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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on April 24, 2017.
Registration No. 333-217214
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Biohaven Pharmaceutical Holding Company Ltd.
(Exact name of registrant as specified in its charter)
British Virgin Islands
(State or other jurisdiction of incorporation or organization) |
2834
(Primary Standard Industrial Classification Code Number) |
Not applicable
(I.R.S. Employer Identification Number) |
c/o Biohaven Pharmaceuticals, Inc.
234 Church Street
New Haven, Connecticut 06510
(203) 404-0410
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Vlad Coric, M.D.
Chief Executive Officer
Biohaven Pharmaceutical Holding Company Ltd.
234 Church Street
New Haven, Connecticut 06510
(203) 404-0410
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o
CALCULATION OF REGISTRATION FEE
|
||||||||
TITLE OF SECURITIES
BEING REGISTERED |
AMOUNT TO BE
REGISTERED (1) |
PROPOSED
MAXIMUM OFFERING PRICE PER SHARE |
PROPOSED
MAXIMUM AGGREGATE OFFERING PRICE (1) |
AMOUNT OF
REGISTRATION FEE (2) |
||||
---|---|---|---|---|---|---|---|---|
Common Shares, no par value |
9,583,333 | $16.00 | $153,333,328 | $17,771.34 | ||||
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer
o
(do not check if a smaller reporting company) |
Smaller reporting company
o
Emerging growth company ý |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ý
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS (Subject to Completion)
Dated April 24, 2017
8,333,333 Shares
COMMON SHARES
Biohaven Pharmaceutical Holding Company Ltd. is offering 8,333,333 of its common shares. This is our initial public offering, and no public market currently exists for our common shares. We anticipate that the initial public offering price of our common shares will be between $14.00 and $16.00 per share.
We have been approved to list our common shares on the New York Stock Exchange under the symbol "BHVN."
We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See "Prospectus SummaryImplications of Being an Emerging Growth Company."
Investing in our common shares involves risks. Please see "Risk Factors" beginning on page 14.
PRICE $ A SHARE
|
Price to
Public |
Underwriting
Discounts and Commissions (1) |
Proceeds,
Before Expenses, to Biohaven |
|||
---|---|---|---|---|---|---|
Per Share |
$ | $ | $ | |||
Total |
$ | $ | $ |
We have granted the underwriters an option to purchase up to 1,250,000 additional common shares at the initial public offering price less the underwriting discount. The underwriters can exercise this option at any time within 30 days after the date of this prospectus.
Certain of our existing principal shareholders, directors and their affiliated entities, including Aisling Capital, RA Capital Management, Venrock and Vivo Capital, have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these entities as they will on any other shares sold to the public in this offering.
The underwriters expect to deliver the common shares to purchasers on or about , 2017.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
MORGAN STANLEY | PIPER JAFFRAY |
BARCLAYS
|
WILLIAM BLAIR |
NEEDHAM & COMPANY
|
, 2017
TABLE OF CONTENTS
Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of our common shares. Our business, financial condition, results of operations, and prospects may have changed since that date.
Through and including , 2017 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
For investors outside the United States: neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States.
This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common shares. You should carefully consider, among other things, our financial statements and the related notes and the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. Unless the context otherwise requires, we use the terms "Biohaven," "company," "we," "us" and "our" in this prospectus to refer to Biohaven Pharmaceutical Holding Company Ltd. and, where appropriate, our subsidiaries.
Overview
We are a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurological diseases, including rare disorders. Our product candidates are small molecules based on two distinct mechanistic platformscalcitonin gene-related peptide, or CGRP, receptor antagonists and glutamate modulatorswhich we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large markets and orphan indications. The most advanced product candidate from our CGRP receptor antagonist platform is rimegepant, which we are developing for the acute treatment of migraine and for which we intend to initiate two Phase 3 clinical trials in the second half of 2017, with topline results expected in the first quarter of 2018. The most advanced product candidate from our glutamate modulation platform is trigriluzole, which we are developing for the treatment of ataxias with an initial focus on spinocerebellar ataxia, or SCA. We have received orphan drug designation from the U.S. Food and Drug Administration, or FDA, for trigriluzole in SCA, and we began a Phase 2/3 clinical trial in SCA in December 2016 and expect to report topline results in the first quarter of 2018. Our second most advanced product candidate from our glutamate modulation platform is BHV-0223, which we are developing for the treatment of amyotrophic lateral sclerosis, or ALS, a neurodegenerative disease that affects nerve cells in the brain and spinal cord. We have received orphan drug designation from the FDA for BHV-0223 in ALS.
We believe many of our product candidates have the potential to be first-in-class or best-in-class treatment options, while others will potentially represent the first available treatment options for their indications. Based on the data from its Phase 2b clinical trial, we believe rimegepant has the potential to be the best-in-class CGRP receptor antagonist for the acute treatment of migraine, having shown statistically significant improvement on the symptoms of pain, nausea, photophobia and phonophobia associated with migraine attacks. To our knowledge, rimegepant is the only small molecule CGRP receptor antagonist currently in development for the acute treatment of migraine to have achieved statistical significance, meaning there is a low probability, typically less than 5%, that the difference happened by chance, on all of these efficacy measures in a single study. We also believe that trigriluzole has the potential to be the first FDA-approved drug treatment option for ataxias. We intend to expedite development of trigriluzole for SCA using the Section 505(b)(2) regulatory pathway and are currently conducting a Phase 2/3 trial that we believe, if successful, may be sufficient to support our application for regulatory approval of trigriluzole. We believe that BHV-0223 has the potential to be the first-in-class sublingual treatment for ALS. BHV-0223 is designed to deliver the unique pharmacologic, glutamate modulation effects of riluzole, which has shown a survival benefit for ALS patients, and which is currently the only treatment for ALS approved by the FDA. We believe BHV-0223 could also provide best-in-class formulation attributes, such as ease of administration, more predictable pharmacokinetic performance, no food effect, reduced drug load and reduced liver exposure.
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Product Candidates
The following table summarizes our lead development programs. We hold the worldwide rights to all of our product candidates.
Our CGRP Receptor Antagonist Platform: Rimegepant and BHV-3500 Targeting Migraine
Our CGRP receptor antagonist platform comprises two product candidates: rimegepant for the acute treatment of migraine and BHV-3500 for the prevention of chronic and episodic migraine. Rimegepant, the lead product candidate, is an orally available, selective and potent small molecule CGRP receptor antagonist. Migraine is both widespread and disabling. The Migraine Research Foundation ranks migraine as the world's third most prevalent illness, and the Global Burden of Disease Study 2010 rates migraine as the seventh highest specific cause of disability worldwide. According to the American Migraine Foundation, migraine affects approximately 36 million people in the United States, and treatment of migraine accounted for an estimated market of approximately $1.9 billion in 2012 in the United States. Current treatment approaches, such as triptans, can be limited by headache recurrence, which are headaches that are relieved and then reoccur within 24 hours after taking migraine medication, and cardiovascular contraindications or warnings. We believe rimegepant has the potential to be a best-in-class CGRP receptor antagonist for the acute treatment of migraine with the ability to address important unmet needs, such as durable efficacy across all four traditional migraine symptoms and reduced incidence of headache recurrence, without contraindications or warnings in patients with cardiovascular disease or hypertension, since its CGRP-based mechanism of action does not involve active vasoconstriction, or the constriction of blood vessels.
In a Phase 2b, double-blind, randomized, placebo-controlled, dose-ranging clinical trial of 812 patients completed by Bristol-Myers Squibb Company, or BMS, rimegepant dosed at 75 mg was observed to have statistically significant improvement as compared to placebo on all four key migraine symptomspain, nausea, photophobia and phonophobiathe four traditional endpoints identified by the FDA for drug approval. To our knowledge based on publicly available information, rimegepant is the only small molecule CGRP receptor antagonist currently in development for the acute treatment of migraine that has achieved statistically significant improvement on all four of the traditional endpoints within a single study. As of December 31, 2016, approximately 687 subjects have received single or multiple doses of rimegepant, no treatment-related serious adverse events have been observed and adverse events have generally been mild and transient in nature. In the second half of 2017, we plan to commence two Phase 3 clinical trials of rimegepant for the acute treatment of migraine, with topline results expected in the first quarter of 2018. We are advancing the 75 mg dose of rimegepant in our Phase 3 clinical trials, as that dose was the lowest
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dose in the Phase 2b trial at which statistically significant improvements as compared to placebo were observed in the four key migraine symptoms, and there did not appear to be additional benefits of higher doses, which is a general characteristic of the dose-response profile of acute treatments for migraine.
Based on the results from the Phase 2b trial and earlier-stage development, we believe rimegepant offers the following clinical and product benefits for the acute treatment of migraine:
BHV-3500, the second product candidate from our CGRP receptor antagonist platform, is a small molecule, structurally distinct from rimegepant, that we are developing for the prevention of chronic and episodic migraine. BHV-3500 is potent, highly soluble and selective at the human CGRP receptor. In addition, BHV-3500 has demonstrated in nonclinical studies characteristics that we believe will make it particularly well suited for daily preventative treatment of chronic and episodic migraine. In 2017, we plan to commence studies to enable an investigational new drug application, or IND, to ultimately pursue clinical trials of BHV-3500 for the prevention of chronic and episodic migraine.
Our Glutamate Modulation Platform: Trigriluzole, BHV-0223 and BHV-5000 Targeting Orphan Neurological Indications
Under our glutamate modulation platform, we are currently developing three product candidates, trigriluzole (previously known as BHV-4157) for the treatment of ataxias, BHV-0223 for the treatment of ALS and BHV-5000 for the treatment of symptoms associated with Rett syndrome, including breathing irregularities. These product candidates modulate the glutamate system via two distinct mechanismsglutamate transporter modulation (trigriluzole and BHV-0223) and glutamate N -methyl-D-aspartate, or NMDA, receptor antagonism (BHV-5000).
Trigriluzole is a third-generation tripeptide prodrug that converts to the active metabolite riluzole that we are developing for the treatment of ataxias. We believe that trigriluzole will qualify as a new chemical entity, or NCE, if it receives regulatory approval by the FDA. Trigriluzole has the potential to be the first
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drug approved by the FDA for the treatment of ataxias, and we have chosen spinocerebellar ataxia, or SCA, as our lead indication. SCA is one of a group of rare genetic disorders that is characterized by slowly progressive incoordination of gait, speech and hand and eye movements. In general, a person with SCA retains full mental capacity but progressively loses physical control over voluntary muscles. According to a 2016 report by Orphanet cataloging the prevalence and incidence of rare diseases, SCA affects approximately 22,000 individuals in the United States. Other ataxias affect an aggregate of greater than 100,000 individuals in the United States. No approved drug treatments for SCA are currently available. We believe that trigriluzole may be effective in the treatment of SCA based on the results of two prior randomized controlled trials conducted by third parties, in which riluzole was observed to have statistically significant improvements in ataxia-related endpoints, and the results of multiple in vivo and in vitro preclinical studies that suggest that trigriluzole may mitigate the limitations of riluzole. As of December 31, 2016, trigriluzole had been dosed in 58 subjects in a Phase 1 clinical trial and has been generally well tolerated, without evidence of novel, clinically significant safety signals or lab abnormalities compared to the active metabolite riluzole. In May 2016, we received orphan drug designation from the FDA for trigriluzole in SCA, and we intend to develop trigriluzole for SCA under Section 505(b)(2) of the U.S. Federal Food, Drug, and Cosmetic Act. We believe our Phase 2/3 clinical trial, which includes Phase 2 elements, such as an early interim analysis of safety or activity, and Phase 3 elements, such as larger patient populations with less restrictive enrollment criteria, if successful, may be sufficient to support our application for regulatory approval of trigriluzole. The primary outcome measure of our Phase 2/3 clinical trial is the change from baseline in a patient's score on the Scale for the Assessment and Rating of Ataxia, or SARA, which is a validated scale that has been used in a third-party clinical trial for the treatment of hereditary ataxias (including SCA), after eight weeks of treatment. We enrolled the first patient in our Phase 2/3 clinical trial in December 2016, and we expect to report topline results from this trial in the first quarter of 2018. If the results of this trial are positive, we anticipate submitting a new drug application, or NDA, to the FDA in 2018.
We believe trigriluzole offers the following potential advantages, compared to orally dosed riluzole:
BHV-0223 is a sublingual, oral disintegrating tablet, or ODT, formulation of riluzole that we are developing for the treatment of ALS. ALS is a progressive neurodegenerative motor neuron disease that affects nerve cells in the brain and the spinal cord. ALS affects up to 20,000 individuals in the United States and typically presents in patients with painless muscle weakness, trouble swallowing and muscle
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atrophy that ultimately progresses to paralysis, impaired breathing and death. Orally administered riluzole, which was approved by the FDA in 1995, remains the only agent shown to extend survival and time to tracheostomy in patients with ALS, although it has significant shortcomings that limit its utility. We believe that BHV-0223 has the potential to significantly improve the treatment of patients with ALS by combining the unique pharmacologic activities of glutamate modulation that are conferred by riluzole with an improved pharmacologic profile that results in easier administration, more predictable pharmacokinetic performance, no food effect, reduced drug load and reduced liver exposure compared to oral riluzole. As of January 31, 2017, BHV-0223 had been dosed in 11 subjects. No treatment-related serious adverse events have been observed and adverse events have generally been mild and transient in nature. In December 2016, we received orphan drug designation from the FDA for BHV-0223 in ALS. In 2017, we plan to commence a bioequivalence study of BHV-0223 40 mg to riluzole 50 mg in healthy volunteers. We plan to subsequently submit an NDA for the use of BHV-0223 in patients with ALS and pursue regulatory approval under the Section 505(b)(2) regulatory pathway.
BHV-5000 is an orally available, first-in-class, low-trapping, NMDA receptor antagonist prodrug of the intravenous drug lanicemine that we are developing for the treatment of symptoms associated with Rett syndrome, including breathing irregularities. Rett syndrome is a rare and severe genetic neurodevelopmental disorder. After six to 18 months of apparently normal post-natal development, patients with Rett syndrome develop global deceleration of psychomotor function, loss of acquired cognitive skills and brain-mediated episodes of transient respiratory suppression. With intensive care, patients may survive into adulthood, yet they are severely physically and cognitively impaired. Rett syndrome affects approximately 15,000 individuals in the United States. No approved drug therapies for Rett syndrome are currently available and care is supportive. We are studying BHV-5000 in Rett syndrome based on results of ketamine studies in preclinical mouse models that have shown improvement in key clinical features of the disease, including the frequency of episodes of respiratory suppression. These preclinical findings are supported by anecdotal clinical reports regarding the use of ketamine, another NMDA receptor antagonist, in patients with Rett syndrome that have been reported to show clinical improvements. As of December 31, 2016, BHV-5000 had been dosed in approximately 40 healthy subjects in a Phase 1 clinical trial conducted by AstraZeneca AB, or AstraZeneca, and has been observed to be well tolerated with no clinically relevant safety signals. BHV-5000's active metabolite, lanicemine, has been administered to approximately 790 subjects in clinical trials conducted by AstraZeneca, in single or multiple doses, and has been observed to be generally well tolerated with most adverse events being mild and transient in nature. We are in the process of developing a commercial formulation of BHV-5000 with acceptable shelf-life and stability at room temperature. After a confirmatory Phase 1 trial, which we plan to commence in 2017, to bridge pharmacokinetics with a prior formulation, we plan to commence a single Phase 2/3 clinical trial of BHV-5000 for the treatment of breathing irregularities associated with Rett syndrome in 2018 which, if successful, we believe may be sufficient to support our application for regulatory approval.
Our Strategy
Our goal is to become a leader in the development of innovative therapies for neurological diseases that have the potential to change current treatment paradigms. The key elements of our strategy to achieve this goal include:
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Our Team
We are led by a team of experienced executives who have held senior research and development positions at leading biotech and large pharmaceutical companies. Members of our management team and board of directors have deep experience leading neuroscience research and have been involved in the development and commercialization of numerous drugs, such as Zoloft, Abilify, Opdivo, Yervoy and Soliris. This depth of experience has facilitated our ability to license important product candidates and intellectual property from top-tier pharmaceutical companies and leading academic institutions, such as AstraZeneca, BMS, ALS Biopharma, Rutgers University, the Massachusetts General Hospital (a teaching hospital of Harvard Medical School) and Yale University. Members of our Scientific Advisory Board hold or have held affiliations with Yale University, Harvard Medical School, the National Institutes of Health and the FDA. We also have ongoing academic collaborations with Johns Hopkins University, Columbia University, Rutgers University and Yale University. We believe the strength of our management team and board of directors positions us well to enter into additional license and collaboration arrangements with world-class institutions.
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Risks Associated with Our Business
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common shares. These risks are discussed more fully in the "Risk Factors" section of this prospectus. These risks include the following:
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Corporate Information
We were incorporated as a business company limited by shares organized under the laws of the British Virgin Islands in September 2013. Our registered office is located at P.O. Box 173, Road Town, Tortola, British Virgin Islands and our telephone number is +1 (284) 852-3000. Our U.S. office and the office of our U.S. subsidiary is located at 234 Church Street, New Haven, Connecticut 06510 and our telephone number is (203) 404-0410. Our website address is www.biohavenpharma.com . The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common shares.
We have three wholly owned subsidiaries, including Biohaven Pharmaceuticals, Inc., a Delaware corporation. Following this offering, we expect to form an additional subsidiary that will be incorporated under the laws of Ireland. We expect that this Irish subsidiary will be the principal operating company for conducting our business and the entity that will hold our intellectual property rights in certain of our product candidates. As a result, we expect that we will become subject to taxation in Ireland in the future.
We have proprietary rights to a number of trademarks used in this prospectus which are important to our business, including the Biohaven logo. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenues during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in 2012. As an emerging growth company, we expect to take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
We may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period,
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including if we become a "large accelerated filer," our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
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Common shares offered |
8,333,333 shares | |
Common shares outstanding after this offering |
32,663,916 shares (33,913,916 shares if the underwriters exercise their over-allotment option in full) |
|
Over-allotment option |
We have granted the underwriters the option, exercisable for 30 days from the date of this prospectus, to purchase up to 1,250,000 additional common shares. |
|
Use of proceeds |
We expect the net proceeds from this offering to be approximately $112.6 million, based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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|
We anticipate that the net proceeds from this offering, together with our existing cash, will be used to advance our CGRP receptor antagonist and glutamate modulation platform product candidates; to repay indebtedness under our credit agreement and notes payable to related parties; to satisfy our obligation to purchase shares of capital stock of a privately held preclinical-stage company; and for working capital and other corporate purposes, including satisfaction of any of our milestone payment obligations under our license agreements. See "Use of Proceeds" on page 78 for additional information. |
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Directed share program |
At our request, the underwriters have reserved for sale at the initial public offering price per share up to 416,667 common shares, or 5% of the common shares offered by this prospectus, to certain individuals through a directed share program, including employees, directors and other persons associated with us. If purchased by these persons, these shares will not be subject to a lock-up restriction, except in the case of shares purchased by any director or officer, which will be subject to a 180-day lock-up restriction. The number of common shares available for sale to the general public will be reduced by the number of reserved shares sold to these individuals. Any reserved shares not purchased by these individuals will be offered by the underwriters to the general public on the same basis as the other common shares offered under this prospectus. See "Underwriting." |
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Risk factors |
See "Risk Factors" beginning on page 14 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common shares. |
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NYSE symbol |
BHVN |
The number of common shares that will be outstanding after this offering is based on 24,330,583 common shares outstanding as of February 28, 2017, after giving effect to (i) the conversion of
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9,358,560 Series A preferred shares outstanding as of February 28, 2017 into an aggregate of 9,358,560 common shares upon the closing of this offering and (ii) the issuance of an aggregate of 1,883,523 common shares to BMS and AstraZeneca in connection with this offering pursuant to our license agreements with BMS and AstraZeneca, and excludes:
Except as otherwise indicated herein, all information in this prospectus, including the number of shares that will be outstanding after this offering, assumes or gives effect to:
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these entities as they will on any other shares sold to the public in this offering.
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SUMMARY CONSOLIDATED FINANCIAL DATA
You should read the following summary consolidated financial data together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2015 and 2016 and the consolidated balance sheet data as of December 31, 2016 from our audited consolidated financial statements appearing at the end of this prospectus. Our historical results are not necessarily indicative of results that may be expected in any future period.
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|
As of December 31, 2016 | |||||||||
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Actual | Pro Forma (2) |
Pro Forma
As Adjusted (3) |
|||||||
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(in thousands)
|
|||||||||
Consolidated Balance Sheet Data: |
||||||||||
Cash |
$ | 23,565 | $ | 62,200 | $ | 169,225 | ||||
Working capital (1) |
16,093 | 54,728 | 166,103 | |||||||
Total assets |
27,017 | 65,652 | 172,543 | |||||||
Notes payable, net of discount |
4,216 | 4,216 | | |||||||
Notes payable to related parties |
595 | 595 | | |||||||
Warrant liability |
780 | 780 | 780 | |||||||
Contingent equity liability |
18,938 | | | |||||||
Convertible preferred shares |
43,270 | | | |||||||
Total shareholders' equity (deficit) |
(45,033 | ) | 55,810 | 167,646 |
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Investing in our common shares involves a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus, including our financial statements and the related notes, before making an investment decision regarding our securities. The risks and uncertainties described below are those significant risk factors, currently known and specific to us, which we believe are relevant to an investment in our securities. If any of these risks materialize, our business, financial condition or results of operations could suffer, the price of our common shares could decline and you could lose part or all of your investment.
Risks Related to Our Financial Position and Need for Additional Capital
We have a limited operating history and have never generated any product revenues, which may make it difficult to evaluate the success of our business to date and to assess our future viability.
We were incorporated in 2013, and our operations to date have been largely focused on organizing and staffing our company, raising capital and in-licensing the rights to, and advancing the development of, our product candidates, including conducting preclinical studies and clinical trials. We have not yet demonstrated an ability to successfully complete later-stage clinical trials, obtain marketing approvals, manufacture products on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products.
We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. We will need to eventually transition from a company with a research and development focus to a company capable of undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in such a transition.
We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
Since our inception, we have incurred significant operating losses. Our net loss was $10.1 million and $63.5 million for the years ended December 31, 2015 and 2016, respectively. As of December 31, 2016, we had an accumulated deficit of $75.5 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. None of our product candidates have been approved for marketing in the United States, or in any other jurisdiction, and may never receive such approval. It could be several years, if ever, before we have a commercialized product that generates significant revenues. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we:
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To become and remain profitable, we must develop and eventually commercialize one or more product candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completing clinical trials of our product candidates, developing commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling any current and future product candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements. We are only in the preliminary stages of most of these activities and, in some cases, have not yet commenced certain of these activities. We may never succeed in any or all of these activities and, even if we do, we may never generate sufficient revenue to achieve profitability.
Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will obtain marketing approval to commercialize any of our product candidates. If we are required by the U.S. Food and Drug Administration, or FDA, or other regulatory authorities such as the European Medicines Agency, or EMA, to perform studies and trials in addition to those currently expected, or if there are any delays in the development, or in the completion of any planned or future preclinical studies or clinical trials of our current or future product candidates, our expenses could increase and profitability could be further delayed.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.
