the execution of a definitive merger agreement. The transaction is not complete until it closes, which we expect to happen by the end of 1Q 2020. Until then, we should continue to operate business as usual, keeping our important programs and timelines at front of mind.

Will Dermira operate as a subsidiary of Lilly?

We do not yet know about Lilly’s plans for Dermira organizationally.

Will I still have a role at Dermira and when will I find out?

At this time, the integration planning is just beginning, and we do not know of Lilly’s plans for Dermira employees.

We understand that this period of uncertainty can be difficult and unsettling; however, we are committed to understanding the path forward as quickly as possible, to making sure our employees are treated fairly, and to being as open and transparent with you as we can.

Until we know more, we ask that you stay focused on our priorities to ensure we are moving our programs forward in service of our patients and the dermatology community.

Is there an opportunity for me to join Lilly (regardless of whether or not Dermira is kept as a separate subsidiary)?

At this time, the integration planning is just beginning, and we do not know of Lilly’s plans for Dermira and how the company will be operationally structured. Our priority, however, is ensuring that our employees understand their opportunities and we will provide information about opportunities at Dermira or with Lilly once plans have been finalized.

If we are retained by Lilly, will we be expected to relocate?

At this time, the integration planning is just beginning, and we do not know of Lilly’s plans for Dermira and how we will be operationally structured, so it is too soon to speculate on opportunities at Dermira or with Lilly in the future.

Should I continue coming in to work?

Yes. Between now and the close of the transaction, Dermira and Lilly remain separate companies. Dermira will continue to run its business as usual. If you have questions about programs that should stop or start given today’s announcement, please check with your immediate manager or your department Vice President.

How do we operate in the period between the announcement today and the close of the transaction?

Between now and the close of the transaction, Dermira and Lilly remain separate companies and Dermira will continue to run its business as usual.

Under federal law, Dermira and Lilly are restricted from engaging in joint operations until the transaction has been approved by antitrust authorities.

We do not anticipate any changes to the Dermira organizational structure until the transaction is completed. Having said that, the merger agreement with Lilly requires that we obtain their consent before we take certain actions that are viewed as outside of the ordinary course of business. If you are involved in contract discussions or other decisions that you think are not ordinary course, either because they are bigger than usual, or different from the norm, please contact your immediate manager or your department Vice President before you make any commitments.

If my position is eliminated, will I receive severance? Will I continue to receive benefits? For how long?

Our HR team will be sharing more information with you about our comprehensive benefits. There are plans in place to provide benefits to any employees impacted as a result of the acquisition, including severance and COBRA continuation benefits. Please contact your HR Business Partner if you have questions about this process.

What happens to my compensation and benefits if I continue with Lilly?

At this time, the integration planning is just beginning, and we do not know of Lilly’s plans for Dermira and how we will be operationally structured.

For employees who continue with Lilly after the transaction closes, in general, Lilly will provide you with a base salary and target cash incentive opportunity that are no less favorable than the base salary and the target cash incentive opportunity you currently receive for at least one year following the close of the transaction.

Your benefits will remain unchanged through the close of the transactions and your elections made during Open Enrollment in October 2019 have taken effect as of January 1, 2020. For employees who continue with Lilly, in general, Lilly will provide you with employee benefits that are substantially comparable in the aggregate to those you are currently provided for at least one year following the closing of the transaction.

Will I still receive my 2019 bonus?

Yes. 2019 bonuses will be paid in accordance with Dermira’s ordinary practices. Per company policy, you will need to remain employed by Dermira through the date of the 2019 bonus payout.

What happens to my vested and unvested stock options, RSUs, and ESPP?

Your unvested stock options and RSUs will be accelerated at the close of the transaction. All of your stock options and RSUs will be cashed out in connection with the closing of the merger based on the $18.75 per share price and will be subject to applicable withholding and taxes. In the case of your stock options, your cash out payment will be reduced by the aggregate exercise price of your stock options. Any stock options that have an exercise price that is equal to or greater than $18.75 will be canceled for no consideration.

You have created important value for the company, and it is important that you are rewarded for your efforts and dedication to Dermira and to our programs.

More specifics on this process and the mechanics will be provided in the coming weeks.

What happens to my ESPP?

In the event the closing of the transaction occurs before the end of the current offering period under the ESPP, the offering period will end as of the day immediately prior to the closing of the transaction, and your ESPP contributions will be used to purchase shares of the Company’s common stock. Those shares will be cancelled and converted into the right to receive the $18.75 per share consideration at the closing of the transaction. You may not increase your payroll deductions or purchase elections for the current offering period, and no new participants are permitted to enter the ESPP. In the event the current offering period concludes before the closing of the transaction, a new offering period will not begin.

What happens to my 401K?

Dermira Human Resources will be distributing information about your current benefits, including your 401K, in the coming weeks.

Do I still need to complete my performance review and/or review of my direct reports?

Yes. You will still need to complete your 2019 performance review.

Self-evaluations are due on January 10 and all managers must complete, deliver, and sign-off on all reviews in PerformYard by January 30. Please contact your HRBP if you have any questions about this process.

Will we still receive merit increases and equity awards?

Dermira will conduct the 2020 merit review process in accordance with its ordinary practices. No new equity awards will be granted prior to the close of the transaction.

Should we continue to recruit for any open positions?

Please contact your HR Business Partner if you have open positions. If you have offers out to candidates, please work with your HR Business Partner to determine how to handle each situation.

How does today’s announcement impact employees who have just signed on to join Dermira?

Employees that have already signed on will still join Dermira.

What about our 2020 budgets? Will we still receive our budgets in order to keep programs moving until the close of the transaction and/or integration period? Should we open POs for new work?

Please discuss your 2020 budget with your manager or an appropriate member of the Finance team.

What should I do if I get questions from the media, investors or others?

We are restricted in what can be said prior to the transaction close. Only approved Dermira spokespeople should speak on behalf of the company.

Should you receive an inquiry, politely let them know that you will let a company representative know that they’ve reached out.

Please take their name, phone number and email, and send that information along to the Corporate Communications mailbox (corpcomm@dermira.com).

What should I do if someone from Lilly reaches out to me?

Should you receive a call or email from an employee of Lilly, please notify [X] team of the inquiry.

What happens to our current partnerships (e.g., Maruho, Almirall)?

These partnerships continue as is for the time being.

Should we proceed with planned business travel?

In most instances, yes, please continue to do your job in the ordinary course. If you have a question about it, please discuss with your manager.

Can I post about the acquisition on my social media channels?

You should not post any information on your social media channels about the acquisition.

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