Even if this offering is successful, we will need substantial additional funding to pursue our business objectives. If we are unable to raise capital when needed or on terms favorable to us, we could be forced to curtail our planned operations and the pursuit of our growth strategy.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to develop our product candidates. Our expenses could increase beyond our current expectations if the FDA requires us to perform clinical trials and other studies in addition to those that we currently anticipate. For example, in our trigriluzole clinical program, we recently enrolled the first patient in our Phase 2/3 clinical trial of trigriluzole for the treatment of SCA, and, given the small number of SCA patients, we believe that, if successful, this Phase 2/3 clinical trial will be the only pivotal trial necessary to support regulatory approval. Likewise, due to the small number of patients with Rett syndrome, we believe that BHV-5000 will require only a single pivotal trial. However, the FDA ordinarily requires two well-controlled clinical trials prior to marketing approval of a product candidate. If the FDA requires us to conduct additional clinical trials of
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trigriluzole or BHV-5000, we would incur substantial additional, unanticipated expenses in order to obtain regulatory approval of those product candidates.
In addition, our product candidates, if approved, may not achieve commercial success. Our revenue, if any, will be derived from sales of products that we do not expect to be commercially available for a number of years, if at all. Additionally, if we obtain marketing approval for our product candidates, we expect to incur significant expenses related to manufacturing, marketing, sales and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.
As of December 31, 2016, we had cash of $23.6 million, and in February 2017, we received net cash proceeds of $38.6 million from the sale of Series A preferred shares in connection with the second and final closing of our Series A preferred share financing. We expect that our existing cash, together with the net proceeds from this offering, will enable us to repay our indebtedness and to fund our operating expenses and capital expenditure requirements for at least the next 15 months. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. Changes may occur beyond our control that would cause us to consume our available capital before that time, including changes in and progress of our development activities and changes in regulation. Our future capital requirements will depend on many factors, including:
Even if this offering is successful, we will require additional capital to complete our planned clinical development programs for our current product candidates to seek regulatory approval. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates, if approved.
In addition, we cannot guarantee that future financing will be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities by us, whether
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equity or debt, or the market perception that such issuances are likely to occur, could cause the market price of our common shares to decline. As a result, once we are a listed company in the United States, we may not be able to access the capital markets as frequently as comparable U.S. companies. See "Our status as a British Virgin Islands, or BVI, business company means that our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs" for additional information related to our ability to timely raise capital. If we are unable to obtain funding on a timely basis on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates, if approved, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this prospectus.
Our report from our independent registered public accounting firm for the year ended December 31, 2016 includes an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. After this offering, future reports from our independent registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
We are subject to significant obligations, including to potentially make significant payments under the license agreements by which we acquired the rights to several of our product candidates.
In July 2016, we acquired the rights to rimegepant and another product candidate, BHV-3500, pursuant to a license agreement with Bristol-Myers Squibb Company, or BMS, and in October 2016, we acquired the rights to BHV-5000 pursuant to a license agreement with AstraZeneca AB, or AstraZeneca. We are subject to significant obligations under these agreements, including payment obligations upon achievement of specified milestones and royalties on product sales, as well as other material obligations. We may be obligated to pay BMS up to $127.5 million in development milestones for rimegepant or a derivative thereof, up to $74.5 million in development milestones for any licensed product other than rimegepant, and up to $150.0 million in commercial milestones for each licensed product. We may also be obligated to pay AstraZeneca up to $30.0 million in development milestones for licensed products for the treatment of Rett syndrome, up to $60.0 million in development milestones for licensed products for indications other than Rett syndrome, and up to $120.0 million in commercial milestones. We are also obligated to pay fixed royalties based on net sales of rimegepant, BHV-3500 and BHV-5000, or any other product that is a licensed product under those agreements. If these payments become due under the terms of our license agreements with BMS and AstraZeneca, we may not have sufficient funds available to meet our obligations and our development efforts may be materially harmed.
In addition, our license agreements with BMS and AstraZeneca obligate us to use commercially reasonable efforts to develop and commercialize product candidates, to provide BMS and AstraZeneca with development reports documenting our progress, and to provide them with data from certain clinical trials. In addition, such license agreements provide BMS and AstraZeneca with rights of first negotiation, triggered by their receipt of a summary of certain top-line data from certain of our clinical trials, to regain
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the respective rights we have in-licensed from them. If either BMS or AstraZeneca exercises their right of first negotiation, we will be required to negotiate in good faith with BMS or AstraZeneca, as the case may be, for a specified period of time before we can enter into negotiations with third parties to sublicense these rights. BMS's and AstraZeneca's rights of first negotiation may adversely impact or delay our ability to enter into collaborations with third parties for the development of these compounds. Our license agreement with BMS further provides that any sublicense, other than to an affiliate or a third-party manufacturer, requires BMS' prior written consent, not to be unreasonably withheld or delayed. Our license agreement with AstraZeneca further provides that, except with respect to wholly owned subsidiaries, we cannot assign the agreement without their consent, even in the event of a change of control. This could adversely impact or delay our ability to effect certain transactions.
Moreover, under our agreement with BMS, until 2023, neither we nor our affiliates may, ourselves or through or in collaboration with a third party, engage directly or indirectly in the clinical development or commercialization of competitive compounds related to the CGRP-based mechanism of action of the licensed products. In the event that we are or become non-compliant with this provision due to licensing, collaboration or acquisition activity, we must either divest ourselves of the competitive compound within a certain period of time or negotiate with BMS to have the competitive compound included as a licensed product under our agreement with BMS. The failure to so divest or reach terms with BMS may result in the termination of our license with BMS. These prohibitions could adversely impact or delay our ability to effect certain transactions, such as our ability to acquire or be acquired by a third party.
Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future revenue streams.
Until such time as we can generate substantial product revenue, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and license and development agreements in connection with any future collaborations. We do not have any committed external source of funds. In the event we seek additional funds, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, our existing shareholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common shares. Debt financing, if available, could result in increased fixed payment obligations and may involve agreements that include restrictive covenants, such as limitations on our ability to incur additional debt, make capital expenditures, acquire, sell or license intellectual property rights or declare dividends, and other operating restrictions that could hurt our ability to conduct our business.
Further, if we raise additional capital through collaborations, strategic alliances, or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.
Risks Related to the Development of Our Product Candidates
We depend entirely on the success of a limited number of product candidates, which are in clinical development and none of which have completed a pivotal trial. If we do not obtain regulatory approval for and successfully commercialize one or more of our product candidates or we experience significant delays in doing so, we may never become profitable.
We do not have any products that have received regulatory approval and may never be able to develop marketable product candidates. We expect that a substantial portion of our efforts and expenses over the next few years will be devoted to the development of our product candidates; specifically, the commencement of two Phase 3 trials of rimegepant, the conducting of our ongoing Phase 2/3 trial of trigriluzole, and other preclinical and clinical activities related to BHV-0223, BHV-5000 and BHV-3500. As
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a result, our business currently depends heavily on the successful development, regulatory approval and, if approved, commercialization of these product candidates. We cannot be certain that our product candidates will receive regulatory approval or will be successfully commercialized even if they receive regulatory approval. The research, testing, manufacturing, safety, efficacy, labeling, approval, sale, marketing and distribution of our product candidates are, and will remain, subject to comprehensive regulation by the FDA and similar foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through pre-clinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. Failure to obtain regulatory approval for our product candidates in the United States will prevent us from commercializing and marketing our product candidates. The success of our product candidates will depend on several additional factors, including:
Many of these factors are beyond our control, including the time needed to adequately complete clinical testing, the regulatory submission process, potential threats to our intellectual property rights and changes in the competitive landscape. It is possible that none of our product candidates will ever obtain regulatory approval, even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete clinical trials, obtain regulatory approval or, if approved, commercialize our product candidates, which would materially harm our business, financial condition and results of operations.
Clinical trials are very expensive, time-consuming and difficult to design and implement and involve uncertain outcomes. Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinical studies or clinical trials.
The risk of failure for our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans for use in each target indication. Clinical testing is expensive and can take many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the clinical trial process.
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In addition, the results of preclinical studies and earlier clinical trials may not be predictive of the results of later-stage preclinical studies or clinical trials. The results generated to date in preclinical studies or clinical trials for our product candidates do not ensure that later preclinical studies or clinical trials will demonstrate similar results. Further, we have limited clinical data for each of our product candidates and have not completed Phase 3 clinical trials for any of our product candidates. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical and earlier stage clinical trials. For example, the favorable results of the Phase 2b trial of rimegepant may not be predictive of similar results in subsequent trials. In particular, we are developing a new dosage form of rimegepant for use in our planned Phase 3 clinical trials of rimegepant. We cannot be certain that we will observe the same results in our Phase 3 trials with the new dosage form as we did in the Phase 2b clinical trial of rimegepant. In later-stage clinical trials, we will likely be subject to more rigorous statistical analyses than in completed earlier stage clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in later-stage clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in clinical trial procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial participants. If we fail to produce positive results in our planned pre-clinical studies or clinical trials of any of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be materially adversely affected.
We have limited experience in drug discovery and drug development, and we have never had a drug approved.
Because we in-licensed rimegepant and BHV-3500 from BMS and BHV-5000 from AstraZeneca, we were not involved in and had no control over the preclinical and clinical development of these product candidates prior to entering into these in-license agreements. In addition, we are relying on BMS and AstraZeneca to have conducted such research and development in accordance with the applicable protocol, legal, regulatory and scientific standards, having accurately reported the results of all clinical trials conducted prior to our acquisition of the applicable product candidate, and having correctly collected and interpreted the data from these studies and trials. To the extent any of these has not occurred, our expected development time and costs may be increased, which could adversely affect our prospects for marketing approval of, and receiving any future revenue from, these product candidates.
Clinical trials may be delayed, suspended or terminated for many reasons, which will increase our expenses and delay the time it takes to develop our product candidates.
We may experience delays in our ongoing or future preclinical studies or clinical trials, and we do not know whether future preclinical studies or clinical trials will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. The commencement and completion of clinical trials for our clinical product candidates may be delayed, suspended or terminated as a result of many factors, including:
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We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or Ethics Committees of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, including the FDA's current Good Clinical Practice, or GCP, regulations, or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
We will need to take a variety of steps before commencing our two planned Phase 3 clinical trials and 12-month safety study of rimegepant and our planned clinical trials of BHV-0223 and BHV-5000. With
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respect to rimegepant, we had an end of Phase 2 meeting with the FDA in March 2017 at which we reviewed the Phase 2b clinical trial data with the FDA and presented our overall plan for our planned Phase 3 clinical trials and safety study and our proposed path to registration. At the meeting, we agreed to submit our trial protocols to the FDA prior to the commencement of our Phase 3 trials. The FDA could disagree with the proposed design of our planned Phase 3 clinical trials and safety study and could require, in any trial or all trials, a larger number of patients or a longer course of treatment than our current expectations. If the FDA takes such positions, the costs of our planned Phase 3 clinical trials and safety study of rimegepant could increase significantly and the potential commercialization of rimegepant could be delayed. The FDA also may require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit such data before it will consider a NDA.
In addition, prior to commencing our two planned Phase 3 clinical trials, we will have to:
In order to commence our planned clinical trials of BHV-0223 and BHV-5000, we will have to complete development of a commercial-grade formulation and obtain sufficient clinical supply of both product candidates.
If we experience delays in the commencement or completion of any clinical trial of our product candidates, or if any of our clinical trials are terminated, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenue from sales of any of these product candidates will be delayed or not realized at all.
We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenue from product sales. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates.
The regulatory approval process of the FDA and comparable foreign jurisdictions is lengthy, time-consuming and unpredictable.
Our future success is dependent upon our ability to successfully develop, obtain regulatory approval for and then successfully commercialize one or more of our product candidates. The time required to obtain approval by the FDA is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval is generally uncertain, may change during the course of a product candidate's clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval. Neither we nor any future collaborator is permitted to market any of our product candidates in the United States or abroad until we receive regulatory approval of a New Drug Application, or NDA, from the FDA or approval from the EMA or other applicable foreign regulatory agency.
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Prior to obtaining approval to commercialize a product candidate in any jurisdiction, we must demonstrate to the satisfaction of the FDA, EMA or any comparable foreign regulatory agency, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. The FDA, EMA or any comparable foreign regulatory agency can delay, limit or deny approval of our product candidates or require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:
For example, with respect to our ongoing Phase 2/3 clinical trial for trigriluzole for the treatment of SCA, the FDA has stated that elements of the SARA (i.e., gait, stance, sitting and speech disturbance) appear capable of reflecting a clinically meaningful benefit for patients depending on how the scoring of these items is defined. If the scoring categories are based on clinically important distinctions, use of these items as a primary endpoint in studies intended to support approval could be appropriate. However, the FDA has stated its concern that our use of the SARA scale, as currently constructed, as a primary endpoint is not appropriate in this trial. No drug has been approved for the treatment of SCA and, therefore, a clear regulatory pathway for approval has not previously been established. Although we selected the SARA scale, which is a validated scale that has been used in a third-party clinical trial for the treatment of hereditary ataxias (including SCA), as the primary outcome measure for the trial based on advice of an advisory panel of ataxia experts, we plan to continue to interact with the FDA to discuss its concerns and consider incorporating any feedback in our analysis of the clinical trial data that we collect and measure
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with the SARA. Because we have already begun our Phase 2/3 clinical trial and the FDA has not suggested an alternative scale that it believes would be acceptable to assess clinical benefit in SCA, we have limited options to incorporate an alternate scale that has been validated and is accepted by the field's experts as measuring clinically meaningful changes. As such, we cannot guarantee that the FDA or any future advisory committee will be satisfied with our approach using the SARA. We cannot guarantee that any regulatory agency or future advisory committee would interpret a successful outcome using the SARA as our primary measure in the same fashion that we would.
Any of our current or future product candidates could take a significantly longer time to gain regulatory approval than expected or may never gain regulatory approval. This could delay or eliminate any potential product revenue by delaying or terminating the potential commercialization of our product candidates.
Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.
FDA guidance regarding the approval of drugs for the treatment of acute migraine has recently changed. No drug has been approved under the new guidance, and it is not certain how such guidance will be interpreted and applied by the FDA. We intend to seek advice and guidance from the FDA including, at a minimum, requesting a pre-NDA meeting with the FDA prior to the submission of an NDA for any of our product candidates. If the feedback we receive is different from what we currently anticipate, this could delay the development and regulatory approval process for these product candidates.
We generally plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union and other key global markets. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdiction. Failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. Failure to obtain marketing authorization for our product candidates will result in our being unable to market and sell such products. If we fail to obtain approval in any jurisdiction, the geographic market for our product candidates could be limited. Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates or may grant approvals for more limited patient populations than requested.
Even if we eventually complete clinical testing and receive approval of an NDA or foreign marketing application for our product candidates, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, including Phase 4 clinical trials or the implementation of a Risk Evaluation and Mitigation Strategy, or REMS, which may be required to ensure safe use of the drug after approval. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would adversely impact our business and prospects.
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Our product candidates may fail to demonstrate safety and efficacy in clinical trials, or may cause serious adverse or unacceptable side effects that could prevent or delay regulatory approval and commercialization, limit the commercial profile of an approved label, increase our costs, necessitate the abandonment or limitation of the development of some of our product candidates or result in significant negative consequences following marketing approval, if any.
Before obtaining regulatory approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing. Clinical trials often fail to demonstrate efficacy or safety of the product candidate studied for the target indication.
For example, in its Phase 2b clinical trial, rimegepant dosed at 75 mg showed statistically significant improvement as compared to placebo on all four key migraine symptomspain, nausea, photophobia, phonophobiawhich are inherently subjective endpoints that are difficult to measure. Patients in the trial were provided with an electronic data capturing device, or an electronic subject diary, which they used to record and rank their assessments of pain, nausea, photophobia and phonophobia at specified time points after they had taken the study medication following the occurrence of a moderate to severe migraine headache. The measurements from the trial were based on subjective patient feedback as recorded on their electronic subject diary, which can be influenced by factors outside of our control, and can vary widely from day to day for a particular patient, and from patient to patient and site to site within a clinical study. The placebo effect also tends to have a more significant impact on clinical trials involving subjective measures such as pain.
Moreover, undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label, the limitation of commercial potential or the delay or denial of regulatory approval by the FDA. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Accordingly, we may need to abandon their development or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefit perspective. Prior to any regulatory approval of rimegepant, we would need to complete a 12-month safety study as well as longer-term nonclinical toxicology and carcinogenicity studies. If any of these studies identify safety issues, we may need to complete additional studies, or abandon development of rimegepant. Many compounds that initially showed promise in preclinical or early-stage testing have later been found to cause side effects that restricted their use and prevented further development of the compound in the tested indication.
In animal studies, at very high doses, rimegepant was observed to have a negative effect on the liver. We observed elevated liver enzymes in one patient that received very high doses of rimegepant in a drug-drug interaction study. In the completed Phase 2b trial of rimegepant conducted by BMS, one patient dosed with rimegepant experienced an asymptomatic and mild increase in certain hepatic enzymes, which are a type of liver enzyme measured in a liver function test to detect damage and inflammation to the liver. Even though no patient treated with rimegepant in the Phase 2b trial had liver enzyme elevation that exceeded the level that is considered by the FDA to be a potentially meaningful indicator of severe drug-induced liver injury, we cannot guarantee that these safety and tolerability results will be replicated in our Phase 3 trials, and it is possible that rimegepant may be observed to cause unacceptable levels of adverse effects or serious adverse effects.
In addition, at our end of Phase 2 meeting, the FDA stated its desire to see a safety study in which patients received daily or near-daily dosing of rimegepant for at least three months. This desire stems from the FDA's concern about a potential liver signal with the class of CGRP antagonists. The FDA stated that any risk of liver injury has to be very low and that exposure with the drug has to be sufficient to cap the risk of liver injury at a level acceptable for the migraine population. We believe the design of our long-term
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safety study may adequately address this concern by providing for the enrollment of approximately 600 patients who experience eight or more migraine days per month, who will, in the study, be allowed to use rimegepant on a daily basis, which we believe will generate safety data with respect to long-term, frequent use of rimegepant. However, the FDA may determine that our trial design or the data we collect is insufficient to address their concerns, in which case we could be required to conduct additional trials.
Occurrence of serious treatment-related side effects could impede subject recruitment and clinical trial enrollment or the ability of enrolled patients to complete the trial, require us to halt the clinical trial, and prevent receipt of regulatory approval from the FDA. They could also adversely affect physician or patient acceptance of our product candidates or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability to market the drug could be compromised.
Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If one or more of our product candidates receives regulatory approval, and we, or others, later discover that they are less effective than previously believed, or cause undesirable side effects, a number of potentially significant negative consequences could result, including:
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, and results of operations.
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Our clinical drug development program may not uncover all possible adverse events that patients who use our products may experience. The number of subjects exposed to treatment and the average exposure time in the clinical development program may be inadequate to detect rare adverse events, or chance findings, that may only be detected once our products are administered to more patients and for greater periods of time.
Clinical trials by their nature utilize a sample of the potential patient population. However, with a limited number of subjects and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered when a significantly larger number of patients are exposed to the product.
Although we have monitored the subjects in our studies for certain safety concerns and we have not seen evidence of significant safety concerns in our clinical trials, patients treated with our product candidates, if approved, may experience adverse reactions. If safety problems occur or are identified after one of our products reaches the market, the FDA or comparable foreign regulatory authorities may require that we amend the labeling of our product, recall our product, or even withdraw approval for our product. Serious adverse events deemed to be caused by our product candidates, either before or after receipt of marketing approval, could have a material adverse effect on the development of our drug candidates and our business as a whole.
We depend on enrollment of patients in our clinical trials for our product candidates. If we are unable to enroll patients in our clinical trials, our research and development efforts could be adversely affected.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. Successful and timely completion of clinical trials will require that we enroll a sufficient number of patients who remain in the study until its conclusion. If we are unable to enroll a sufficient number of patients in our clinical trials, our timelines for recruiting patients, conducting clinical trials and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of our clinical trials altogether.
We cannot predict how successful we will be at enrolling patients in future clinical trials. Patient enrollment is affected by other factors including:
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In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process, and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that may lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We have limited financial and managerial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage, and our product liability insurance may not cover all damages from such claims.
We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing, and use of pharmaceutical products. We currently have no products that have been approved for commercial sale. However, the current and future use of product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies, or others selling such products. In addition, we have agreed to indemnify the licensors of the intellectual property related to our product candidates against certain intellectual property infringement claims. Any claims against us, or with respect to which we are obligated to provide indemnification, regardless of their merit, could be difficult and costly to defend or settle, and could compromise the market acceptance of our product candidates or any prospects for commercialization of our product candidates, if approved.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.
Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage each time we commence a clinical trial and if we successfully commercialize any product candidate. As the expense of insurance coverage is increasing, we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
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If serious adverse events or other undesirable side effects are identified during the use of our product candidates in investigator-sponsored trials, it may adversely affect our development of such product candidates.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt nonclinical studies and clinical trials, or could make it more difficult for us to enroll patients in our clinical trials. If serious adverse events or other undesirable side effects or unexpected characteristics of our product candidates are observed in investigator-sponsored trials, further clinical development of such product candidate may be delayed or we may not be able to continue development of such product candidate at all, and the occurrence of these events could have a material adverse effect on our business. Undesirable side effects caused by our product candidates could also result in the delay or denial of regulatory approval by the FDA or other regulatory authorities or in a more restrictive label than we expect.
Risks Related to Commercialization of Our Product Candidates
We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources to successfully commercialize any of our products that receive regulatory approval on our own or together with collaborators.
We have never commercialized a product candidate. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring the rights to our product candidates and undertaking preclinical studies and clinical trials of our product candidates. We currently have no sales force, marketing or distribution capabilities. To achieve commercial success of our product candidates, if any are approved, we will have to develop our own sales, marketing and supply capabilities or outsource these activities to a third party.
Factors that may affect our ability to commercialize our product candidates on our own include recruiting and retaining adequate numbers of effective sales and marketing personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our product candidates and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales and marketing organization requires significant investment, is time-consuming and could delay the launch of our product candidates. We may not be able to build an effective sales and marketing organization in the United States, the European Union or other key global markets. If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidates, we may have difficulties generating revenue from them.
We operate in a highly competitive and rapidly changing industry.
Biopharmaceutical product development is highly competitive and subject to rapid and significant technological advancements. Our success is highly dependent upon our ability to in-license, acquire, develop and obtain regulatory approval for new and innovative products on a cost-effective basis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated, well-established pharmaceutical companies who already possess a large share of the market, specialty pharmaceutical and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in the United States, the European Union and other jurisdictions.
With respect to our CGRP receptor antagonists, rimegepant and BHV-3500, we face competition from other companies that market or are developing migraine treatments. These include products in the class of products known as triptans, including the 5-HT1F receptor antagonist lasmiditan being developed by CoLucid Pharmaceuticals, as well as other small molecule CGRP receptor antagonists such as ubrogepant, being developed by Allergan. These products are more advanced in their clinical development than rimegepant and BHV-3500, and therefore may receive marketing approval before our migraine product candidates receive marketing approval, if at all, which could make it more difficult for our products to achieve commercially reasonable market acceptance. In addition, we expect that our migraine
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product candidates will also compete with opioids and other analgesics, monoclonal antibodies in development and Botox and other treatments that have been approved by the FDA for migraine.
With respect to BHV-0223, which we are developing for the treatment of ALS, we believe our primary competition is Covis Pharmaceuticals, which sells Rilutek, the brand name for riluzole, and the six approved generic versions of Rilutek, which is currently the only approved drug for the treatment of ALS in the United States. We are aware of at least two other companies marketing or planning to market new formulations of riluzole. MonoSol Rx has filed an IND with the FDA to conduct clinical trials for a riluzole oral soluble film, and Italfarmaco SpA, or Italfarmaco, a private Italian company, markets an oral liquid suspension formulation of riluzole in the United Kingdom and elsewhere in Europe under the brand name Teglutik. To our knowledge, no other companies are marketing sublingual formulations of riluzole. Other companies of which we are not aware may also be developing formulations using the API riluzole; if such companies pursued regulatory approval of such product candidates using the Section 505(b)(2) regulatory pathway, those product candidates would potentially compete with BHV-0223. For example, Italfarmaco has obtained orphan designation for Teglutik, and is eligible to obtain orphan exclusivity subject to a showing of clinical superiority to riluzole. If Teglutik is shown to be clinically superior to Rilutek and receives marketing approval before BHV-0223, then BHV-0223 may need to demonstrate clinical superiority to Teglutik to receive marketing approval.
With respect to trigriluzole, which we are currently developing for the treatment of ataxias, with SCA as our initial indication, there are currently no approved drug treatments for spinocerebellar ataxias in the United States. With respect to BHV-5000, which we are developing for the treatment of Rett syndrome, there are currently no approved treatments for Rett syndrome in the United States.
If we expand our development of trigriluzole, BHV-0223 or BHV-5000 into additional neuropsychiatric or other indications, we would face substantial competition from companies that develop or sell products that treat those indications.
Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the biopharmaceutical industry could result in even more resources being concentrated among a small number of our competitors.
Competition may further increase as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop.
Established biopharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving FDA approval for or commercializing drugs before we do, which would have an adverse impact on our business and results of operations.
The availability of our competitors' products could limit the demand and the price we are able to charge for any product candidate we commercialize, if any. The inability to compete with existing or subsequently introduced drugs would harm our business, financial condition and results of operations.
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The successful commercialization of certain of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford products such as our product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize, and attract additional collaboration partners to invest in the development of our product candidates. Coverage under certain government programs, such as Medicare, Medicaid and Tricare, may not be available for certain of our product candidates. Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates and other therapies as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing drugs may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on products that we may develop.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse health care providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.
Obtaining and maintaining reimbursement status is time-consuming and costly. No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale
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of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care services to contain or reduce costs of health care may adversely affect:
Even if we obtain regulatory approval for our product candidates, they will remain subject to ongoing regulatory oversight.
Even if we obtain regulatory approval for any of our product candidates, they will be subject to extensive and ongoing regulatory requirements for manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, sampling and record-keeping. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practices, or cGMP, regulations and good clinical practices, or GCPs, for any clinical trials that we conduct post-approval, all of which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
The FDA's and other regulatory authorities' policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability. Moreover, if there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include:
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If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could adversely affect our business, financial condition and results of operations.
Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
Even if the FDA approves the marketing of any product candidates that we develop, physicians, patients, third-party payors or the medical community may not accept or use them. Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If any of our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue or any profits from operations. The degree of market acceptance of our product candidates that are approved for commercial sale will depend on a variety of factors, including:
Our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of our products, if approved, may require significant resources and may never be successful. Such efforts may require more resources than are typically required due to the complexity and uniqueness of our product candidates. Because we expect sales of our product candidates, if approved, to generate substantially all of our product revenue for the foreseeable future, the failure of our product candidates to find market acceptance would harm our business and could require us to seek additional financing.
In addition, the potential market opportunity for our product candidates is difficult to estimate precisely. Our estimates of the potential market opportunity are predicated on several key assumptions such as industry knowledge and publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions may be inaccurate. If any of the assumptions proves to be inaccurate, then the actual market for our product candidates could be smaller than our estimates of the potential market opportunity. If the actual market for our product candidates is smaller than we expect, or if the products fail to achieve an adequate level of acceptance by physicians,
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health care payors and patients, our revenue from product sales may be limited and we may be unable to achieve or maintain profitability.
We currently have no marketing, sales or distribution infrastructure. If we are unable to develop sales, marketing and distribution capabilities on our own or through collaborations, or if we fail to achieve adequate pricing or reimbursement we will not be successful in commercializing our product candidates, if approved.
We currently have no marketing, sales and distribution capabilities and our product candidates are still in clinical development. If any of our product candidates are approved, we intend either to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize our product candidates, or to outsource these functions to a third party. Either of these options would be expensive and time-consuming. These costs may be incurred in advance of any approval of our product candidates. In addition, we may not be able to hire a sales force that is sufficient in size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our products.
To the extent that we enter into collaboration agreements with respect to marketing, sales or distribution, our product revenue may be lower than if we directly marketed or sold any approved products. In addition, any revenue we receive will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.
If the FDA or comparable foreign regulatory authorities approve generic versions of any of our products that receive marketing approval, or such authorities do not grant our products appropriate periods of exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.
Once an NDA is approved, the product covered thereby becomes a "reference listed drug" in the FDA's publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," commonly known as the Orange Book. Manufacturers may seek approval of generic versions of reference listed drugs through submission of ANDAs in the United States. In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to the reference listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference listed drug is typically lost to the generic product.
The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference listed drug has expired. The FDCA provides a period of five years of non-patent exclusivity for a new drug containing an NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference listed drug.
While we believe that rimegepant contains active ingredients that would be treated as NCEs by the FDA and, therefore, if approved, should be afforded five years of data exclusivity, the FDA may disagree with that conclusion and may approve generic products after a period that is less than five years. Moreover,
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while we believe that trigriluzole, a prodrug of riluzole, and BHV-5000 will also be treated as NCEs under current FDA interpretations, if approved, the FDA may ultimately disagree with our conclusion. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.
Competition that our products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.
Risks Related to Our Dependence on Third Parties
If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.
We are party to several license agreements under which we in-license patent rights and other intellectual property related to or business, including a license agreement with BMS, under which we were granted an exclusive license relating to rimegepant and BHV-3500, a license agreement with ALS Biopharma and FCCDC, pursuant to which we were assigned intellectual property rights relating to trigriluzole, a license agreement with Catalent, pursuant to which we were granted an exclusive license to use their Zydis technology in the development of BHV-0223, and a license agreement with AstraZeneca, pursuant to which we were granted an exclusive license relating to BHV-5000. We have also entered into other license agreements that relate to other patent rights and other indications we are pursuing or may pursue in the future. We may enter into additional license agreements in the future. Our license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. Any uncured, material breach under these license agreements could result in our loss of rights to practice the patent rights and other intellectual property licensed to us under these agreements, and could compromise our development and commercialization efforts for our product candidates. See "BusinessLicense Agreements" for a more detailed description of our current license agreements.
Our intellectual property in-licenses with third parties may be subject to disagreements over contract interpretations, which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.
The agreements under which we currently in-license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations and prospects. If any of our current or future licenses or material relationships or any in-licenses upon which our current or future product candidates are based are terminated or breached, we may:
If we experience any of the foregoing, it could harm our business, financial condition and results of operations.
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We rely on third parties to conduct our preclinical studies and clinical trials and if these third parties perform in an unsatisfactory manner, our business could be substantially harmed.
We intend to conduct our future clinical trials, including our two planned Phase 3 clinical trials of rimegepant and our Phase 2/3 clinical trial of trigriluzole, using our own clinical resources while also leveraging expertise and assistance from CROs as appropriate. We do not currently have the ability to independently conduct large-scale clinical trials, such as a Phase 3 clinical trial, without outside assistance.
We have relied upon and plan to continue to rely upon medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct or assist us in conducting GCP-compliant clinical trials on our product candidates properly and on time, and may not currently have all of the necessary contractual relationships in place to do so. Once we have established contractual relationships with such third-party CROs, we will have only limited control over their actual performance of these activities.
We and our CROs and other vendors are required to comply with cGMP, GCP and GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Union and any comparable foreign regulatory authorities for all of our product candidates in preclinical and clinical development. Regulatory authorities enforce these regulations through periodic inspections of trial sponsors, principal investigators, clinical trial sites and other contractors. Although we rely on CROs to conduct any current or planned GLP-compliant preclinical studies and GCP-compliant clinical trials and have limited influence over their actual performance, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our preclinical studies and clinical trials may be deemed unreliable and the FDA, EMA or any comparable foreign regulatory agency may require us to perform additional preclinical studies and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory agency, such regulatory agency will determine that all of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products produced under cGMP requirements. Our failure to comply with these requirements may require us to repeat clinical trials, which would delay the regulatory approval process.
While we will have agreements governing their activities, our CROs will not be our employees, and we will not be able to control whether or not they devote sufficient time and resources to our future preclinical and clinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our business. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reason, our clinical trials may be extended, delayed or terminated, the clinical data generated in our clinical trials may be deemed unreliable, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed.
If our relationship with these CROs terminates, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus, and could delay development and commercialization of our product candidates. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can negatively impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our
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CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a negative impact on our business and financial condition.
We currently rely on third parties for the production of our clinical supply of our product candidates and we intend to continue to rely on third parties for our clinical and commercial supply.
We currently rely on and expect to continue to rely on third parties for the manufacturing and supply of chemical compounds for the clinical trials of our product candidates and, if approved, our commercial supply. Reliance on third-party suppliers may expose us to different risks than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA or other regulatory authorities pursuant to inspections that will be conducted after we submit our NDA or comparable foreign marketing application to the FDA or other foreign regulatory agency.
Although we have auditing rights with all our manufacturing counterparties, we do not have control over a supplier's or manufacturer's compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters. There can be no assurance that our preclinical and clinical development product supplies will not be limited, interrupted or of satisfactory quality or continue to be available at acceptable prices. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. In the event that any of our manufacturers fails to comply with regulatory requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, or if the FDA or a comparable foreign regulatory agency does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities. Any replacement of our manufacturers could require significant effort, time and expense, which could significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
Any failure to achieve and maintain compliance with these laws, regulations and standards could adversely affect our business in a number of ways, including:
Furthermore, third-party providers may breach agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed.
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In addition, the fact that we are dependent on third parties for the manufacture, storage and distribution of our product candidates means that we are subject to the risk that our product candidates and, if approved, commercial products may have manufacturing defects that we have limited ability to prevent or control. The sale of products containing such defects could result in recalls or regulatory enforcement action that could adversely affect our business, financial condition and results of operations. Our reliance on third parties also exposes us to the possibility that they, or third parties with access to their facilities, will have access to and may appropriate our trade secrets or other proprietary information.
We rely completely on third-party contractors to supply, manufacture and distribute clinical drug supplies for our product candidates, including certain sole-source suppliers and manufacturers; we intend to rely on third parties for commercial supply, manufacturing and distribution if any of our product candidates receive regulatory approval; and we expect to rely on third parties for supply, manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates.
We do not currently have, nor do we plan to acquire, the internal infrastructure or capability to supply, manufacture or distribute preclinical, clinical or commercial quantities of drug substances or products.
Our ability to develop our product candidates depends and our ability to commercially supply our products will depend, in part, on our ability to successfully obtain the APIs and other substances and materials used in our product candidates from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization. If we fail to develop and maintain supply relationships with these third parties, we may be unable to continue to develop or commercialize our product candidates.
We do not have direct control over the ability of our contract suppliers and manufacturers to maintain adequate capacity and capabilities to serve our needs, including quality control, quality assurance and qualified personnel. Although we are ultimately responsible for ensuring compliance with regulatory requirements such as cGMPs, we are dependent on our contract suppliers and manufacturers for day-to-day compliance with cGMPs for production of both APIs and finished products. Facilities used by our contract suppliers and manufacturers to produce the APIs and other substances and materials or finished products for commercial sale must pass inspection and be approved by the FDA and other relevant regulatory authorities. Our contract suppliers and manufacturers must comply with cGMP requirements enforced by the FDA through its facilities inspection program and review of submitted technical information. If the safety of any product or product candidate or component is compromised due to a failure to adhere to applicable laws or for other reasons, we may not be able to successfully commercialize or obtain regulatory approval for the affected product or product candidate, and we may be held liable for injuries sustained as a result. Any of these factors could cause a delay or termination of preclinical studies, clinical trials or regulatory submissions or approvals of our product candidates, and could entail higher costs or result in our being unable to effectively commercialize our approved products on a timely basis, or at all.
We also rely and will continue to rely on certain third parties as the sole source of the materials they supply or the finished products they manufacture. For example, Catalent is the sole-source supplier for the Zydis formulation of BHV-0223. We may also have sole-source suppliers for one or more of our other product candidates. Some of the APIs and other substances and materials used in our product candidates are currently available only from one or a limited number of domestic or foreign suppliers and foreign manufacturers and certain of our finished product candidates are manufactured by one or a limited number of contract manufacturers. In the event an existing supplier fails to supply product on a timely basis or in the requested amount, supplies product that fails to meet regulatory requirements, becomes unavailable through business interruption or financial insolvency or loses its regulatory status as an approved source or if we or our manufacturers are unable to renew current supply agreements when such agreements expire and we do not have a second supplier, we likely would incur added costs and delays in identifying or qualifying replacement manufacturers and materials and there can be no assurance that
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replacements would be available to us on a timely basis, on acceptable terms or at all. In certain cases we may be required to get regulatory approval to use alternative suppliers, and this process of approval could delay production of our products or development of product candidates indefinitely. We and our manufacturers do not currently maintain inventory of these APIs and other substances and materials. Any interruption in the supply of an API or other substance or material or in the manufacture of a finished product could have a material adverse effect on our business, financial condition, operating results and prospects.
In addition, these contract manufacturers are or may be engaged with other companies to supply and manufacture materials or products for such companies, which also exposes our suppliers and manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a contract supplier's or manufacturer's facility. If the FDA or a comparable foreign regulatory agency does not approve these facilities for the supply or manufacture of our product candidates, or if it withdraws its approval in the future, we may need to find alternative supply or manufacturing facilities, which would negatively impact our ability to develop, obtain regulatory approval of or market our product candidates, if approved.
As we prepare for later-stage clinical trials and potential commercialization, we will need to take steps to increase the scale of production of our product candidates, which may include transferring production to new third-party suppliers or manufacturers. In order to conduct larger or late-stage scale clinical trials for our product candidates and supply sufficient commercial quantities of the resulting drug product and its components, if that product candidate is approved for sale, our contract manufacturers and suppliers will need to produce our product candidates in larger quantities, more cost effectively and, in certain cases, at higher yields than they currently achieve. These third-party contractors may not be able to successfully increase the manufacturing capacity for any of such product candidates in a timely or cost-effective manner or at all. Significant scale up of manufacturing may require additional processes, technologies and validation studies, which are costly, may not be successful and which the FDA and foreign regulatory authorities must review and approve. In addition, quality issues may arise during those scale-up activities because of the inherent properties of a product candidate itself or of a product candidate in combination with other components added during the manufacturing and packaging process, or during shipping and storage of the APIs or the finished product. If our third-party contractors are unable to successfully scale up the manufacture of any of our product candidates in sufficient quality and quantity and at commercially reasonable prices, and we are unable to find one or more replacement suppliers or manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and we are unable to successfully transfer the processes on a timely basis, the development of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could significantly harm our business, financial condition, operating results and prospects.
We expect to continue to depend on third-party contract suppliers and manufacturers for the foreseeable future. Our supply and manufacturing agreements, if any, do not guarantee that a contract supplier or manufacturer will provide services adequate for our needs. We and our contract suppliers and manufacturers continue to improve production processes, certain aspects of which are complex and unique, and we may encounter difficulties with new or existing processes. While we attempt to build in certain contractual obligations on such third-party suppliers and manufacturers, we may not be able to ensure that such third parties comply with these obligations. Depending on the extent of any difficulties encountered, we could experience an interruption in clinical or commercial supply, with the result that the development, regulatory approval or commercialization of our product candidates may be delayed or interrupted. In addition, third-party suppliers and manufacturers may have the ability to increase the price payable by us for the supply of the APIs and other substances and materials used in our product candidates, in some cases without our consent.
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Additionally, any damage to or destruction of our third-party manufacturers' or suppliers' facilities or equipment may significantly impair our ability to have our product candidates manufactured on a timely basis. Furthermore, if a contract manufacturer or supplier becomes financially distressed or insolvent, or discontinues our relationship beyond the term of any existing agreement for any other reason, this could result in substantial management time and expense to identify, qualify and transfer processes to alternative manufacturers or suppliers, and could lead to an interruption in clinical or commercial supply.
Our reliance on contract manufacturers and suppliers further exposes us to the possibility that they, or third parties with access to their facilities, will have access to and may misappropriate our trade secrets or other proprietary information.
In addition, the manufacturing facilities of certain of our suppliers are located outside of the United States. This may give rise to difficulties in importing our products or product candidates or their components into the United States or other countries as a result of, among other things, regulatory agency approval requirements or import inspections, incomplete or inaccurate import documentation or defective packaging.
We, or third-party manufacturers on whom we rely, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.
In order to conduct clinical trials of our product candidates and commercialize any approved product candidates, we, or our manufacturers, will need to manufacture them in large quantities. We, or our manufacturers, may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we, or any of our manufacturers, are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of that product candidate may be delayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business. If we are unable to obtain or maintain third-party manufacturing for commercial supply of our product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully.
We may in the future enter into collaborations with third parties to develop our product candidates. If these collaborations are not successful, our business could be harmed.
We may potentially enter into collaborations with third parties in the future. We will face, to the extent that we decide to enter into collaboration agreements, significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time-consuming to negotiate, document, implement and maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we so chose to enter into such arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, including:
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If any such potential future collaborations do not result in the successful development and commercialization of product candidates, or if one of our future collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, the development of our product candidates could be delayed and we may need additional resources to develop our product candidates. In addition, if one of our future collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval and commercialization apply to the activities of our potential future collaborators.
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If we are not able to establish or maintain collaborations, we may have to alter some of our future development and commercialization plans.
Our product development programs and the potential commercialization of our product candidates will require substantial additional capital to fund expenses. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the future development and potential commercialization of those product candidate. Furthermore, we may find that our programs require the use of proprietary rights held by third parties, and the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights.
We face significant competition in seeking appropriate collaborators, and a number of more established companies may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA or similar foreign regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under existing license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. Even if we are able to obtain a license to intellectual property of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to curtail the development of such product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to develop and manufacture our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information,
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such as trade secrets. Despite these contractual agreements with third parties, sharing trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may harm our business.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
Risks Related to Regulatory Compliance
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.
In the United States, the European Union, and other foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changes the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include:
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Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA. In addition, the current administration and Congress will likely continue to seek legislative and regulatory changes, including repeal and replacement of certain provisions of the ACA. In January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In March 2017, following the passage of the budget resolution for fiscal year 2017, the U.S. House of Representatives introduced legislation known as the American Health Care Act, which, if enacted, would have amended or repealed significant portions of the ACA. However, consensus over the scope and content of the American Health Care Act could not be reached by its proponents in the U.S. House of Representatives. Thus, the proposed legislation has been withdrawn and the prospects for legislative action on this bill are uncertain. Congress could consider other legislation to repeal or replace certain elements of the ACA. We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have an adverse effect on our customers and accordingly, our financial operations.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. The U.S. Department of Health and Human Services, or HHS, set a goal of moving 30% of Medicare payments to alternative payment models tied to the quality or value of services by 2016 and 50% of Medicare payments into these alternative payment models by the end of 2018. In March, HHS announced that it has achieved its goal for 2016. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which
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could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize any of our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Although we do not currently have any products on the market, if we obtain FDA approval for our product candidates, and begin commercializing those products in the United States, our operations may be directly, or indirectly through our prescribers, customers and third-party payors, subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal civil and criminal false claims laws and Physician Payments Sunshine Act and regulations. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. These laws may impact, among other things, our current business operations, including our clinical research activities,
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and proposed sales, marketing and education programs and constrain the business of financial arrangements and relationships with healthcare providers, physicians and other parties through which we market, sell and distribute our products for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business. Finally, we may be subject to additional healthcare, statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:
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Children's Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;
Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business and our results of operations.
We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.
We have obtained orphan drug designation in the United States for trigriluzole in SCA and BHV-0223 in ALS. We may seek orphan drug designation for other product candidates in the future. Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States.
Our orphan drug exclusivity for BHV-0223 for ALS is contingent upon a showing that BHV-0223 is clinically superior to Rilutek in the treatment of ALS. Clinical superiority may be demonstrated by showing that a drug has greater effectiveness than the approved drug, greater safety in a substantial portion of the target population, or otherwise makes a major contribution to patient care. If we are unable to demonstrate that BHV-0223 is clinically superior to riluzole, we will not be entitled to the benefits of orphan drug exclusivity for BHV-0223 for ALS, which could adversely affect our business and our ability to market and sell BHV-0223 if it is approved for sale.
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Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same drug for the same indication during that time period. The applicable period is seven years in the United States and ten years in the European Union. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
We cannot assure you that any future application for orphan drug designation with respect to any other product candidate will be granted. If we are unable to obtain orphan drug designation with respect to other product candidates in the United States, we will not be eligible to obtain the period of market exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug designation. Even when we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a later drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our development programs and product candidates. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our current and future product candidates. We have sought to protect our proprietary position by filing and in-licensing patent applications in the United States and abroad related to our development programs and product candidates.
The patent prosecution process is expensive and time-consuming, and we or our licensors may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions. Prosecution of much of our patent portfolio is at a very early stage. None of our owned or in-licensed patents claiming BHV-5000, trigriluzole or BHV-0223 have issued, and applications under the Patent Cooperation Treaty, or PCT, remain pending with respect to trigriluzole and BHV-0223. As applicable deadlines under the PCT become due, we will have to decide whether and where to pursue patent protection for the various inventions claimed in our patent portfolio, and we will only have the opportunity to obtain patents in those jurisdictions where we pursue protection.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our current and future product candidates in the United States or in other foreign countries. Our patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, a patent issues from such applications, and then only to the extent the issued claims cover the technology.
If the patent applications we hold or have in-licensed with respect to our development programs and product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our current and future product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize, products. Any such outcome could have a negative effect on our business.
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The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, EU patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions remain confidential for a period of time after filing, and some remain so until issued. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, and such prior art could potentially invalidate one or more of our patents or prevent a patent from issuing from one or more of our pending patent applications. There is also no assurance that there is not prior art of which we are aware, but which we do not believe affects the validity, patentability or enforceability of a claim in our patents and patent applications, which may, nonetheless, ultimately be found to affect the validity, patentability or enforceability of a claim.
Even if patents do successfully issue and even if such patents cover our current or future product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated or held unenforceable, which could allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, prevent others from designing around our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third parties. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
We, independently or together with our licensors, have filed several patent applications covering various aspects of our product candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent, or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.
Our patents and pending patent applications related to trigriluzole and BHV-0223 only protect or seek to protect the formulation or method of administration of our product candidates and not the active pharmaceutical ingredient, riluzole, a compound for which patent protection is no longer available.
We own several families of patent applications covering prodrugs and formulations of riluzole. These patent applications include several U.S. applications and corresponding PCT applications. These families of patent applications cover trigriluzole and numerous other prodrugs of riluzole as well as BHV-0223, a sublingual or ODT form of riluzole. Other patent applications provide coverage for alternative formulations of riluzole prodrugs and their uses. The applications also cover prodrugs related to riluzole and prodrugs relating to lanicemine. The patent for riluzole, which is the active pharmaceutical ingredient in these product candidates, expired in 2013, and so only novel riluzole-containing pharmaceutical compositions and their uses can be protected by one or more patent applications.
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We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect our ability to develop and market our product candidates.
We cannot guarantee that any of our or our licensors' patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. For example, U.S. applications filed before November 29, 2000 and certain U.S. applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our product candidates. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent's prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our product candidates. We may incorrectly determine that our product candidates are not covered by a third-party patent or may incorrectly predict whether a third party's pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our product candidates.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might, if possible, also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We are dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved. If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties or, in certain cases, we fail to meet certain development deadlines, we could lose license rights that are important to our business.
We are a party to a number of license agreements under which we are granted rights to intellectual property that are important to our business and we may need or choose to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose on us, various development, regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license. Our business could suffer, for example, if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
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Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including:
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We have entered into several licenses to support our various programs. See "BusinessLicense Agreements" for a detailed description of our rights and obligations under these license agreements. Termination of any of these license agreements would have a material adverse impact on our ability to develop and commercialize derived products under each respective agreement.
We may enter into additional licenses to third-party intellectual property that are necessary or useful to our business. Our current licenses and any future licenses that we may enter into impose various royalty payment, milestone, and other obligations on us. Under some license agreements, we may not control prosecution of the licensed intellectual property, or may not have the first right to enforce the intellectual property. In those cases, we may not be able to adequately influence patent prosecution or enforcement, or prevent inadvertent lapses of coverage due to failure to pay maintenance fees. If we fail to comply with any of our obligations under a current or future license agreement, the licensor may allege that we have breached our license agreement, and may accordingly seek to terminate our license. Termination of any of our current or future licenses could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize a product candidate or product, if approved, as well as harm our competitive business position and our business prospects. Under some license agreements, termination may also result in the transfer of or granting in rights under certain of our intellectual property and information related to the product candidate being developed under the license, such as regulatory information.
In addition, if our licensors fail to abide by the terms of the license, if the licensors fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms, our business could suffer.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents
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covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended, and the extension cannot extend the total patent term beyond fourteen years from approval. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Because riluzole has already been approved, we will not be eligible to obtain patent term extension for any of our patents, should they issue, that cover BHV-0223.
If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. If we are unable to license such technology, or if we are forced to license such technology, on unfavorable terms, our business could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.
If we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or technology or impede, delay or prohibit the further development or commercialization of one or more product candidates that rely on such agreements.
Intellectual property rights do not necessarily address all potential threats to our business.
Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before
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patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether.
In addition, the degree of future protection afforded by our intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitor or potential competitors or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
Should any of these events occur, they could have significantly harm our business and results of operations.
Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical
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industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act, or the AIA, was signed into law on September 16, 2011, and many of the substantive changes became effective on March 16, 2013.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a "first-to-file" system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the U.S. Patent and Trademark Office, or USPTO, after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing additional opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
The USPTO has developed in the last few years regulations and procedures to govern administration of the AIA, and many of the substantive changes to patent law associated with the AIA, and, in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the AIA will have on the operation of our business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors' or collaboration partners' patent applications and the enforcement or defense of our or our licensors' or collaboration partners' issued patents, all of which could have an adverse effect on our business and financial condition.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years, such as Association for Molecular Pathology v. Myriad Genetics, Inc. (Myriad I), Mayo Collaborative Services v. Prometheus Laboratories, Inc. , and Alice Corporation Pty. Ltd. v. CLS Bank International , either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent laws has also increased in recent years. For example, the April 2010 amendment of the European Patent Convention, which limited the time permitted for filing divisional applications, was subsequently abrogated. This amendment and subsequent abrogation illustrates the uncertainty involved in the prosecution of European patent laws. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. These changes could limit our ability to obtain new patents in the future that may be important for our business.
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Some intellectual property which we have in-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as "march-in" rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.
Some of the intellectual property rights we have licensed or acquired, including rights licensed to us by Rutgers, the State University of New Jersey, and rights assigned to us by ALS Biopharma, LLC, may have been generated through the use of U.S. government funding and may therefore be subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as "march-in rights"). The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. In addition, the U.S. government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply. Any exercise by the government of certain of its rights could harm our competitive position, business, financial condition, results of operations and prospects.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a negative impact on the success of our business.
Our commercial success depends, in part, upon our ability, and the ability of our future collaborators, to develop, manufacture, market and sell our product candidates, if approved, and use our proprietary technologies without alleged or actual infringement, misappropriation or other violation of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and re-examination proceedings before the USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the intellectual property rights of third parties.
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We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technology, including interference or derivation proceedings, post grant review and inter partes review before the USPTO or similar adversarial proceedings or litigation in other jurisdictions. Similarly, we or our licensors or collaborators may initiate such proceedings or litigation against third parties, including to challenge the validity or scope of intellectual property rights controlled by third parties. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our technology, such as our compositions, formulations, or methods of treatment, prevention or use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires or is finally determined to be invalid, unenforceable or not infringed by our technology. In either case, such a license may not be available on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In such an event, we would be unable to further practice our technologies or develop and commercialize any of our product candidates at issue, which could harm our business significantly.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates, if approved. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. Third parties making such claims may have the ability to dedicate substantially greater resources to these legal actions than we or our licensors or collaborators can. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
We may become involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe or otherwise violate our or our licensors' patents or misappropriate or otherwise violate our or our licensor's other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. Our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable or claims challenging the scope of the intellectual property rights we own or control. In patent litigation in the United States,
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defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, lack of adequate written description or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte re-examinations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we, our licensors and the patent examiner were unaware during prosecution.
For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. Therefore, these patents and applications may not be defended in a manner consistent with the best interests of our business. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such a loss of patent protection could harm our business. In addition, if the breadth or strength of protection provided by our or our licensors' patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
We may not be able to prevent, alone or with our licensors, infringement or misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common shares.
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing, prosecuting and defending patents covering our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Further, licensing partners may not prosecute patents in certain jurisdictions in which we may obtain commercial rights, thereby precluding the possibility of later obtaining patent protection in these countries. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain
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developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents, if obtained, or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights, whether owned or licensed to us, in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets.
Additionally, the requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States, there is no link between regulatory approval of a drug and its patent status. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors' patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. In addition to India, certain countries in Europe and developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors' efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of their former employers or other third parties.
We do and may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our licensors, competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, and we are not currently subject to any claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties, we may in the future be subject to such claims. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
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We may be subject to claims challenging the inventorship or ownership of our patents, patent applications or other intellectual property, or our licensors may be subject to similar such claims.
Although we are not currently experiencing any claims challenging the inventorship or ownership of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor, or that an employee, consultant, or other third party performed work for us that conflicts with that person's obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. While it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. For example, the assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, or we may have disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. This risk similarly applies to any intellectual property that we in-license. If a licensor is subject to a claim challenging inventorship or ownership, it could adversely impact our exclusivity under or rights to use valuable in-licensed intellectual property.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time-consuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
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Our inability to protect our confidential information and trade secrets would harm our business and competitive position.
In addition to seeking patents for some of our technology and product candidates, via intellectual property we own or license, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. We cannot guarantee that our trade secrets and other proprietary and confidential information will not be disclosed or that competitors will not otherwise gain access to our trade secrets. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States may be less willing or unwilling to protect trade secrets. Moreover, if a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us. Any misappropriation, disclosure or independent development of our trade secrets could harm our competitive position.
Trade secrets and know-how can be difficult to protect as trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles, and the movement of personnel skilled in the art from company to company or academic to industry scientific positions. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business, results of operations and financial condition. Even if we are able to adequately protect our trade secrets and proprietary information, our trade secrets could otherwise become known or could be independently discovered by our competitors. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, in the absence of patent protection, we would have no right to prevent them, or those to whom they communicate, from using that technology or information to compete with us.
We may not be able to prevent misappropriation of our intellectual property, trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common shares.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our products, our competitors might be able to enter the market, which would harm our business. In addition, to the extent that we have responsibility for taking any action related to the prosecution or maintenance of patents or patent application in-licensed from a third party, any failure on our part to maintain the in-licensed rights could jeopardize our rights under the relevant license and may expose us to liability.
Risks Related to Our Business Operations, Employee Matters and Managing Growth
Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.
We are highly dependent on the management, development, clinical, financial and business development experience of our senior management. Each of these officers may currently terminate their employment with us at any time and will continue to be able to do so after the closing of this offering. We do not maintain "key person" insurance for any of our executives or employees.
The competition for qualified personnel in the biopharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly-skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to implement business strategy, which could harm our business.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future profitability will depend, in part, on our ability to commercialize our product candidates in markets outside of the United States and the European Union. If we commercialize our product candidates in foreign markets, we will be subject to additional risks and uncertainties, including:
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Foreign sales of our products could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.
Laws and regulations governing our international operations may preclude us from developing, manufacturing and selling certain product candidates and products outside of the United States and require us to develop and implement costly compliance programs.
As we expand our operations outside of the United States, we will be required to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate, as well as with the Foreign Corrupt Practices Act, or FCPA, compliance with which is expensive and difficult, particularly in countries in which corruption is a recognized problem. As a result, these laws may preclude us from developing, manufacturing or selling certain product candidates outside of the United States, which could limit our growth potential and increase our development costs. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA's accounting provisions.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
As of December 31, 2016, we had 12 employees, all of which were employed directly by our U.S. subsidiary, Biohaven Pharmaceuticals, Inc. As our clinical development progresses, we expect to experience growth in the number of our employees and the scope of our operations, particularly in the areas of clinical operations, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and
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continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or unauthorized activities that violates (1) the laws and regulations of the FDA, the EMA and other similar regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities, (2) manufacturing standards, (3) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad and (4) laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of individually identifiable information, including information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product candidates, which could result in regulatory sanctions and serious harm to our reputation.
Although we have adopted a code of business conduct and ethics that will become effective at the completion of this offering, it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, including damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm and the curtailment or restructuring of our operations.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our share price may be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.
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Risks Related to This Offering and Our Common Shares
There has been no public market for our common shares prior to this offering, and an active market in the shares may not develop or be liquid enough for investors to resell our common shares quickly or at the market price.
Prior to this offering, there has been no public market for our common shares. We cannot predict the extent to which an active market for our common shares will develop or be sustained after this offering, or how the development of such a market might affect the market price for our common shares. The initial public offering price of our common shares in this offering will be agreed upon between us and the underwriters based on a number of factors, including market conditions in effect at the time of the offering, which may not be indicative of the price at which our shares will trade following completion of the offering. If an active market for our common shares does not develop or is not sustained, it may be difficult for you to sell shares you purchased in this offering at an attractive price or at all.
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. To the extent that such entities purchase shares in this offering, it would reduce the available public float for our shares because these entities will be restricted from selling the shares by a lock-up agreement they have entered into with the underwriters and/or by restrictions under applicable securities laws. As a result, any purchase of shares by such entities in this offering may reduce the liquidity of our common shares compared to what it would have been had these shares been purchased by investors that were not affiliated with us.
The price of our common shares is likely to be volatile and may fluctuate due to factors beyond our control.
The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of our common shares may fluctuate significantly due to a variety of factors, including:
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These and other market and industry factors may cause the market price and demand for our securities to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their common shares at or above the price paid for the shares and may otherwise negatively affect the liquidity of our common shares. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
Some companies that have experienced volatility in the trading price of their shares have been the subject of securities class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices. Defending against litigation is costly and time-consuming, and could divert our management's attention and resources. Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a negative effect on the market price of our common shares.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common shares and our trading volume could decline.
The trading market for our common shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by equity research analysts. If no or too few securities or industry analysts commence coverage of us, the trading price for our common shares would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the price of our common shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline.
We will incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the stock exchange on which our common shares are listed, and other applicable securities rules and regulations impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management, board of directors and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our management and board of directors. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
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Concentration of ownership of our common shares among our existing executive officers, directors and principal shareholders may prevent new investors from influencing significant corporate decisions.
Following this offering, our directors and executive officers, and entities affiliated with them, as well as holders of more than 5% of our outstanding common shares, in the aggregate will beneficially own 58.3% of our common shares, after giving effect to the issuance of shares in this offering but without giving effect to any purchases by such persons or entities in the offering or the directed share program. These shareholders, acting together, will be able to control or significantly influence all matters requiring shareholder approval, including the election and removal of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. Certain of these persons and entities have indicated an interest in purchasing additional common shares in this offering, which would increase their ownership percentage, and they may further increase their ownership in our company pursuant to the directed share program.
Some of these persons or entities may have interests different than yours. For example, because many of these shareholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other shareholders.
Anti-takeover provisions in our memorandum and articles of association could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management and limit the market price of our common shares.
Provisions in our memorandum and articles of association that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for our common shares, thereby depressing the market price of our common shares. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors. Among other things, these provisions:
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Any provision of our memorandum and articles of association or BVI law that has the effect of delaying or deterring a change of control could limit the opportunity for our shareholders to receive a premium for their common shares, and could also affect the price that some investors are willing to pay for our common shares.
Future sales of our common shares in the public market could cause our share price to fall.
Sales of a substantial number of our common shares in the public market after this offering, or the perception that these sales might occur, could depress the market price of our common shares and could impair our ability to raise capital through the sale of additional equity securities. Upon the closing of this offering, we will have 32,663,916 common shares outstanding, assuming no exercise of outstanding options or the underwriters' option to purchase additional shares.
All of the common shares sold in this offering will be freely tradable without restrictions or further registration under the Securities Act except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. A total of 24,330,583, or 74.5%, of the common shares outstanding immediately after this offering will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for 180 days after the date of this prospectus.
The underwriters may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements with the underwriters prior to expiration of the lock-up period. See "Shares Eligible for Future Sale."
The holders of approximately 23,000,000, or 70.4%, of the common shares outstanding immediately after this offering will be entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investors' rights agreement between such holders and us. See "Description of Share CapitalRegistration Rights." If such holders, by exercising their registration rights, sell a large number of shares, the market price for our common shares could be harmed. If we file a registration statement for the purpose of selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired. We will also file a registration statement on Form S-8 under the Securities Act to register shares for issuance under our equity incentive plans, including our 2014 Equity Incentive Plan and our 2017 Equity Incentive Plan. Our 2017 Equity Incentive Plan will provide for automatic increases in the shares reserved for issuance under the plan which could result in additional dilution to our shareholders. Once we register these shares, they can be freely sold in the public market upon issuance and vesting, subject to any lock-up restrictions of the holder.
Because we do not expect to pay dividends on our common shares in the foreseeable future, capital appreciation, if any, would be your sole source of gain.
We have never declared or paid any dividends on our common shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. The decision to pay future dividends to shareholders will be at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.
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If you purchase common shares in this offering, you will suffer immediate dilution of your investment.
The assumed initial public offering price of our common shares is substantially higher than the pro forma as adjusted net tangible book value per share. Therefore, if you purchase common shares in this offering, you will pay a price per share that substantially exceeds the book value per share of our tangible assets, after subtracting our liabilities, after this offering. Based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, you will experience immediate dilution of $9.87 per common share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common shares in this offering will have contributed approximately 55.6% of the aggregate price paid by all purchasers of our common shares but will own only approximately 25.5% of our common shares outstanding after this offering. To the extent options or warrants are exercised, you will incur further dilution. See the section of this prospectus entitled "Dilution."
We will have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common shares. We intend to use the net proceeds from this offering to conduct our two planned Phase 3 clinical trials of rimegepant for the acute treatment of migraine; to fund continued research and development of BHV-3500 for the prevention of chronic and episodic migraine; to complete our ongoing Phase 2/3 clinical trial of trigriluzole for the treatment of spinocerebellar ataxia; to fund continued research and development of BHV-5000 for the treatment of symptoms associated with Rett syndrome, including completion of our planned Phase 1 clinical trial for this indication; to fund other research and development activities, including development of BHV-0223 for the treatment of ALS; to repay indebtedness outstanding under our credit agreement and notes payable to related parties; and for working capital and other general corporate purposes, including the satisfaction of any milestone payment obligations under our license agreements. The failure by our management to apply these funds effectively could result in financial losses that could have an adverse effect on our business, cause the price of our common shares to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to "emerging growth companies" will make our common shares less attractive to investors.
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an "emerging growth company," we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an "emerging growth company," we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an "emerging growth company." We could be an "emerging growth company" for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our common shares held by non-affiliates exceeds $700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an "emerging growth company" as of the following December 31 (our fiscal year end). We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If
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some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common shares.
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common shares.
Prior to the completion of this offering, we have been a private company with limited accounting personnel and other resources to address our internal control over financial reporting. In preparation of our financial statements to meet the requirements of this offering, we determined that material weaknesses in our internal control over financial reporting existed during each of fiscal 2014 and 2015 and remained unremediated as of December 31, 2016. These material weaknesses in our internal control over financial reporting are described below.
We did not design or maintain an effective control environment commensurate with our financial reporting requirements. We lacked a sufficient number of trained professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. This material weakness contributed to the following material weaknesses:
These material weaknesses contributed to several accounting adjustments being made to our financial statements for the years ended December 31, 2014, 2015 and 2016 and the nine months ended September 30, 2015 and 2016 related to our accounting for our license agreement obligations, income taxes, variable interest entities, share-based compensation, derivative liabilities, warrants and contingent equity, research and development expense, general and administrative expense, and other income (expense). In addition, these material weaknesses contributed to the restatement of our financial statements for the nine months ended September 30, 2016 related to our accounting for license agreement obligations.
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We identified an additional material weakness as a result of the material weakness in our control environment in that we did not design and maintain controls over the operating effectiveness of information technology, or IT, general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain effective controls over program change management; user access, including segregation of duties; or computer operations.
These IT deficiencies did not result in a material misstatement to our financial statements; however, the deficiencies, when aggregated, could impact the effectiveness of IT-dependent controls, such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports.
Each of the control deficiencies could result in a misstatement of these accounts or disclosures that would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute material weaknesses.
We have initiated remediation efforts focused on improving our internal control over financial reporting and to specifically address the control deficiencies that led to our material weaknesses. These efforts include the following:
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. In addition, neither our management nor an independent registered public accounting firm has ever performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result.
You may have fewer protections as a shareholder of our company, as the rights of shareholders under British Virgin Islands law differ from those under U.S. law.
Our corporate affairs will be governed by our memorandum and articles of association, the BVI Business Companies Act, 2004, or the BVI Act, and the common law of the BVI. The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under BVI law are to a large extent governed by the common law of the BVI and by the BVI Act. The common law of the BVI is derived in part from comparatively limited judicial
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precedent in the BVI as well as from English common law, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities of our directors under BVI law therefore are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law.
As a result of all of the above, holders of our common shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company. They may have greater difficulty securing legal advice about the law of the BVI than they would U.S. and state law, and the relatively less developed nature of that country's securities law may leave investors with less certainty about the validity and strength of any claims they believe they may have against us. In addition, other differences between BVI and U.S. law, as well as the terms of our articles of association, may result in shareholders having different potential influence than they would under various U.S. state laws with respect to matters such as officer and director actions, mergers and acquisitions, takeover efforts, and other corporate decision making. For a discussion of significant differences between the provisions of the BVI Act and the laws applicable to companies incorporated in the United States and their shareholders, see "Description of Share CapitalDifferences in Corporate Law."
Shareholders in BVI business companies may not be able to initiate shareholder derivative actions, thereby depriving a shareholder of the ability to protect its interests.
While statutory provisions do exist in BVI law for derivative actions to be brought in certain circumstances, shareholders in BVI business companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a BVI business company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The BVI courts are also unlikely to: (i) recognize or enforce against us judgments of courts in the United States based on certain civil liability provisions of U.S. securities law; or (ii) to impose liabilities against us, in original actions brought in the BVI, based on certain civil liability provisions of U.S. securities laws that are penal in nature or that relate to taxes or similar fiscal or revenue obligations or would be viewed as contrary to British Virgin Island public policy or the proceedings pursuant to which judgment was obtained were contrary to natural justice. There is no statutory recognition in the BVI of judgments obtained in the United States, although any final and conclusive monetary judgment obtained against a BVI business company in a U.S. court, for a definite sum, may be treated by the courts of the BVI as a cause of action in itself so that no retrial of the issues would be necessary provided that in respect of the judgment of the U.S. court:
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The laws of the BVI relating to the protection of minority shareholders differ from those under U.S. law and, in some circumstances, may offer less protection.
The BVI Act includes the following statutory remedies which minority shareholders in the company can rely upon:
In addition to the statutory rights outlined above, there are common law rights for the protection of shareholders that may be invoked, largely dependent on English common law. Under the general rule pursuant to English common law known as the rule in Foss v. Harbottle , a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company's memorandum and articles of association, then the courts will grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of the shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the United States.
Having regard to the above, the protection available to minority shareholders under BVI law may be more limited than under the laws of some jurisdictions in the United States.
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It may be difficult to enforce a U.S. or foreign judgment against us, our directors and officers named in this prospectus outside the United States, or to assert U.S. securities laws claims outside of the United States.
As a BVI business company, it may be difficult for a shareholder to effect service of process within the United States upon us, our directors and officers, or to enforce against us, or them, judgments obtained in U.S. courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state therein. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the United States. Foreign courts may refuse to hear a U.S. securities law claim because foreign courts may not be the most appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides.
Changes in tax law, determinations by tax authorities or changes in our effective tax rates may adversely affect our business and financial results.
Under current law, we expect to be treated as a non-U.S. corporation for U.S. federal income tax purposes. The tax laws applicable to our business activities, however, are subject to change and uncertain interpretation. Our tax position could be adversely impacted by changes in tax rates, tax laws, tax practice, tax treaties or tax regulations or changes in the interpretation thereof by the tax authorities in jurisdictions in which we do business. Our actual tax rate may vary from our expectation and that variance may be material. A number of factors may increase our future effective tax rates, including: (1) the jurisdictions in which profits are determined to be earned and taxed; (2) the resolution of issues arising from any future tax audits with various tax authorities; (3) changes in the valuation of our deferred tax assets and liabilities; (4) our ability to use net operating loss carryforwards to offset future taxable income and any adjustments to the amount of the net operating loss carryforwards we can utilize; and (5) changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles.
As a company organized under the laws of the BVI, we are principally subject to taxation in the BVI. Under the current laws of the BVI, tax on a company's income is assessed at a zero percent tax rate. For U.S. federal tax purposes, a corporation is generally considered a "domestic corporation" if it is incorporated or organized in the United States, and a "foreign corporation" if it is incorporated or organized in a non-U.S. jurisdiction. Because we are a British Virgin Islands incorporated entity, we would be classified as a foreign corporation under these general rules. Section 7874 of the Code, or Section 7874, however, contains rules that can result in a foreign corporation being treated as a domestic corporation for U.S. federal tax purposes. Under Section 7874, a foreign corporation will nevertheless be treated as a domestic corporation for U.S. federal tax purposes if (1) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a domestic corporation (including the indirect acquisition of assets by acquisition of all the outstanding shares of a domestic corporation), (2) the shareholders of the acquired domestic corporation hold at least 80% (by either vote or value) of the shares of the acquiring foreign corporation after the acquisition by reason of holding shares in the acquired domestic corporation (including the receipt of the foreign corporation's shares in exchange for the domestic corporation's shares) (the "ownership test"), and (3) the foreign corporation's "expanded affiliated group" does not have substantial business activities in the foreign corporation's country of organization or incorporation relative to the expanded affiliated group's worldwide activities. For purposes of Section 7874, "expanded affiliated group" means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the shares by vote and value.
On December 31, 2016, the Company entered into an agreement with the stockholders of Biohaven Pharmaceuticals, Inc., a Delaware corporation, or BPI, to purchase all of the outstanding capital stock of BPI for an aggregate purchase price of $0.6 million, payable by the issuance of Company promissory notes
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to each BPI stockholder (see "Certain Relationships and Related Party TransactionsTransactions with Biohaven Pharmaceuticals, Inc."). Although the Company and BPI had certain shareholders in common before December 31, 2016, based on the rules for determining share ownership under Section 7874, we believe the stockholders of BPI owned less than 80% of our company. Accordingly, we do not believe that this transaction meets the ownership test under Section 7874 and therefore do not believe that we should be treated as a domestic corporation for U.S. federal tax purposes. However, the tax law in this area could be changed, including changed on a retroactive basis, and the application of Section 7874 to our acquisition of BPI could substantially increase our effective tax rate.
We may also become subject to income, withholding or other taxes in jurisdictions by reason of our activities and operations, and it is possible that taxing authorities in such jurisdictions could assert that we are subject to greater taxation than we currently anticipate. For example, following this offering, we expect to form an Irish subsidiary that will be the principal operating company for conducting our business and the entity that will hold our intellectual property rights in certain of our product candidates. This new Irish subsidiary would be subject to taxation in Ireland. In addition to the establishment of this Irish entity as our principal operating company, we, as the parent company, may also be subject to taxation in Ireland in the future, even as we remain a company organized under the laws of the BVI. Any of these transactions may result in higher tax liabilities and a higher overall effective tax rate. Any significant increase in our future effective tax rates could reduce net income for future periods.
If we are a passive foreign investment company there could be adverse U.S. federal income tax consequences to U.S. holders.
Under the Code, we will be a passive foreign investment company, or PFIC, for any taxable year in which (1) 75% or more of our gross income consists of passive income or (2) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, passive income. For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property and certain rents and royalties. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets and received directly its proportionate share of the income of such other corporation. If we are a PFIC for any taxable year during which a U.S. holder holds our shares, the U.S. holder may be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC, including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements.
Although we do not believe we were a PFIC for our taxable year ended December 31, 2016, and do not currently expect to be a PFIC for our current taxable year or future taxable years, we cannot provide any assurances regarding our PFIC status for any past, current or future taxable years. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies which in some circumstances are unclear and subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our shares from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which, in our current and future taxable years, we may not be able to fully control, for example, with respect to income attributed to us from entities owned 25% or more by us. The composition of our income and assets is also affected by how, and how quickly, we spend the cash we raise in any offering, including this offering.
In certain circumstances, a U.S. holder of shares in a PFIC may alleviate some of the adverse tax consequences described above by making a "qualified electing fund", or QEF, election to include in income its pro rata share of the corporation's income on a current basis. However, a U.S. holder may make
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a qualified electing fund election with respect to our common shares only if we agree to furnish such U.S. holder annually with a PFIC annual information statement as specified in the applicable U.S. Treasury Regulations. We currently do not intend to prepare or provide the information that would enable U.S. holders to make a QEF election if we are treated as a PFIC for any taxable year, and prospective investors should assume that a QEF election will not be available.
For further discussion of the PFIC rules and the adverse U.S. federal income tax consequences in the event we are classified as a PFIC, see the section of this prospectus entitled "Material United States Federal Income Considerations For U.S. HoldersPassive Foreign Investment Company Considerations."
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "design," "intend," "expect," "could," "plan," "potential," "predict," "seek," "should," "would" or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements include, but are not limited to, statements concerning the following:
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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We obtained the industry, market and competitive position data used throughout this registration statement from our own internal estimates and research, as well as from industry and general publications, in addition to research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In addition, while we believe the industry, market and competitive position data included in this registration statement is reliable and is based on reasonable assumptions, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed in "Risk Factors." These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
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We estimate that the net proceeds from our issuance and sale of common shares in this offering will be approximately $112.6 million, or approximately $130.1 million if the underwriters exercise their over-allotment option in full, based upon an assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $7.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 shares in the number of common shares we are offering would increase or decrease the net proceeds to us from this offering by $14.0 million, assuming no change in the assumed initial public offering price.
We currently estimate that we will use the net proceeds from this offering, together with our existing cash, as follows:
In the ordinary course of our business, we expect to from time to time evaluate the acquisition of, investment in or in-license of complementary products, technologies or businesses, and we could use a portion of the net proceeds from this offering for such activities. We currently do not have any agreements, arrangements or commitments with respect to any potential acquisition, investment or license, other than the Kleo investment described above.
This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. Predicting the cost necessary to develop product candidates can be difficult and the amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the status of and results from clinical trials, any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs.
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Based on our current operational plans and assumptions, we expect that the net proceeds from this offering, together with our existing cash, will be sufficient to fund our operations through July 31, 2018, including the repayment of our outstanding debt, and, with respect to our planned and ongoing clinical trials, will be sufficient to enable us to complete our two planned Phase 3 clinical trials of rimegepant and complete our Phase 2/3 clinical trial of trigriluzole. However, we expect that we will require additional funds to complete the development of rimegepant for the treatment of acute migraine, including for the completion of our planned long-term safety study. With respect to the continued research and development of BHV-3500 and BHV-5000, we expect that we may require additional funds as these programs progress, the amounts of which will depend on the ultimate clinical development paths we pursue. However, our plans and assumptions could be wrong and we may need to raise additional capital in order to complete our planned and ongoing trials and any potential future trials that may be required by regulatory authorities. We may need to raise additional capital through public and private equity offerings, debt financings, strategic partnerships, alliances and licensing arrangements, or a combination of the above.
We incurred the indebtedness under the one-year credit agreement with Wells Fargo in August 2016 in the principal amount of $5.0 million to satisfy our payment obligations under our license agreement with BMS. The one-year credit agreement matures on August 30, 2017, and borrowings under the agreement bear interest at a rate equal to monthly LIBOR plus 1.50% per annum. As of December 31, 2016, the interest rate applicable to the borrowings under the one-year credit agreement was 2.27% per annum. In connection with this credit agreement, Wells Fargo required that we obtain a personal guaranty of our loan obligations from one of our directors, John Childs. Another one of our directors, Gregory Bailey, provided a further guaranty related to the credit agreement. We incurred the indebtedness under our notes payable in the aggregate amount of $0.6 million in consideration for the acquisition of 100% of the capital stock of BPI on December 31, 2016. We issued the notes to the holders of the capital stock of BPI, which consisted of Declan Doogan, the chairman of our board of directors; family trusts associated with Vlad Coric, our chief executive officer and one of our directors; and a family trust associated with Robert Berman, our chief medical officer. The notes mature on December 31, 2021, but are mandatorily payable upon the consummation of this offering, and the interest on the notes accrues at a rate of 4.5% per annum.
As of December 31, 2016, we owned approximately 18.6% of the outstanding shares of Kleo and two of our outside directors serve as Kleo directors, resulting from our arm's-length investment in Kleo in August 2016. In connection with our initial investment, we committed to make additional investments totaling $5.5 million in Kleo, subject to certain conditions, and in March 2017, we satisfied our first purchase obligation by purchasing 1,375,000 shares of Kleo common stock for cash consideration of $1.4 million.
Our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds from this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending these uses, we plan to hold these net proceeds in non-interest bearing accounts, with the goal of capital preservation and liquidity so that such funds are readily available to fund our operations.
We have never declared or paid any dividends on our common shares. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.
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The following table sets forth our cash and our capitalization as of December 31, 2016:
The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the following table in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus, and the
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sections of this prospectus titled "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of Share Capital."
|
As of December 31, 2016 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Actual | Pro Forma |
Pro Forma
As Adjusted (1) |
|||||||
|
(in thousands, except share and per
share data) |
|||||||||
Cash |
$ | 23,565 | $ | 62,200 | $ | 169,225 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Notes payable, net of discount |
$ | 4,216 | $ | 4,216 | $ | | ||||
Notes payable to related parties |
595 | 595 | | |||||||
Warrant liability |
780 | 780 | 780 | |||||||
Contingent equity liability |
18,938 | | | |||||||
Series A convertible preferred shares, no par value; 11,242,172 shares authorized, 4,948,369 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted |
43,270 | | | |||||||
Shareholders' equity (deficit): |
||||||||||
Preferred shares, no par value; no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted |
| | | |||||||
Common shares, no par value; 38,000,000 shares authorized, 13,088,500 shares issued and outstanding, actual; 200,000,000 shares authorized, 24,330,583 shares issued and outstanding, pro forma; 200,000,000 shares authorized, 32,663,916 shares issued and outstanding, pro forma as adjusted |
19,944 | 120,787 | 233,407 | |||||||
Additional paid-in capital |
10,479 | 10,479 | 10,479 | |||||||
Accumulated deficit |
(75,456 | ) | (75,456 | ) | (76,240 | ) | ||||
| | | | | | | | | | |
Total shareholders' equity (deficit) |
(45,033 | ) | 55,810 | 167,646 | ||||||
| | | | | | | | | | |
Total capitalization |
$ | 22,766 | $ | 61,401 | $ | 168,426 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, total shareholders' equity and total capitalization by $7.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. An increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, total shareholders' equity and total capitalization by $14.0 million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions.
The number of common shares outstanding in the table above does not include:
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If you invest in our common shares in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per common share and the pro forma as adjusted net tangible book value per common share immediately after this offering.
Our historical net tangible book value (deficit) as of December 31, 2016 was $(45.2) million, or $(3.45) per common share. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and the carrying value of convertible preferred shares, which is not included within shareholders' equity (deficit). Historical net tangible book value per share represents historical net tangible book value (deficit) divided by the 13,088,500 common shares outstanding as of December 31, 2016.
Our pro forma net tangible book value as of December 31, 2016 was $55.7 million, or $2.29 per common share. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to:
Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the total number of shares outstanding as of December 31, 2016, after giving effect to the pro forma adjustments described above.
After giving further effect to (i) our issuance and sale of 8,333,333 common shares in this offering at an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) the repayment of $5.6 million of aggregate indebtedness under our credit agreement and our notes payable to related parties using a portion of the net proceeds from this offering, our pro forma as adjusted net tangible book value as of December 31, 2016 would have been $167.6 million, or $5.13 per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $2.84 to existing shareholders and immediate dilution in pro forma as adjusted net tangible book value per share of $9.87 to new investors purchasing common shares in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed
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initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share |
$ | 15.00 | |||||
Historical net tangible book value (deficit) per share as of December 31, 2016 |
$ | (3.45 | ) | ||||
Increase per share attributable to the pro forma adjustments described above |
5.74 | ||||||
| | | | | | | |
Pro forma net tangible book value per share as of December 31, 2016 |
2.29 | ||||||
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing common shares in this offering and the repayment of our indebtedness |
2.84 | ||||||
| | | | | | | |
Pro forma as adjusted net tangible book value per share after this offering |
5.13 | ||||||
| | | | | | | |
Dilution per share to new investors purchasing common shares in this offering |
$ | 9.87 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value after this offering by $0.24 per share and the dilution to new investors purchasing common shares in this offering by $0.76 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discount and commissions. An increase of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value after this offering by $0.26 per share and decrease the dilution to new investors purchasing common shares in this offering by $0.26 per share, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions. A decrease of 1,000,000 shares in the number of shares offered by us would decrease the pro forma as adjusted net tangible book value after this offering by $0.28 per share and increase the dilution to new investors purchasing common shares in this offering by $0.28 per share, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions.
If the underwriters exercise their over-allotment option in this offering in full, the pro forma as adjusted net tangible book value per share after this offering would be $5.46 per share, and the dilution in pro forma as adjusted net tangible book value per share to new investors purchasing common shares in this offering would be $9.54 per share, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table summarizes, on the pro forma as adjusted basis described above, the total number of common shares purchased from us on an as converted to common share basis, the total consideration paid or to be paid, and the average price per share paid or to be paid by existing shareholders and by new investors in this offering at an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:
|
Shares Purchased | Total Consideration |
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Average Price
Per Share |
|||||||||||||||
|
Number | Percentage | Amount | Percentage | ||||||||||||
Existing shareholders |
24,330,583 | 74.5 | % | $ | 99,755,146 | 44.4 | % | $ | 4.10 | |||||||
New investors |
8,333,333 | 25.5 | 124,999,995 | 55.6 | $ | 15.00 | ||||||||||
| | | | | | | | | | | | | | | | |
Total |
32,663,916 | 100.0 | % | $ | 224,755,141 | 100.0 | % | |||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease)
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the total consideration paid by new investors by $8.3 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 1.6 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 1.7 percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $15.0 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 2.8 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 3.2 percentage points, assuming no change in the assumed initial public offering price.
The table above assumes no exercise of the underwriters' over-allotment option in this offering. If the underwriters' over-allotment option is exercised in full, the number of common shares held by new investors purchasing common shares in this offering would be increased to 28.3% of the total number of common shares outstanding after this offering, and the number of shares held by existing shareholders would be reduced to 71.7% of the total number of common shares outstanding after this offering.
The tables and discussion above do not include:
To the extent that stock options or warrants are exercised, new stock options are issued under our equity incentive plan, or we issue additional common shares in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing an aggregate of up to $70.0 million in common shares in this offering at the initial public offering price per share. Based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, these entities would purchase up to an aggregate of 4,666,667 of the 8,333,333 shares in this offering based on these indications of interest. However, because indications of interest are not binding agreements or commitments to purchase, these entities may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase any shares in this offering. It is also possible that these entities could indicate an interest in purchasing more common shares. In addition, the underwriters could determine to sell fewer common shares to any of these entities than the entities indicate an interest in purchasing or not to sell any shares to these entities. The foregoing discussion and tables do not reflect any potential purchases by these entities.
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SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2015 and 2016 and the consolidated balance sheet data as of December 31, 2015 and 2016 from our audited consolidated financial statements appearing at the end of this prospectus. Our historical results are not necessarily indicative of results that may be expected in any future period.
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|
As of
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
|
(in thousands)
|
||||||
Consolidated Balance Sheet Data: |
|||||||
Cash |
$ | 1,460 | $ | 23,565 | |||
Working capital (1) |
1,558 | 16,093 | |||||
Total assets |
1,892 | 27,017 | |||||
Notes payable, net of discount |
| 4,216 | |||||
Notes payable to related parties |
| 595 | |||||
Warrant liability |
| 780 | |||||
Contingent equity liability |
| 18,938 | |||||
Convertible preferred shares |
| 43,270 | |||||
Total shareholders' equity (deficit) |
1,087 | (45,033 | ) |
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected Consolidated Financial Data" and our consolidated financial statements and the related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this prospectus, our actual results could differ materially from the results described in or implied by these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurologic diseases, including rare disorders. Our product candidates are small molecules based on two distinct mechanistic platformscalcitonin gene-related peptide, or CGRP, receptor antagonists and glutamate modulatorswhich we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurologic indications with high unmet need in both large markets and orphan indications. The most advanced product candidate from our CGRP receptor antagonist platform is rimegepant, an orally available, potent and selective small molecule human CGRP receptor antagonist that we are developing for the acute treatment of migraine. In July 2016, we acquired exclusive, worldwide rights to our CGRP receptor antagonist platform, including rimegepant and another product candidate, BHV-3500, which we are developing for the prevention of chronic and episodic migraine, through a license agreement with Bristol-Myers Squibb Company, or BMS. In 2017, we intend to initiate two Phase 3 clinical trials of rimegepant and to commence IND-enabling studies to allow us to ultimately pursue clinical trials of BHV-3500.
We are developing three product candidates that modulate the body's glutamate system. Two of these product candidates, trigriluzole and BHV-0223, act as glutamate transporter modulators, while our product candidate BHV-5000 is an antagonist of the glutamate N -methyl-D-aspartate, or NMDA, receptor. We are developing trigriluzole for the treatment of ataxias, with an initial focus on spinocerebellar ataxia, or SCA. In May 2016, we received orphan drug designation from the U.S. Food and Drug Administration, or FDA, for trigriluzole for the treatment of SCA, and in the fourth quarter of 2016 we enrolled the first patient in a Phase 2/3 clinical trial, from which we expect to report topline results in the first quarter of 2018.
We are developing BHV-0223 for the treatment of amyotrophic lateral sclerosis, or ALS. In December 2016, we received orphan drug designation from the FDA for BHV-0223 to treat ALS. In 2017, we plan to commence a trial comparing the bioequivalence of BHV-0223 and riluzole in healthy volunteers. Depending on the outcome of this bioequivalence study, we plan to file a new drug application, or NDA, with the FDA and pursue the regulatory approval of BHV-0223 for ALS under Section 505(b)(2) of the U.S. Federal Food, Drug, and Cosmetic Act.
We are also developing BHV-5000, an orally available, first-in-class, low-trapping NMDA receptor antagonist, for the treatment of symptoms associated with Rett syndrome, including breathing irregularities. Rett syndrome is a rare and severe genetic neurodevelopmental disorder for which no approved treatments are currently available. We acquired worldwide rights to BHV-5000 under an exclusive license agreement with AstraZeneca AB, or AstraZeneca, in October 2016. We anticipate completing our commercial-grade formulation efforts for BHV-5000 in the third quarter of 2017. We plan to conduct a Phase 1 clinical trial of BHV-5000 to evaluate its pharmacokinetic properties and then in 2018 to commence a single Phase 2/3 clinical trial of BHV-5000 for the treatment of breathing irregularities associated with Rett syndrome that, if successful, we believe could support our application for regulatory approval.
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Since our inception in September 2013, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, acquiring and developing product candidates and related intellectual property rights, planning for commercialization, and conducting discovery, research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily with proceeds from the sale of preferred shares and common shares and borrowings under a credit agreement with a bank. Through December 31, 2016, we had received net cash proceeds of $57.8 million from sales of our preferred shares and common shares and gross proceeds of $5.0 million from borrowings under the credit agreement. In February 2017, we received net cash proceeds of $38.6 million from the sale of Series A preferred shares in connection with the second and final closing of our Series A preferred share financing.
Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current product candidates and programs. Our net loss was $10.1 million and $63.5 million for the years ended December 31, 2015 and 2016, respectively. As of December 31, 2016, we had an accumulated deficit of $75.5 million. We expect to continue to incur significant expenses for at least the next several years as we advance our product candidates from discovery through preclinical development and clinical trials and seek regulatory approval and pursue commercialization of any approved product candidate. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional product candidates. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of December 31, 2016, we had cash of $23.6 million, and in February 2017, we received net cash proceeds of $38.6 million from the sale of Series A preferred shares in connection with the second and final closing of our Series A preferred share financing. We believe that the anticipated net proceeds from this offering, together with our existing cash, will enable us to repay our indebtedness and to fund our operating expenses and capital expenditure requirements for at least the next 15 months. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "Liquidity and Capital Resources."
Without giving effect to the anticipated net proceeds from this offering, we expect that our existing cash will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments through July 31, 2017. Beyond that point, we will need to raise additional capital to finance our
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operations, which cannot be assured. We have concluded that this circumstance raises substantial doubt about our ability to continue as a going concern within one year after the issuance date of our financial statements for the year ended December 31, 2016. See Note 1 to our consolidated financial statements appearing at the end of this prospectus for additional information on our assessment.
Similarly, in its report on our financial statements for the year ended December 31, 2016, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval or additional license agreements with third parties, we may generate revenue in the future from product sales.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs, and central laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee the research and discovery as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track their costs by program.
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The table below summarizes our research and development expenses incurred by program:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
|
(in thousands)
|
||||||
BHV-0223 |
$ | 1,627 | $ | 380 | |||
Rimegepant |
| 25,139 | |||||
Trigriluzole |
3,497 | 11,761 | |||||
BHV-5000 |
| 13,550 | |||||
Research and discovery and unallocated costs |
2,435 | 4,699 | |||||
| | | | | | | |
Total research and development expenses |
$ | 7,559 | $ | 55,529 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we increase personnel costs, including share-based compensation, commence Phase 3 clinical trials of rimegepant, continue our ongoing Phase 2/3 clinical trial of trigriluzole, conduct other clinical trials and prepare regulatory filings for our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical
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trials of some product candidates or focus on others. Any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. Drug commercialization will take several years and millions of dollars in development costs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel and share-based compensation expense for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, accounting and audit services.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company. We anticipate the additional costs for these services will increase our general and administrative expenses by approximately $1.5 million to $2.0 million on an annual basis. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidate.
Other Income (Expense)
Interest Expense
Interest expense consists of interest on outstanding borrowings under our credit agreement with Wells Fargo Bank, National Association, or Wells Fargo, entered into in August 2016 at the applicable interest rate as well as amortization of the debt discount relating to that loan. In periods subsequent to December 31, 2016, interest expense will also consist of interest on our notes payable to related parties, which we issued in December 2016 in connection with our acquisition of Biohaven Pharmaceuticals, Inc., or BPI, at the applicable interest rate.
Change in Fair Value of Warrant Liability
In connection with entering into our credit agreement with Wells Fargo, we agreed to issue warrants to purchase our common shares to the guarantor and co-guarantor of our obligations under the agreement. We classify the warrants as a liability on our consolidated balance sheet that we remeasure to fair value at each reporting date, and we recognize changes in the fair value of the warrant liability as a component of other income (expense), net in our consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair value of the warrant liability until the warrants are exercised, expire or qualify for equity classification.
Change in Fair Value of Derivative Liability
Our license agreement with Yale University, or Yale, provides for a change-of-control payment to Yale upon the occurrence of a change-of-control event, as defined in the agreement, including an initial public offering. We classify the change-of-control payment obligation as a liability on our consolidated balance sheet that we remeasure to fair value at each reporting date, and we recognize changes in the fair value of
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the derivative liability as a component of other income (expense), net in our consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair value of the derivative liability until a change-of-control event occurs.
Change in Fair Value of Contingent Equity Liability
Our license agreements with BMS and AstraZeneca require us to issue shares of capital stock upon the occurrence of specified financing or change-of-control events or development milestones, as defined in the agreements. We classify these contingent obligations to issue shares as liabilities on our consolidated balance sheet that we remeasure to fair value at each reporting date, and we recognize changes in the fair values of the contingent equity liabilities as a component of other income (expense), net in our consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair values of the contingent equity liabilities until the occurrence of a respective triggering event.
Loss from Equity Method Investment
In August 2016, we executed a stock purchase agreement with Kleo Pharmaceuticals, Inc., or Kleo, to purchase shares of common stock in an initial closing, with a commitment to purchase additional shares of common stock over a 15-month period through December 2017. As of August 29, 2016 and December 31, 2016, we owned approximately 21.7% and 18.6%, respectively, of the outstanding shares of Kleo. We account for our investment in Kleo under the equity method of accounting. As a result, our proportionate share of Kleo's net income or loss each reporting period is included in other income (expense), net in our consolidated statement of operations and comprehensive loss and results in a corresponding adjustment to the carrying value of the equity method investment on our consolidated balance sheet.
Provision for Income Taxes
As a company incorporated in the British Virgin Islands, or BVI, we are principally subject to taxation in the BVI. Under the current laws of the BVI, tax on a company's income is assessed at a zero percent tax rate. As a result, we have not recorded any income tax benefits from our losses incurred in the BVI during each reporting period, and no net operating loss carryforwards will be available to us for those losses.
In addition, in each reporting period, our tax provision includes the effects of consolidating the results of operations of BPI, either through December 30, 2016 as a variable interest entity or as of December 31, 2016 as our wholly owned subsidiary. BPI is subject to taxation in the United States. Due to BPI's history of cumulative losses through September 30, 2016, we had recorded no tax benefits for the losses incurred by BPI through that date and had recorded a full valuation allowance against BPI's deferred tax assets, which consisted primarily of its U.S. net operating loss carryforwards for all periods through September 30, 2016.
During the three months ended December 31, 2016, we fully utilized BPI's remaining U.S. net operating loss carryforwards due to BPI's profitability in that period and we recorded a full release of the valuation allowance, which was an insignificant amount. As a result, we recorded an income tax provision for the first time during the three months ended December 31, 2016.
Net Income (Loss) Attributable to Non-Controlling Interests
From our inception through December 31, 2016, we consolidated the results of BPI. Although we did not have an ownership interest in BPI during that period, we determined that BPI was a variable interest entity, of which we were the primary beneficiary.
Net income (loss) attributable to non-controlling interests in our consolidated statement of operations and comprehensive loss consists of the portion of the net income or loss of BPI that is not allocated to us. Changes in the amount of net income (loss) attributable to non-controlling interests are directly impacted
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by changes in the net income or loss of BPI. On December 31, 2016, we acquired 100% of the issued and outstanding shares of BPI. As a result, for periods subsequent to the acquisition, we no longer report any non-controlling interests related to BPI.
Results of Operations
Comparison of the Years Ended December 31, 2015 and 2016
The following table summarizes our results of operations for the years ended December 31, 2015 and 2016:
|
Year Ended
December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2016 | Change | |||||||
|
(in thousands)
|
|||||||||
Operating expenses: |
||||||||||
Research and development |
$ | 7,559 | $ | 55,529 | $ | 47,970 | ||||
General and administrative |
2,137 | 5,109 | 2,972 | |||||||
| | | | | | | | | | |
Total operating expenses |
9,696 | 60,638 | 50,942 | |||||||
| | | | | | | | | | |
Loss from operations |
(9,696 | ) | (60,638 | ) | (50,942 | ) | ||||
| | | | | | | | | | |
Other income (expense): |
||||||||||
Interest expense |
| (385 | ) | (385 | ) | |||||
Change in fair value of warrant liability |
| 154 | 154 | |||||||
Change in fair value of derivative liability |
(370 | ) | (65 | ) | 305 | |||||
Change in fair value of contingent equity liability |
| (2,263 | ) | (2,263 | ) | |||||
Loss from equity method investment |
| (247 | ) | (247 | ) | |||||
| | | | | | | | | | |
Total other income (expense), net |
(370 | ) | (2,806 | ) | (2,436 | ) | ||||
| | | | | | | | | | |
Loss before provision for income taxes |
(10,066 | ) | (63,444 | ) | (53,378 | ) | ||||
Provision for income taxes |
| 90 | 90 | |||||||
| | | | | | | | | | |
Net loss |
(10,066 | ) | (63,534 | ) | (53,468 | ) | ||||
Less: Net income (loss) attributable to non-controlling interests |
(4 | ) | 143 | 147 | ||||||
| | | | | | | | | | |
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. |
$ | (10,062 | ) | $ | (63,677 | ) | $ | (53,615 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Research and Development Expenses
|
Year Ended
December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2015 | 2016 | Change | |||||||
|
(in thousands)
|
|||||||||
Direct research and development expenses by program: |
||||||||||
BHV-0223 |
$ | 1,627 | $ | 380 | $ | (1,247 | ) | |||
Rimegepant |
| 25,139 | 25,139 | |||||||
Trigriluzole |
3,497 | 11,761 | 8,264 | |||||||
BHV-5000 |
| 13,550 | 13,550 | |||||||
Research and discovery and unallocated costs: |
||||||||||
Personnel related (including share-based compensation) |
1,915 | 4,137 | 2,222 | |||||||
Other |
520 | 562 | 42 | |||||||
| | | | | | | | | | |
Total research and development expenses |
$ | 7,559 | $ | 55,529 | $ | 47,970 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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Research and development expenses were $7.6 million for the year ended December 31, 2015, compared to $55.5 million for the year ended December 31, 2016. The increase of $48.0 million was primarily due to increases of $25.1 million in direct costs for our rimegepant program, $13.6 million in direct costs for our BHV-5000 program, $8.3 million in spending related to our trigriluzole program and $2.3 million in research and discovery and unallocated costs, all partially offset by a decrease of $1.2 million in direct costs for our BHV-0223 program.
The increase in direct costs for our rimegepant program was primarily due to an accrual of a liability of $13.1 million for our contingent obligation to issue equity to BMS under our license agreement with BMS and the payment of $9.0 million in license fees under that agreement. The increase in direct costs for our BHV-5000 program was due to an accrual of a liability of $8.6 million for our contingent obligation to issue equity to AstraZeneca under our license agreement and the payment of $5.0 million in license fees under that agreement. The increase in direct costs for our trigriluzole program primarily related to an animal toxicity study that commenced in December 2015.
The increase in research and discovery and unallocated costs was primarily due to an increase of $2.2 million in personnel-related costs, including share-based compensation, as a result of hiring additional personnel in our research and development department. Personnel-related costs for the year ended December 31, 2015 and 2016 included share-based compensation expense of $1.5 million and $2.4 million, respectively.
The decrease in direct costs for our BHV-0223 program was due to formulation work and Phase 1 clinical trial work that was completed during the year ended December 31, 2015. Our Phase 2 clinical trial of BHV-0223 had not begun as of December 31, 2016.
General and Administrative Expenses
General and administrative expenses were $2.1 million for the year ended December 31, 2015, compared to $5.1 million for the year ended December 31, 2016. The increase of $3.0 million was primarily due to increases of $1.9 million in personnel-related costs, including share-based compensation, $1.0 million in professional fees and $0.1 million in facility-related costs. Personnel-related costs for the year ended December 31, 2015 and 2016 included share-based compensation expense of $1.3 million and $2.2 million, respectively. The increase in personnel-related costs was due to the hiring of additional personnel in our general and administrative functions. Professional fees increased due to costs associated with the preparation, audit and review of our financial statements as well as ongoing business operations.
Other Income (Expense), Net
Other income (expense), net was a net expense of $0.4 million for the year ended December 31, 2015, compared to $2.8 million for the year ended December 31, 2016. The increase of $2.4 million in net expense was primarily due to an increase of $2.3 million in the fair value of the contingent equity liability associated with our license agreements with BMS and AstraZeneca and an increase in interest expense of $0.4 million due to interest on borrowings under our credit agreement with Wells Fargo that we entered into in August 2016. These increases in other expense were partially offset by a decrease of $0.3 million in the change in the fair value of the derivative liability associated with our license agreement with Yale.
Provision for Income Taxes
We recorded no provision for income taxes for the year ended December 31, 2015, compared to a provision of $0.1 million for the year ended December 31, 2016. We recorded a tax provision in 2016 for the U.S. federal and state income taxes of BPI's profitable operations in the United States and due to the fact that, in the three months ended December 31, 2016, we fully utilized BPI's remaining U.S. net operating loss carryforwards.
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Liquidity and Capital Resources
Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of preferred shares and common shares and borrowings under our credit agreement with Wells Fargo. Through December 31, 2016, we had received net cash proceeds of $57.8 million from sales of our preferred shares and common shares and gross proceeds of $5.0 million from borrowings under the credit agreement. As of December 31, 2016, we had cash of $23.6 million. In February 2017, we received net cash proceeds of $38.6 million from the sale of Series A preferred shares in connection with the second and final closing of our Series A preferred share financing.
Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
|
(in thousands)
|
||||||
Net cash used in operating activities |
$ | (5,625 | ) | $ | (29,504 | ) | |
Net cash used in investing activities |
(3 | ) | (3,153 | ) | |||
Net cash provided by financing activities |
5,316 | 54,762 | |||||
| | | | | | | |
Net increase (decrease) in cash |
$ | (312 | ) | $ | 22,105 | ||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Operating Activities
During the year ended December 31, 2016, operating activities used $29.5 million of cash, resulting from our net loss of $63.5 million, partially offset by non-cash charges of $31.2 million and net cash provided by changes in our operating assets and liabilities of $2.8 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2016 consisted primarily of a $2.1 million increase in accrued expenses and a $0.7 million increase in accounts payable. The increases in accrued expenses and accounts payable were primarily due to increases in clinical trial costs and professional fees associated with the preparation, audit and review of our financial statements.
During the year ended December 31, 2015, operating activities used $5.6 million of cash, resulting from our net loss of $10.1 million and net cash used in changes in our operating assets and liabilities of $0.3 million, partially offset by non-cash charges of $4.7 million. Net cash used in changes in our operating assets and liabilities for the year ended December 31, 2015 consisted primarily of a $0.4 million increase in prepaid expenses and other current assets as a result of prepayments under our ongoing research, development and clinical trial work performed by CROs, partially offset by a $0.1 million increase in accrued expenses. The increase in accrued expenses was due to our increased level of operating activities and the timing of vendor invoicing and payments.
Investing Activities
During the year ended December 31, 2016, we used $3.2 million of cash in investing activities, primarily consisting of our investment in Kleo.
During the year ended December 31, 2015, we used an insignificant amount of cash in investing activities, consisting of purchases of property and equipment.
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Financing Activities
During the year ended December 31, 2016, net cash provided by financing activities was $54.8 million, primarily consisting of net cash proceeds of $38.6 million from our issuance of Series A preferred shares in October 2016, net cash proceeds of $11.3 million from our issuance of common shares and gross proceeds of $5.0 million from borrowings under the credit agreement, partially offset by $0.2 million of payments of debt issuance costs associated with the borrowings.
During the year ended December 31, 2015, net cash provided by financing activities was $5.3 million, consisting of net proceeds of $4.8 million from our issuance of common shares and net proceeds of $0.5 million from the collection of a note receivable from Portage Biotech, Inc. in connection with its initial equity investment in our company.
Credit Agreement
On August 30, 2016, we entered into a one-year credit agreement with Wells Fargo providing for a term loan in the principal amount of $5.0 million, or the Credit Agreement, and we borrowed the full $5.0 million available. Our obligations under the Credit Agreement are guaranteed by a member of our board of directors, who is also a shareholder. A second member of our board of directors and shareholder agreed to serve as a secondary guarantor for 50% of the loan balance. In connection with their guaranties of the loan, we issued to each director an immediately exercisable warrant to purchase 107,500 common shares at an exercise price of $9.2911 per share. Borrowings under the Credit Agreement bear interest at a variable rate equal to monthly LIBOR, which was 0.77% as of December 31, 2016, plus 1.50% per annum. In the event of a default, the interest rate applicable is equal to the monthly LIBOR rate then in effect, increased by 4.0% per annum. The Credit Agreement requires monthly, interest-only payments through the maturity date of August 30, 2017, at which date all remaining amounts will be due and payable. The Credit Agreement contains affirmative and negative covenants, but does not contain any financial covenants.
Notes Payable to Related Parties
On December 31, 2016, we entered into stock purchase agreements with each of the stockholders of BPI, acquiring 100% of the issued and outstanding shares of BPI for aggregate purchase consideration of $0.6 million. We funded the acquisition through the issuance of promissory notes to each of the former stockholders of BPI. The former beneficial stockholders of BPI are shareholders of our company and currently serve as our chief executive officer, our chief medical officer and the chairman of our board of directors, respectively. The notes are payable in five annual payments, the first four of which are interest only, with the final payment to include the principal balance outstanding plus any accrued and unpaid interest. The notes bear interest at a rate of 4.5% per annum and mature on December 31, 2021. The notes become immediately due and payable upon specified events, including immediately prior to the consummation of this offering or upon the occurrence of a change of control of our company. There are no affirmative, negative or financial covenants associated with the notes.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. Our expenses will also increase as we:
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We believe that the anticipated net proceeds from this offering, together with our existing cash, will enable us to repay our indebtedness and to fund our operating expenses and capital expenditure requirements for at least the next 15 months, including the completion of our ongoing Phase 2/3 clinical trial of trigriluzole. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to commercialize rimegepant, if we receive regulatory approval, and to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for rimegepant, trigriluzole or our other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
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Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common shareholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2016 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
|
Payments Due by Period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less than
1 Year |
1 to 3
Years |
4 to 5
Years |
More than
5 Years |
|||||||||||
|
(in thousands)
|
|||||||||||||||
Research commitments (1) |
$ | 6,973 | $ | 5,154 | $ | 1,819 | $ | | $ | | ||||||
Debt obligations (2) |
5,836 | 5,133 | 54 | 649 | | |||||||||||
Share purchase obligations (3) |
5,750 | 5,750 | | | | |||||||||||
| | | | | | | | | | | | | | | | |
Total |
$ | 18,559 | $ | 16,037 | $ | 1,873 | $ | 649 | $ | | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Clinical development commitments in the preceding table include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. For obligations with cancellation provisions, the amounts included in the preceding table are limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee.
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Under various agreements with third-party licensors and collaborators, we have agreed to make milestone payments and pay royalties and annual maintenance fees to third parties and to meet due diligence requirements based upon specified milestones. We have not included any contingent payment obligations, such as milestones, royalties, or due diligence, in the table above as the amount, timing and likelihood of such payments are not known. We have not included any of the annual maintenance fee payments in the above table, as although the amount and timing are known, we cannot currently determine the final termination dates of the agreements and, as a result, we cannot determine the total amounts of such payments we will be required to make under the agreements.
Under our license agreement with BMS, we are obligated to make development milestone payments of up to $127.5 million for rimegepant or a derivative thereof and up to $74.5 million for other covered product candidates, as well as up to $150.0 million in commercial milestone payments for each licensed product and tiered royalties based on net sales of licensed products under the agreement at percentages in the low to mid teens.
Under our license agreement with AstraZeneca, we are obligated to make development milestone payments of up to $30.0 million with respect to Rett syndrome and up to $60.0 million for any other indication, as well as commercial milestone payments of up to $120.0 million for all products licensed under the agreement and tiered royalties based on net sales of licensed products under the agreement at mid single-digit to low double-digit percentages.
Under our license agreement with Yale, we are obligated to make regulatory milestone payments of up to $2.0 million, as well as royalties based on net sales of products from the licensed patents at a low single-digit percentage, subject to a minimum amount of up to $1.0 million per year.
Under our license agreement with Catalent, we are obligated to pay up to $1.6 million upon the achievement of specified regulatory and commercial milestones, as well as royalties based on net sales of products licensed under the agreement at a low single-digit percentage.
Under our license agreement with MGH, we are obligated to pay an annual license maintenance fee of up to $50,000, to make clinical and regulatory milestone payments of up to $0.8 million and commercial milestone payments of up to $2.5 million, and to pay royalties based on net sales at a low single-digit percentage.
Under our agreement with ALS Biopharma and FCCDC, we are obligated to pay $3.0 million upon the achievement of a specified regulatory milestone with respect to the first licensed product and $1.0 million upon the achievement of a specified regulatory milestone with respect to subsequent products, as well as royalties based on net sales of products licensed under the agreement at a low single-digit percentage.
Under our license agreement with Rutgers, we are obligated to pay an annual license maintenance fee of up to $25,000 per year, to make clinical and regulatory milestone payments of up to $0.8 million, and to pay royalties based on net sales of products at a low single-digit percentage, subject to a minimum amount of up to $0.1 million per year.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
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other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Share-Based Compensation
We measure stock options and other share-based awards granted to employees and directors based on the fair value on the date of the grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We have only issued stock options with service-based vesting conditions and record the expense for these awards using the straight-line method.
For share-based awards granted to consultants and non-employees, we recognize compensation expense over the period during which services are rendered by such consultants and non-employees until
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completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of our common shares and updated assumption inputs in the Black-Scholes option-pricing model.
We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common shares and assumptions we make for the volatility of our common shares, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.
Determination of the Fair Value of Common Shares
As there has been no public market for our common shares to date, the estimated fair value of our common shares has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recent arm's-length sale of our common shares or third-party valuation of our common shares as well as our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent sale of our common shares or third-party valuation through the date of the grant. Our board of directors considered various objective and subjective factors to determine the fair value of our common shares as of each grant date, including:
In the course of preparing for this offering, in February 2017, we obtained third-party valuations, performed on a retrospective basis, of our common shares as of August 17, 2015, the date we issued common shares and common share warrants in connection with our license agreement with ALS Biopharma, and as of October 31, 2016, the date of the first closing of our Series A preferred share financing. In addition, we obtained third-party valuations of our common shares as of various dates between December 31, 2016 and March 31, 2017. Our third-party valuations resulted in valuations of our common shares of $5.23 per share as of August 17, 2015, $6.73 per share as of October 31, 2016, $7.45 per share as of December 31, 2016, $8.68 per share as of January 31, 2017, $9.85 per share as of February 28, 2017 and $10.82 per share as of March 31, 2017. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
Our third-party valuation of common shares performed as of August 17, 2015 was prepared using the discounted cash flow, or DCF, method, a form of the income approach, to estimate our equity value. In
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order to estimate equity value, the DCF method uses the estimated present value of future net cash flows for the expected life of the related assets or business, discounted at a rate of return that considers the relative risk of achieving those cash flows, the time value of money and the current stage of development of the business. A reasonable discount for lack of marketability is applied to the total equity value to arrive at an estimate of the total fair value of equity on a non-marketable basis. The total fair value of equity on a non-marketable basis is then allocated between each class of equity, including common shares, stock options and warrants. The aggregate fair value of outstanding options and warrants, which was calculated using the Black-Scholes option-pricing model, was deducted from the total equity value on a non-marketable basis to arrive at the fair value of common shares outstanding.
Our third-party valuations of common shares performed as of every other date listed above were prepared using the hybrid method, which used market approaches to estimate our enterprise value. The hybrid method is a probability-weighted expected return method, or PWERM, where the equity value in one or more of the scenarios is calculated using an option-pricing method, or OPM. The OPM treats common shares and preferred shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common shares have value only if the funds available for distribution to shareholders exceeded the value of the preferred share liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. The PWERM is a scenario-based methodology that estimates the fair value of common shares based upon an analysis of future values for the company, assuming various outcomes. The common share value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of shares. The future value of the common shares under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common shares.
The assumptions underlying these valuations represent management's best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our share-based compensation expense could be materially different.
Following the closing of this offering, the fair value of our common shares will be determined based on the quoted market price of our common shares.
Options Granted
The following table sets forth by grant date the number of shares subject to options granted between January 1, 2015 and April 6, 2017, the per share exercise price of the options, the fair value of common shares per share on each grant date, and the per share estimated fair value of the options:
Grant Date
|
Number of
Shares Subject to Options Granted |
Per Share
Exercise Price of Options |
Fair Value
per Common Share on Grant Date |
Per Share
Estimated Fair Value of Options |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
October 23, 2015 |
1,247,500 | $ | 5.60 | $ | 5.23 | $ | 3.22 | ||||||
December 15, 2016 |
616,925 | $ | 9.29 | $ | 6.73 | $ | 4.09 | ||||||
January 9, 2017 |
5,500 | $ | 9.29 | $ | 7.45 | $ | 4.24 | ||||||
January 11, 2017 |
54,000 | $ | 9.29 | $ | 7.45 | $ | 4.41 | ||||||
January 25, 2017 |
10,800 | $ | 9.29 | $ | 8.68 | $ | 5.12 | ||||||
January 31, 2017 |
325,819 | $ | 9.29 | $ | 8.68 | $ | 5.44 | ||||||
February 15, 2017 |
20,800 | $ | 9.29 | $ | 8.68 | $ | 5.15 | ||||||
February 27, 2017 |
54,000 | $ | 9.85 | $ | 9.85 | $ | 5.94 | ||||||
March 6, 2017 |
10,000 | $ | 9.85 | $ | 9.85 | $ | 6.01 | ||||||
April 5, 2017 |
74,000 | $ | 10.82 | $ | 10.82 | $ | 6.84 | ||||||
April 6, 2017 |
479,514 | $ | 10.82 | $ | 10.82 | $ | 7.03 |
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Valuation of Warrant Liability
In connection with entering into the Credit Agreement, we agreed to issue warrants to purchase our common shares to the guarantor and co-guarantor of our obligations under the agreement. We classify the warrants as a liability on our consolidated balance sheet because each warrant represents a freestanding financial instrument that it not indexed to our own shares. The warrant liability was initially recorded at fair value upon entering into the Credit Agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair value of the warrant liability until the warrants are exercised, expire or qualify for equity classification.
We utilize a Monte Carlo simulation, which is a statistical method used to generate a defined number of share price paths to develop a reasonable estimate of the range of future expected share prices, to value our warrant liability. The Monte Carlo simulation incorporates assumptions and estimates to value the warrant liability. We assess these assumptions and estimates on a quarterly basis as additional information impacting the assumptions is obtained. Estimates and assumptions impacting the fair value measurement include the estimated probability of adjusting the exercise price of the warrants, the number of shares for which the warrants are exercisable, the fair value per share of the underlying common shares issuable upon exercise of the warrants, remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying common shares. We estimated the fair value of our common shares by taking into consideration the most recent arm's-length sale of our common shares or third-party valuation of our common shares as well as additional factors that we deem relevant. We have historically been a private company and lack company-specific historical and implied volatility information of our shares. Therefore, we estimate expected share volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. We estimated a 0% expected dividend yield based on the fact that we have never paid or declared dividends and do not intend to do so in the foreseeable future.
Valuation of Derivative Liability
Our license agreement with Yale provides for a change-of-control payment to Yale upon the occurrence of a change-of-control event, as defined in the agreement, including an IPO. We classify the change-of-control payment obligation as a liability on our consolidated balance sheet because it represents a contingent obligation to pay a variable amount of cash that may be based, in part, on the value of our own shares. The derivative liability was initially recorded at fair value upon entering into the license agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the derivative liability are recognized as a component of other income (expense), net in our consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair value of the derivative liability until a change-of-control event occurs.
The fair value of the derivative liability was determined using the PWERM, which considers as inputs the type and probability of occurrence of a change-of-control event, the amount of the payment, the expected timing of a change-of-control event and a risk-adjusted discount rate. The estimates are based, in part, on subjective assumptions and could differ materially in the future. Changes to these assumptions could have a significant impact on the fair value of the derivative liability.
Valuation of Contingent Equity Liability
Our license agreements with BMS and AstraZeneca require us to issue shares of capital stock upon the occurrence of specified financing or change-of-control events or development milestones, as defined in
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the agreements. In each agreement, the class and number of shares to be issued upon a triggering event were not known upon entering into the license agreements; however, the dollar amount of the shares to be issued upon a triggering event is fixed. We classify these contingent obligations to issue shares as a liability on our consolidated balance sheet because each represents an obligation to issue a variable number of shares for a fixed dollar amount. Each contingent equity liability was initially recorded at fair value upon entering into each respective agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair values of the contingent equity liabilities are recognized as a component of other income (expense), net in our consolidated statement of operations and comprehensive loss. We will continue to recognize changes in the fair values of the contingent equity liabilities until the occurrence of a respective triggering event.
The fair values of the contingent equity liabilities were determined using the PWERM, which considers as inputs the probability of occurrence of events that would trigger the issuance of shares, the expected timing of such events, the expected value of the contingently issuable equity upon the occurrence of a triggering event and a risk-adjusted discount rate. The estimates are based, in part, on subjective assumptions and could differ materially in the future. Changes to these assumptions could have a significant impact on the fair value of the contingent equity liabilities.
In October 2016, upon the initial closing of our Series A preferred share financing, we issued to AstraZeneca 538,150 Series A preferred shares in partial satisfaction of our obligation to issue shares under our license agreement with AstraZeneca. In connection with this offering, we expect that we will issue an aggregate of 1,883,523 additional common shares to BMS and AstraZeneca in satisfaction of our remaining obligation to issue shares under our license agreements with BMS and AstraZeneca. As a result, upon the closing of this offering, the then-current fair value of the contingent equity liabilities will be reclassified to shareholders' equity and the contingent equity liabilities will no longer be outstanding.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing at the end of this prospectus.
Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
As of December 31, 2016, we had $5.0 million of borrowings outstanding under the Credit Agreement. Amounts outstanding under the Credit Agreement bear interest at a variable rate equal to monthly LIBOR, which was 0.77% as of December 31, 2016, plus a margin of 1.50%. An immediate 10% change in monthly LIBOR rates would not have had a material impact on our debt-related obligations, financial position or results of operations. In addition, given the short-term nature of the Credit Agreement, which matures in August 2017, we do not believe our exposure to interest rate risk is significant.
Our notes payable to related parties outstanding as of December 31, 2016 bear interest at fixed interest rates and, therefore, do not expose us to interest rate risk.
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Overview
We are a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurological diseases, including rare disorders. Our product candidates are small molecules based on two distinct mechanistic platformscalcitonin gene-related peptide, or CGRP, receptor antagonists and glutamate modulatorswhich we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large markets and orphan indications. The most advanced product candidate from our CGRP receptor antagonist platform is rimegepant, which we are developing for the acute treatment of migraine and for which we intend to initiate two Phase 3 clinical trials in the second half of 2017, with topline results expected in the first quarter of 2018. The most advanced product candidate from our glutamate modulation platform is trigriluzole, which we are developing for the treatment of ataxias with an initial focus on spinocerebellar ataxia, or SCA. We have received orphan drug designation from the FDA for trigriluzole in SCA, and we began a Phase 2/3 clinical trial in SCA in December 2016 and expect to report topline results in the first quarter of 2018. Our second most advanced product candidate from our glutamate modulation platform is BHV-0223, which we are developing for the treatment of amyotrophic lateral sclerosis, or ALS, a neurodegenerative disease that affects nerve cells in the brain and spinal cord. We have received orphan drug designation from the FDA for BHV-0223 in ALS.
We believe many of our product candidates have the potential to be first-in-class or best-in-class treatment options, while others will potentially represent the first available treatment options for their indications. Based on the data from its Phase 2b clinical trial, we believe rimegepant has the potential to be the best-in-class CGRP receptor antagonist for the acute treatment of migraine, having shown statistically significant improvement on the symptoms of pain, nausea, photophobia and phonophobia associated with migraine attacks. To our knowledge, rimegepant is the only small molecule CGRP receptor antagonist currently in development for the acute treatment of migraine to have achieved statistical significance, meaning there is a low probability, typically less than 5%, that the difference happened by chance, on all of these measures in a single study. We also believe that trigriluzole has the potential to be the first FDA-approved drug treatment option for ataxias. We intend to expedite development of trigriluzole for SCA using the Section 505(b)(2) regulatory pathway and are currently conducting a Phase 2/3 trial that we believe, if successful, may be sufficient to support our application for regulatory approval of trigriluzole. We believe that BHV-0223 has the potential to be the first-in-class sublingual treatment for ALS. BHV-0223 is designed to deliver the unique pharmacologic, glutamate modulation effects of riluzole which has shown a survival benefit for ALS patients, and which is currently the only treatment for ALS approved by the FDA. We believe BHV-0223 could also provide best-in-class formulation attributes such as ease of administration, more predictable pharmacokinetic performance, no food effect, reduced drug load and reduced liver exposure.
Our CGRP Receptor Antagonist Platform: Rimegepant and BHV-3500 Targeting Migraine
Our CGRP receptor antagonist platform comprises two product candidates: rimegepant for the acute treatment of migraine and BHV-3500 for the prevention of chronic and episodic migraine. Rimegepant, the lead product candidate, is an orally available, selective and potent small molecule CGRP receptor antagonist. Migraine is both widespread and disabling. The Migraine Research Foundation ranks migraine as the world's third most prevalent illness, and the Global Burden of Disease Study 2010 rates migraine as the seventh highest specific cause of disability worldwide. According to the American Migraine Foundation, migraine affects approximately 36 million people in the United States, and treatment of migraine accounted for an estimated market of approximately $1.9 billion in 2012 in the United States. Current treatment approaches, such as triptans, can be limited by headache recurrence, which are headaches that are relieved and then reoccur within 24 hours after taking migraine medication, and cardiovascular contraindications or warnings. We believe rimegepant has the potential to be a best-in-class
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CGRP receptor antagonist for the acute treatment of migraine with the ability to address important unmet needs, such as durable efficacy across all four traditional migraine symptoms and reduced incidence of headache recurrence, without contraindications or warnings in patients with cardiovascular disease or hypertension, since its CGRP-based mechanism of action does not involve active vasoconstriction, or the constriction of blood vessels.
In a Phase 2b, double-blind, randomized, placebo-controlled, dose-ranging clinical trial of 812 patients completed by Bristol-Myers Squibb Company, or BMS, rimegepant dosed at 75 mg was observed to have statistically significant improvement as compared to placebo on all four key migraine symptomspain, nausea, photophobia and phonophobiathe four traditional endpoints identified by the U.S. Food and Drug Administration, or FDA, for drug approval for treatment of migraine. To our knowledge based on publicly available information, rimegepant is the only small molecule CGRP receptor antagonist currently in development that has achieved statistically significant improvement on all four of the traditional endpoints within a single study. Rimegepant also was observed to have statistically significant effects on two-to-24 hour and two-to-48 hour pain freedom (head pain intensity level reported as "no pain") and two-to-24 hour pain relief (no pain or mild pain), as compared to placebo. In these measurements, benefits were present at two hours after dosing and persisted through 24 hours after dosing and, with respect to pain freedom, persisted through 48 hours after dosing. This durable improvement is significant because other common migraine medications, such as triptans, have been linked to the headache recurrence. The Phase 2b data also showed statistically significant improvement as compared to placebo in multiple doses of rimegepant. As of December 31, 2016, approximately 687 subjects have received single or multiple doses of rimegepant, and no treatment-related serious adverse events have been observed and adverse events have generally been mild and transient in nature. In the second half of 2017, we plan to commence two Phase 3 clinical trials of rimegepant for the acute treatment of migraine, with topline results expected in the first quarter of 2018. We are advancing the 75 mg dose of rimegepant in our Phase 3 clinical trials, as that dose was the lowest effective dose in the Phase 2b trial and there did not appear to be additional benefits of higher doses, which is a general characteristic of the dose-response profile of acute treatments for migraine.
BHV-3500, the second product candidate from our CGRP receptor antagonist platform, is a small molecule, structurally distinct from rimegepant, that we are developing for the prevention of chronic and episodic migraine. Chronic migraine is characterized by experiencing 15 or more headache days per month, while episodic migraine is characterized by experiencing fewer than 15 headache days per month. BHV-3500 is potent, highly soluble and selective at the human CGRP receptor. In addition, BHV-3500 has demonstrated in nonclinical studies characteristics that we believe will make it particularly well suited for daily preventative treatment of chronic and episodic migraine. Preliminary proof-of-concept has been observed in a marmoset model with oral delivery and, based on preliminary preclinical evaluations, no significant cardiovascular safety or systemic toxicity issues have been observed. We believe BHV-3500's chemical properties also make the product candidate potentially suitable for multiple routes of delivery, including nasal, subcutaneous, inhalation or oral administration. Because BHV-3500 has exhibited an efficacy profile similar to rimegepant in preclinical studies, we believe that BHV-3500 may demonstrate similar comprehensive and durable improvements in the four key migraine symptoms. In 2017, we plan to commence studies to enable an investigational new drug application, or IND, to ultimately pursue clinical trials of BHV-3500 for the prevention of chronic and episodic migraine.
We acquired exclusive, worldwide rights to our CGRP receptor antagonist platform, including rimegepant and BHV-3500, through a license agreement with BMS. As part of this agreement, BMS has taken an equity stake in our company.
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Our Glutamate Modulation Platform: Trigriluzole, BHV-0223 and BHV-5000 Targeting Orphan Neurological Indications
Under our glutamate modulation platform, we are currently developing three product candidates, trigriluzole (previously known as BHV-4157) for the treatment of ataxias, BHV-0223 for the treatment of ALS and BHV-5000 for the treatment of symptoms associated with Rett syndrome, including breathing irregularities. These product candidates modulate the glutamate system via two distinct mechanismsglutamate transporter modulation (trigriluzole and BHV-0223) and glutamate N -methyl-D-aspartate, or NMDA, receptor antagonism (BHV-5000).
Trigriluzole is a third-generation tripeptide prodrug, that converts to the active metabolite riluzole, that we are developing for the treatment of ataxias. We believe that trigriluzole will qualify as a new chemical entity, or NCE, if it receives regulatory approval by the FDA. Trigriluzole has the potential to be the first drug approved by the FDA for the treatment of ataxias, and we have chosen SCA as our lead indication. SCA is one of a group of rare genetic disorders that is characterized by slowly progressive incoordination of gait, speech and hand and eye movements. In general, a person with SCA retains full mental capacity but progressively loses physical control over voluntary muscles. According to a 2016 report by Orphanet cataloging the prevalence and incidence of rare diseases, SCA affects approximately 22,000 individuals in the United States. Other ataxias affect an aggregate of greater than 100,000 individuals in the United States. No approved drug treatments for SCA are currently available. We believe that trigriluzole may be effective in the treatment of SCA based on the results of two prior randomized controlled trials conducted by third parties, in which riluzole was observed to have statistically significant improvements in ataxia-related endpoints, and the results of multiple in vivo and in vitro preclinical studies that suggest that trigriluzole may mitigate the limitations of riluzole. In May 2016, we received orphan drug designation from the FDA for trigriluzole in SCA, and we intend to develop trigriluzole for SCA under Section 505(b)(2) of the U.S. Federal Food, Drug, and Cosmetic Act. Trigriluzole had been dosed in 58 subjects in a Phase 1 clinical trial and has been generally well tolerated, without evidence of novel, clinically significant safety signals or lab abnormalities compared to the active metabolite riluzole. We are currently enrolling in our Phase 2/3 clinical trial, which includes Phase 2 elements, such as an early interim analysis of safety or activity, and Phase 3 elements, such as larger patient populations with less restrictive enrollment criteria, which we believe, if successful, may be sufficient to support our application for regulatory approval of trigriluzole. We enrolled the first patient in our Phase 2/3 clinical trial in December 2016, and we expect to report topline results from this trial in the first quarter of 2018. If the results of this trial are positive, we anticipate submitting a new drug application, or NDA, to the FDA in 2018.
BHV-0223 is a sublingual, oral disintegrating tablet, or ODT, formulation of riluzole that we are developing for the treatment of ALS. ALS is a progressive neurodegenerative motor neuron disease that affects nerve cells in the brain and the spinal cord. ALS affects up to 20,000 individuals in the United States and typically presents in patients with painless muscle weakness, trouble swallowing and muscle atrophy that ultimately progresses to paralysis, impaired breathing and death. Orally administered riluzole, which was approved by the FDA in 1995, remains the only agent shown to extend survival and time to tracheostomy in patients with ALS, although it has significant shortcomings that limit its utility. We believe that BHV-0223 has the potential to significantly improve the treatment of patients with ALS by combining the unique pharmacologic activities of glutamate modulation that are conferred by riluzole with an improved pharmacologic profile that results in easier administration, more predictable pharmacokinetic performance, no food effect, reduced drug load and reduced liver exposure compared to oral riluzole. In December 2016, we received orphan drug designation from the FDA for BHV-0223 in ALS. BHV-0223 had been dosed in 11 subjects as of January 31, 2017 in connection with our Phase 1 clinical trial. Adverse events have generally been mild and transient, and no treatment-related serious adverse events have been observed. In 2017, we plan to commence a bioequivalence study of BHV-0223 40 mg to riluzole 50 mg in healthy volunteers. We plan to subsequently submit an NDA for the use of BHV-0223 in patients with ALS and pursue regulatory approval under the Section 505(b)(2) regulatory pathway.
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BHV-5000 is an orally available, first-in-class, low-trapping, NMDA receptor antagonist prodrug that we are developing for the treatment of symptoms associated with Rett syndrome, including breathing irregularities. Rett syndrome is a rare and severe genetic neurodevelopmental disorder. After six to 18 months of apparently normal post-natal development, patients with Rett syndrome develop global deceleration of psychomotor function, loss of acquired cognitive skills and brain-mediated episodes of transient respiratory suppression. With intensive care, patients may survive into adulthood, yet they are severely physically and cognitively impaired. Rett syndrome affects approximately 15,000 individuals in the United States. No approved drug therapies for Rett syndrome are currently available and care is supportive. As a low-trapping NMDA receptor antagonist, BHV-5000 has differentiating pharmacologic properties compared to other agents that have been in development within this drug class. The unique property of a low-trapping NMDA receptor antagonist is its ability to uncouple from the target receptor more freely, a property that is thought to mitigate the dissociative or psychotic-like effects that have been observed with other NMDA antagonists. We are studying BHV-5000 in Rett syndrome based on results of ketamine studies in preclinical mouse models, in which improvement in key clinical features of the disease have been observed, including a reduction in the frequency of episodes of respiratory suppression. These preclinical findings are supported by anecdotal clinical reports regarding the use of ketamine, another NMDA receptor antagonist, in patients with Rett syndrome that have been reported to also show clinical improvements. We anticipate completing our commercial-grade formulation for BHV-5000 in the third quarter of 2017. As of December 31, 2016, BHV-5000 had been dosed in approximately 40 healthy subjects in a Phase 1 trial conducted by AstraZeneca AB, or AstraZeneca, and has been observed to be well tolerated with no clinically relevant safety signals. Its active metabolite, lanicemine, has been administered in clinical trials conducted by AstraZeneca to approximately 790 subjects, in single or multiple doses, and has been observed to be generally well tolerated with most adverse events being mild and transient in nature. After a confirmatory Phase 1 clinical trial, which we plan to initiate in 2017, to bridge pharmacokinetics with a prior formulation, we plan to commence a single Phase 2/3 clinical trial of BHV-5000 for the treatment of breathing irregularities associated with Rett syndrome in 2018, with the potential for this to be a pivotal trial that, if successful, we believe could support our application for regulatory approval.
We acquired exclusive, worldwide rights to BHV-5000 through a license agreement with AstraZeneca in October 2016. As part of this agreement, AstraZeneca has taken an equity stake in our company.
In addition to ataxias, ALS and Rett syndrome, we may expand our pipeline into other therapeutic indications where glutamate plays a central role in the pathophysiology of the disease, including anxiety and mood disorders.
Biohaven Management Team
We are led by a team of experienced executives who have held senior research and development positions at leading biotech and large pharmaceutical companies. Members of our management team and board of directors have deep experience leading neuroscience research and have been involved in the development and commercialization of numerous drugs, such as Zoloft, Abilify, Opdivo, Yervoy and Soliris. This depth of experience has facilitated our ability to license important product candidates and intellectual property from top-tier pharmaceutical companies and leading academic institutions, such as AstraZeneca, BMS, ALS Biopharma, Rutgers University, the Massachusetts General Hospital (a teaching hospital of Harvard Medical School) and Yale University. Members of our Scientific Advisory Board hold or have held affiliations with Yale University, Harvard Medical School, the National Institutes of Health and the FDA. We also have ongoing academic collaborations with Johns Hopkins University, Columbia University, Rutgers University and Yale University. We believe the strength of our management team and board of directors positions us well to enter into additional license and collaboration arrangements with world-class institutions and large pharmaceutical companies.
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Product Candidates
The following table summarizes our lead development programs. We hold the worldwide rights to all of our product candidates.
Our Strategy
Our goal is to become a leader in the development of innovative therapies for neurological diseases that have the potential to change current treatment paradigms. The key elements of our strategy to achieve this goal include:
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cerebellar disorders, including Friedreich's ataxia and sporadic ataxia, and potentially other neurological indications.
Our CGRP Receptor Antagonist Platform
Migraine Overview and Market Opportunity
Migraine is a chronic and debilitating disorder characterized by recurrent attacks lasting four to 72 hours with multiple symptoms, including typically one-sided, pulsating headaches of moderate to severe pain intensity that are associated with nausea or vomiting, and/or sensitivity to sound (phonophobia) and sensitivity to light (photophobia). Migraines are often preceded by transient neurological warning symptoms, known as auras, which typically involve visual disturbances such as flashing lights, but may also involve numbness or tingling in parts of the body. Migraine is both widespread and disabling. The Migraine Research Foundation ranks migraine as the world's third most prevalent illness, and the Global Burden of Disease Study 2010 rates migraine as the seventh highest specific cause of disability worldwide. According to the Migraine Research Foundation, in the United States, approximately 36 million individuals suffer from migraine attacks. While most sufferers experience migraine attacks once or twice per month, more
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than 4 million people have chronic migraine, defined as experiencing at least 15 migraine days per month for more than three months. Others have episodic migraine, which is characterized by experiencing less than 15 migraine days per month. People with episodic migraine may progress to chronic migraine over time. Migraine attacks can last a few hours or up to days. More than 90% of individuals suffering from migraine attacks are unable to work or function normally during a migraine attack, with many experiencing comorbid conditions such as depression, anxiety and insomnia.
Triptans are the current first-line therapy for treatment of migraine, with over 13.9 million annual prescriptions in the United States. Despite the market for triptans being highly genericized, branded options continue to be popular. For example, even at a price of approximately $400-600/month, Maxalt is one of the more commonly prescribed triptans. There has been minimal improvement in the standard treatment for migraine since the early 1990s. Reformulations of generic triptans or incremental improvements with new agents that target the same pathway are predicted to generate additional sales in the near term, but major sales growth for the migraine market are expected from novel therapeutics over the next several years. We believe that rimegepant will be a potential best-in-class small molecule CGRP receptor antagonist for the acute treatment of migraine and could achieve meaningful penetration of the market of migraine sufferers whose symptoms are not adequately addressed with current treatments.
The prevention of chronic and episodic migraine in the United States is a multi-billion dollar potential market. According to a report published by Neuropsychiatric Disease and Treatment , 38% to 50% of diagnosed migraine sufferers may be candidates for migraine prevention therapy. Currently, preventive medications approved for migraine include beta blockers, such as propranolol, topiramate, sodium valproate, and botulinum toxin, or Botox, and generate nearly 10 million prescriptions annually.
In patients with high frequency and chronic migraine, beta blockers, topiramate and sodium valproate are commonly used. These medications are often not well tolerated by patients because of adverse events such as cognitive impairment, nausea, fatigue and sleep disturbance. In clinical trials with topiramate, the reduction in number of migraine days per month has been observed to be relatively small; for example, migraine days reduced by 2.5 days from 6-7 days at baseline, or reduced by 3.5 days from 15-16 days at baseline. Migraine is twice as prevalent in women as compared to men. In the affected female patient population, predominantly women of child-bearing age, the association of these agents with poor pregnancy outcomes and fetal abnormalities can limit their use. Botox is only approved in patients with 15 or more migraine days per month. Approximately 47% of Botox-treated patients experience a 50% reduction in either migraine days per month or migraine frequency per month within six months, which leaves more than half of patients inadequately treated. In addition, the Botox dosing regimen consists of approximately 31 subcutaneous injections at various sites on the head and neck, with recommended repetition every 12 weeks if the patient has a therapeutic response.
We believe BHV-3500 has the potential to address a significant unmet need as well as compete effectively with current and future migraine prevention therapies. BHV-3500 may afford multiple routes of delivery including daily oral administration for the prevention of chronic migraine, potential for enhanced safety profile, superior chemical attributes and a higher value to patients and payors with lower expected costs compared to large molecule biologics in current development.
CGRP's Role in Migraine
The CGRP receptor is located within pain-signaling pathways, intracranial arteries and mast cells and its activation is thought to play a causal role in migraine pathophysiology. For example, research and clinical studies have shown: serum levels of CGRP are elevated during migraine attacks, infusion of intravenous CGRP produces persistent pain in migraine sufferers and non-migraine sufferers, and treatment with anti-migraine drugs normalize CGRP levels. Additionally, multiple clinical studies show that small molecule CGRP receptor antagonists, which inhibit the binding of endogenous CGRP to CGRP receptors, are effective in aborting migraine attacks.
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Treatment with a CGRP receptor antagonist is believed to relieve migraine through the following possible mechanisms:
The graphic below depicts the mechanism of action by which CGRP receptor antagonism is thought to alleviate migraine.
N Engl J Med, Paul L. Durham, "CGRP-Receptor AntagonistsA Fresh Approach to Migraine Therapy," March 11, 2004. Copyright © Massachusetts Medical Society.
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Our Lead Product Candidate: Rimegepant, an Oral CGRP Receptor Antagonist for Acute Treatment of Migraine
We are developing rimegepant as an orally available, selective and potent small molecule CGRP receptor antagonist for the acute treatment of migraine. We believe that rimegepant has the potential to be the best-in-class CGRP receptor antagonist for the treatment of migraine with the ability to address important unmet needs, such as durable efficacy across all four traditional migraine symptoms and reduced incidence of headache recurrence, without contraindications or warnings in patients with cardiovascular disease or cardiovascular risk factors such as hypertension.
Rimegepant dosed at 75 mg was observed to have statistically significant, durable improvement as compared to placebo in a Phase 2b, double-blind, randomized, placebo-controlled, dose-ranging clinical trial completed by BMS. In this trial, 812 patients suffering from migraine attacks received either placebo, sumatriptan 100 mg (a currently approved triptan medication for migraine) or rimegepant dosed at 10, 25, 75, 150, 300 or 600 mg. The Phase 2b data showed statistically significant effects of rimegepant starting at the 75 mg dose compared to placebo, meaning that at this dose level, statistically significant results were observed on all four key migraine symptomspain, nausea, photophobia and phonophobia. Higher doses of rimegepant, while also showing improvement compared to placebo, did not appear to convey any meaningful additional benefit above the 75 mg dose. The observed improvement profile is consistent with the published literature showing a lack of a progressive dose-response curve for acute anti-migraine drugs. To our knowledge and based on publicly available information, rimegepant is the only small molecule CGRP receptor antagonist currently in development that has achieved statistically significant improvement on all four of the traditional endpoints within a single study, which suggests a broad efficacy profile important both to patients and physicians. Rimegepant also was observed to have evidence of durable improvement as demonstrated by statistically significant effects on two-to-24 hour and two-to-48 hour pain freedom and two-to-24 hour pain relief, as compared to placebo. In these measurements, benefits were present at two hours after dosing and persisted through 24 hours after dosing and, with respect to pain freedom, through 48 hours after dosing. This durable improvement is significant because other common migraine medications, such as triptans, have been associated with headache recurrence.
The Phase 2b trial successfully completed its aim of identifying a Phase 3 dose. Based on these observations, we are advancing the 75 mg dose of rimegepant in our Phase 3 clinical trials. In the second half of 2017, we plan to commence two Phase 3 clinical trials of rimegepant for the acute treatment of migraine, with topline results expected in the first quarter of 2018.
Acute Treatment of Migraine and Limitation of Current Treatments
Clinicians use a number of pharmacologic agents for the acute treatment of migraine. A study published by the American Headache Society in 2015 concluded that the medications deemed effective for the acute treatment of migraine fell into the following classes: triptans, ergotamine derivatives, NSAIDs, opioids and combination medications. The current standard of care for the acute treatment of migraine is prescription of triptans, which are serotonin 5-HT1B/1D receptor agonists. Triptans have been developed and approved for the acute treatment of migraine over the past two decades. The initial introduction of triptans represented a shift toward drugs more selectively targeting the suspected pathophysiology of migraine. While triptans account for almost 80% of anti-migraine therapies prescribed at office visits by healthcare providers, issues such as an incomplete effect or headache recurrence remain important clinical limitations. In fact, only about 30% of patients from clinical trials are pain free at two hours after taking triptans. In addition, triptans are contraindicated in patients with cardiovascular disease, cerebrovascular disease, or significant risk factors for either because of potential systemic and cerebrovascular vasoconstriction from the 5-HT1B-mediated effects. The package insert for triptans includes warnings and precautions for migraine patients with risk factors for cardiovascular disease and states that high risk patients, including those with increased age, diabetes, hypertension, smoking, obesity or a strong family history of coronary artery disease, should be evaluated prior to receiving the first dose of a triptan. Triptans
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are contraindicated in patients with a history of ischemic heart disease, coronary artery vasospasm, history of stroke, peripheral vascular disease or uncontrolled hypertension. Even in patients who have a negative cardiovascular evaluation, product labeling for triptans recommends that consideration be given to administration of the first dose in a medically-supervised setting and performing an electrocardiogram immediately following administration. Additionally, periodic cardiovascular evaluation should be considered for long-term users of triptans who have cardiovascular risk factors. According to a recent study published in the journal Headache, an estimated 2.6 million migraine sufferers in the United States have a cardiovascular event, condition or procedure that limits the potential of triptans as a treatment option. Thus, we believe there remains a significant unmet medical need for a novel migraine-specific medication that does not increase the risk of cardiovascular liability.
The Potential Benefits of Rimegepant Compared to Other Treatments
Traditionally, for approval of drugs for the acute treatment of migraine, the FDA required the drug to meet four co-primary endpoints at two hours after dosage in clinical trials: pain freedom or pain relief, and freedom from nausea, phonophobia and photophobia. In October 2014, the FDA issued new, less stringent draft guidance indicating that pivotal migraine trials could use co-primary endpoints of freedom from pain and most bothersome symptom to support approval. We believe rimegepant may be superior to other acute treatments for migraine currently approved and in development because, based on our Phase 2b clinical trial data, rimegepant was observed to result in statistically significant improvement in all four endpoints of pain, nausea, photophobia and phonophobia at the 75 mg dose, compared to placebo, with a favorable safety profile.
The table below compares key features of rimegepant to two other product candidates targeting migraine that are currently in development and that we anticipate could receive marketing approval as
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early as 2019-2020, and to CGRP antibodies, which represent another class of migraine-targeting product candidates in development.
Based on the results from the Phase 2b trial and earlier-stage development, we believe rimegepant offers the following clinical and product benefits for the acute treatment of migraine:
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antagonists currently in development have failed to show statistically significant improvement on nausea, and also failed to show significant improvement on pain relief.
The Potential of CGRP Antagonists: Novel mechanism of action without causing vasoconstriction
The release of the neuropeptide CGRP from pain nerves is believed to play a causal role in the underlying pathophysiology of migraine and is also a potent dilator of intracranial arteries. Unlike triptans, which possess potent vasoconstrictive properties that could worsen cardiovascular or cerebrovascular disease, blocking the CGRP receptor reverses pathologic dilation of blood vessels without constricting them past their normal resting state size and without active vasoconstriction. The absence of cardiovascular effects may prove to be one of the major advantages in the use of CGRP receptor antagonists for the treatment of migraine. Preclinical and clinical evidence suggests that the use of CGRP receptor antagonists may be effective in treating migraine by blocking the pathophysiological processes associated with CGRP release, specifically by: (1) inhibiting pain transmission; (2) decreasing artery dilation without any active vasoconstriction; and (3) halting neurogenic inflammation. To date, the preclinical and clinical evidence indicates that CGRP receptor antagonists have an absence of vasoconstrictor activity and lack other undesirable cardiovascular side effects, such as changes in the blood pressure or heart rate. Studies of numerous drugs in development have provided proof of concept of the effects of CGRP targeting agents in humans.
Our Clinical Program for Rimegepant in Acute Treatment of Migraine
We licensed rimegepant from BMS in July 2016. To date, the majority of clinical and preclinical development with rimegepant has been conducted by BMS. BMS selected rimegepant as a lead CGRP receptor antagonist compound for its potential best-in-class chemical profile after 10 years of research on this drug target.
Phase 2b Clinical Trial Design and Results
Rimegepant is being developed for oral administration and was observed to have evidence of comprehensive and durable treatment effect in a large Phase 2b clinical trial conducted by BMS. This Phase 2b clinical trial, the results of which were published in 2014, was a double-blind, randomized, placebo-controlled, dose-ranging trial of rimegepant for the acute treatment of migraine. The primary
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objective was to evaluate the efficacy of rimegepant compared with placebo in the acute treatment of migraine as measured by pain freedom (head pain intensity level reported as "no pain") at two hours post-dosing using a four point rating scale (no pain, mild pain, moderate pain, severe pain) while identifying an optimal dose to support the Phase 3 clinical trials. Subjects were randomized to receive placebo, a 100 mg dose of sumatriptan or one of six doses of rimegepant (10 mg, 25 mg, 75 mg, 150 mg, 300 mg, or 600 mg). Randomization made use of an adaptive design, whereby one quarter of subjects were assigned placebo and one-eighth were assigned sumatriptan; the remainder were assigned to one of six rimegepant groups based on a Bayesian analysis of the observed response rates. Subjects were instructed to treat one migraine of moderate to severe pain intensity and return to the clinic within seven days.
A total of 885 subjects were randomized and 812 completed the study (the remaining subjects did not experience a migraine during the treatment phase of the trial). Key entry criteria included: age 18 to 65 inclusive with at least a one-year history of migraine beginning prior to 50 years of age; migraine attacks lasting four to 72 hours if left untreated; not more than eight attacks per month of moderate or greater severity over the prior three months; and less than 15 total headache days per month (migraine plus non-migraine) in each of the three preceding months.
Patients were given an electronic diary to record improvements and returned to the study site within seven days of study treatment for review of the data. Patients who experienced relief of headache pain to a mild intensity or pain-free intensity level at two hours post-dosing were considered to be responders. The patients who did not experience such relief at the end of two hours were permitted to use an approved rescue medication. Use of rescue medication within 48 hours was also recorded. Whatever the case, the patient was required to continue to complete his or her electronic diary for up to 48 hours after dosing. Secondary efficacy variables included total migraine freedom: a composite endpoint consisting of freedom from headache pain coupled with no symptoms of photophobia, phonophobia or nausea, at two hours post-dosing, and sustained pain freedom from two to 24 hours. Exploratory measures included pain relief at two hours post-dosing, sustained pain relief from two to 24 hours post-dosing, freedom from photophobia, phonophobia or nausea at two hours post-dosing, and sustained pain freedom from two to 48 hours post-dosing. Safety variables included AEs, serious adverse events, or SAEs, clinical laboratory evaluations, vital sign measurements, physical examinations, and electrocardiograms, or ECGs. The following graphic illustrates the study design of the Phase 2b clinical trial:
With regard to the primary study outcome, the percentage of patients who were pain free at two hours after dosing is depicted in the figure below. The rimegepant 75 mg, 150 mg, and 300 mg dose groups each were significantly superior to placebo (p £ 0.01). Among the rimegepant dose groups, the percentage of subjects who were pain free at two hours after dosing was 31.4% (27/86) in the 75 mg group; 32.9% (28/85) in the 150 mg group; and 29.7% (33/111) in the 300 mg group, compared to 15.2% of patients in the placebo group. Statistical separation from placebo was not seen with the 600 mg group (24.4%, 20/82) as compared to the lower doses.
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Pain Freedom 2 hours Post-Dosing (+/ 95% Confidence)
The table below shows the percentage of patients in the placebo, sumatriptan, and each rimegepant dose groups who experienced pain freedom and pain relief in the trial, and the corresponding p-values. P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of 0.05 represents statistical significance, meaning that there is only a 5% likelihood that the observed results occurred by chance. The table shows that rimegepant 75 mg showed statistically significant improvements compared to placebo on sustained pain freedom from two-to-24 hours and two-to-48 hours post-dose, on pain relief two hours post-dose and on sustained pain relief from two-to-24 hours post-dose (all with a 0.1% likelihood that the observed results were merely due to chance).
The figure below shows the percentage of patients who reported sustained pain freedom and sustained pain relief at two-to-24 hours after dosing among the placebo dose group, the sumatriptan dose group, and each dose group of rimegepant. Rimegepant was statistically superior to placebo on pain freedom and pain relief at two-to-24 hours across all dose groups 75 mg and above.
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Sustained Pain Freedom and Pain Relief 2-24 Hours Post-Dosing (+/ 95% Confidence)
The figure below shows the Phase 2 trial results for the three other traditional co-primary endpoints previously required by the FDAfreedom from nausea, phonophobia and photophobia, showing the proportion of patients with alleviation of these symptoms at two hours after dosing in the placebo dose group, the sumatriptan dose group, and in each of the rimegepant dose groups. Rimegepant 75 mg was statistically superior to placebo on nausea, photophobia and phonophobia freedom at two hours after dosing.
Nausea, Phonophobia and Photophobia Freedom 2 Hours Post-Dosing (+/ 95% Confidence)
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With regard to safety and tolerability in the Phase 2 clinical trial, the overall incidence of AEs was comparable across the placebo and rimegepant treatment groups. The most commonly seen AE in the rimegepant dosing groups was nausea, which appeared to exhibit a dose dependent trend at the higher doses: 1.4% in the 10 mg dose group; 0% in the 25 mg dose group; 3% in each of the 75 mg and 150 mg dose groups; 4% in the 300 mg dose group; and 8% in the 600 mg dose group. Importantly, although the patient numbers were small, the reported events of chest discomfort, chest pain, muscle tightness, and jaw pain were only observed in the sumatriptan-treated patients, with no rimegepant treated patients reporting chest pain-related symptoms. Most of the adverse events reported were mild to moderate in intensity. Two serious adverse events were reported (post-lumbar puncture headache and pneumonia), but neither was deemed by the trial investigators to be treatment-related. No deaths were reported, and no patients discontinued because of AEs. There were no clinically important ECG findings, vital sign abnormalities, or physical examination findings after administration of rimegepant.
The table below shows the number and percentage of patients reporting a commonly occurring AE within 48 hours post-dosing. Rimegepant was generally well tolerated with no events of chest discomfort and low rate of AEs across dose groups.
Treatment-emergent AEs that occurred within two hours post-dosing were reported most often in the sumatriptan group (10.0%), followed by the 600 mg (8.3%), 300 mg (8.0%), 150 mg (7.0%), 10 mg (6.9%), 25 mg (4.8%), and the 75 mg (4.7%) dose groups, and the placebo group (2.9%). In the rimegepant dose groups, the most common adverse events reported within two hours post-dosing were primarily low rates of dizziness and somnolence, and gastrointestinal disorders, primarily nausea and vomiting.
The liver has been a target of interest in certain small molecule CGRP receptor antagonists, as indications of liver toxicity have been associated with frequent use. In the Phase 2b trial, one patient in the rimegepant 75 mg dose group and one patient in the placebo group had a report of an asymptomatic and mild increase in certain hepatic enzymes, which are types of liver enzyme measured in a liver function test to detect damage and inflammation to the liver. The subject in the rimegepant 75 mg dose group had peak alanine transaminase, or ALT, and aspartate transaminase, or AST, elevations that were less than 1.22 times the upper limit of normal (ULN) and reported as an AE, while the placebo subject had a total bilirubin level that was greater than 2xULN. No subjects in the Phase 2b trial had AST or ALT elevation that exceeded 3xULN, a level that is considered to be a potentially meaningful indicator of a drug's potential to cause severe drug-induced liver injury, or DILI, based on FDA guidance.
In conclusion, in the Phase 2b clinical trial, rimegepant was observed to be superior to placebo in the acute treatment of migraine and the trial identified the lowest dose that is fully effective in patients. More specifically, the selection of 75 mg rimegepant as the dose for advancement in Phase 3 trials was based on observed improvement as compared to placebo on the key primary outcome measure, pain freedom at two hours (31.4% vs 15.2% placebo; p = 0.0018) and key secondary and exploratory outcome measures: total
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migraine freedom at two hours (27.9% vs 11.8%; p = 0.0008), sustained pain freedom two to 24 hours (27.9% vs 7.4%, p < 0.0001), freedom from photophobia at two hours (41.9% vs 24.0%, p = 0.0023), freedom from phonophobia at two hours (52.3% vs 27.9%, p < 0.0001), freedom from nausea at two hours (67.4% vs 51.0%, p = 0.0074), pain relief at two hours (72.1% vs 51.2%, p = 0.0007), and sustained pain relief from two-to-24 hours (69.8% vs 42.4%, p < 0.0001). Notably, rimegepant is the only small molecule and orally available CGRP receptor antagonist that has shown statistically significant improvement on the key migraine symptoms of pain, nausea, photophobia and phonophobia in a single trial.
Phase 3 Clinical Trial Development Plan
Based on the results of the Phase 2 clinical trial, we have elected to advance the 75 mg dose of rimegepant in our proposed Phase 3 clinical trials. According to FDA 2014 draft guidance for developing drugs for acute treatment of migraine, approval for this indication has historically involved the demonstration of an effect on four co-primary endpoints: pain, nausea, photophobia and phonophobia. More recently, the agency has considered an alternate approach for approval based on an effect on headache pain freedom and patient's most bothersome migraine symptom, or MBS, selected as either nausea, photophobia or phonophobia. Using this approach, the two co-primary endpoints would be (1) having no headache pain at two hours after dosing and (2) a demonstrated effect on the MBS at two hours after dosing. Regardless of the associated symptom identified as most bothersome, the FDA guidance states that all three important migraine symptoms (nausea, photophobia and phonophobia) should be assessed as secondary endpoints.
We had an end of Phase 2 meeting with the FDA in March 2017 and we plan on conducting two Phase 3 registrational trials commencing in 2017. Both trials will conform to the FDA guidance for approval in acute treatment of migraine. The trials will be double-blinded, randomized, and placebo controlled. The trials will recruit male and female patients 18-65 years of age with at least a one year history of migraine, including an age of onset prior to 50, migraine attacks that last about four to 72 hours, not more than eight attacks of moderate to severe intensity per month within the last three months and not less than two attacks per month. Our goal is to enroll patients who represent the spectrum of real-world migraineurs, including those who have previously been non-responsive to triptans, as the FDA stated to us at our end of Phase 2 meeting that triptan-resistant patients may benefit from rimegepant treatment. We are also enrolling patients who have cardiovascular risk factors and/or vascular disease. The primary objective of the trials will be to evaluate the efficacy of 75 mg of rimegepant compared with placebo in the acute treatment of migraine as measured by two co-primary endpoints: (1) pain freedom (headache pain intensity level reported as "no pain") at two hours after dosing using a four-point numeric rating scale (no pain, mild pain, moderate pain, severe pain) and (2) freedom from the MBS at two hours after dosing. The three other important migraine symptoms (nausea, photophobia and phonophobia) will be assessed as secondary endpoints.
In designing the Phase 3 trials, care was taken to minimize any changes in study populations compared to the already completed Phase 2 trial with rimegepant with no major changes in inclusion and exclusion criteria between the completed and planned trials. The main differences in trial design between the previous Phase 2 trials and our planned Phase 3 clinical trials include:
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This change in the hierarchy of outcome measures, sample size and number of treatment arms reflect somewhat standard changes in clinical trial design to increase technical and regulatory chances of success in the registrational program. We are also developing a commercial-grade formulation of rimegepant that we plan to use in our Phase 3 clinical trials. We intend to submit our trial protocols to the FDA prior to the commencement of our Phase 3 trials. The FDA may have additional feedback on our trial design.
We are also planning a long-term safety study to meet FDA requirements for approval. This study will be a 12-month, long-term, open label safety study conducted in patients with migraine. Two thousand patients will be treated in this study. A subset of patients (approximately 600) will have frequent migraine attacks (i.e., more than eight migraine attacks per month) and will be able to take up to 30 doses of 75 mg rimegepant in one month. At our end of Phase 2 meeting, the FDA stated its desire to see a safety study in which patients received daily or near-daily dosing of rimegepant for at least three months. This desire stems from the FDA's concern about a potential liver signal with the class of CGRP antagonists. The FDA stated that any risk of liver injury has to be very low and that exposure with the drug has to be sufficient to cap the risk of liver injury at a level acceptable for the migraine population. We believe the design of our long-term safety study may adequately address this concern by providing for the enrollment of approximately 600 patients who experience eight or more migraine days per month, who will, in the study, be allowed to use rimegepant on a daily basis, which we believe will generate safety data with respect to long-term, frequent use of rimegepant. Study visits for all patients will be monthly for the first three months and every three months thereafter. Based on feedback we received at our end of Phase 2 meeting with the FDA, we will administer liver function testing at two weeks post-dose and will follow patients with any abnormal liver function tests until clinical resolution. We intend to initiate this study in 2017.
Previous Clinical Trials with Rimegepant
To date, six clinical trials have been completed in healthy volunteers and patients with migraine that inform pharmacokinetic, metabolic interactions, safety, tolerability and efficacy of rimegepant. Rimegepant has been observed to be generally safe and well tolerated in humans when given as single oral doses up to the maximum dose of 1500 mg and multiple oral doses up to the maximum daily dose of 600 mg for 14 days. No deaths have occurred in clinical trials to date.
Approximately 687 subjects have been dosed with rimegepant to date. In Phase 1 and 2b trials, approximately 600 subjects have received single doses of rimegepant, ranging from 25 mg to 1500 mg; and approximately 87 subjects have received multiple doses of rimegepant, ranging from 75 mg to 600 mg daily for up to 14 days. In total, we believe the current data suggests a favorable benefit-risk profile for rimegepant in the acute treatment of migraine attacks. The clinical experience with rimegepant to date has allowed the characterization of safety and tolerability at substantial multiples of the intended therapeutic dose and intended frequency of use. Rimegepant has been assessed in single doses up to 1500 mg and in multiple doses from 75 mg to 600 mg with 14 days of dosing (including 300 mg twice daily), where the higher doses yielded exposures more than 54 times greater in AUC, which is a measure of drug exposure, and 23 times higher in C max , which is the peak concentration that a drug achieves after dosing, as compared to the mean therapeutic exposure of a single 75 mg dose. These high exposure multiples were observed to be generally well tolerated.
As of December 31, 2016, only two SAEs have been reported in the rimegepant program, neither considered related to study drug: one subject had an SAE of severe post-lumbar puncture headache seven
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days after exposure to a single dose of rimegepant that was considered unrelated to study treatment, and one subject had an SAE of moderate pneumonia with onset five days after exposure to a single dose of rimegepant that was considered unrelated to treatment. In addition, one subject who received placebo experienced an SAE (appendicitis).
Since no data are available regarding the effects of rimegepant on human fetuses or newborns, women of childbearing potential must use adequate birth control and have a negative serum or urine pregnancy test to be eligible to receive rimegepant. Female subjects should avoid attempts at pregnancy in the month prior to exposure to rimegepant and eight weeks after exposure to rimegepant. All urine pregnancy testing results must be confirmed by serum pregnancy testing. Drug interaction studies with oral contraceptives are ongoing to assess effects at therapeutic doses of rimegepant.
Nonclinical Toxicology
Rimegepant is not genotoxic or phototoxic and has a low potential for off-target receptor interactions or effects on the cardiovascular, respiratory, and CNS systems. With repeated dosing up to three months, rimegepant was clinically tolerated at up to 150 mg/kg/day in rats and 100 mg/kg/day in monkeys. The liver was the primary target organ in mice at levels of 100 mg/kg/day and greater and in rats at levels of 60 mg/kg/day and greater. These dosing levels were not associated with hepatocellular degeneration/necrosis, inflammation, or fibrosis. In monkeys, the primary target organ effect was minimal to moderate macrophage accumulation (histiocytosis) in mandibular and mesenteric lymph nodes in males at 100 mg/kg/day (at least 66× (for rats) and 123× (for monkeys) the anticipated maximum human AUC at a 75 mg/day clinical dose) in the 3-month study that was considered to be a marginal exacerbation of a common spontaneous change in this species. Hepatic lipidosis identified in mouse and rat studies was determined to be rodent specific as it was not observed at rimegepant exposures in monkeys which overlapped those producing lipid effects in rats in the three-month pivotal studies. At the NOEL (no observable effect level) and NOAEL (no observable adverse effect level) doses in rats (30 mg/kg/day) and monkeys (50 mg/kg/day) in the three-month studies, mean (male and female combined) AUC exposures were at least 23× (for rats) and 56× (for monkeys) the anticipated human AUC at a 75 mg/day clinical dose. Since fetal effects in rats were observed only at doses that produced maternal toxicity (300 mg/kg/day) and there were no fetal findings in rabbits at any dose level, rimegepant is not considered to be a selective developmental toxicant. Clinical monitoring for potential hepatotoxicity has been and will continue to be conducted in subsequent studies in humans. Such monitoring will include routine liver function tests including ALT, AST, total bilirubin, GGT and ALP at all study phases, including screening (before exposure to rimegepant), regularly during exposure, and after exposure. Additionally, the frequency, severity, and discontinuations of hepatic-related AEs are monitored closely. All cases of drug induced liver injury, or DILI, are reported as SAEs. There have been no reported cases of DILI with rimegepant administration to date. Other symptoms or target organs from nonclinical studies that will continue to be followed include skeletal muscle effects, emesis, skin rash and hematology measures.
Our Product Candidate BHV-3500, a CGRP Receptor Antagonist for Migraine Prevention
BHV-3500 is the second compound from our CGRP receptor antagonist platform. We are developing BHV-3500 for the prevention of chronic and episodic migraine, and we believe it has the potential to improve the existing standard of care based on the following benefits:
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potential for liver effects at high exposures, BHV-3500 has not demonstrated any propensity for liver abnormalities in preclinical studies to date, even at very high dose levels. Because preventative treatments involve chronic dosing on a daily basis, any potential target organ effects on the liver could be problematic. Therefore, based on these observations from nonclinical toxicology studies, we believe that BHV-3500 may provide a substantial benefit over other agents with such propensities. In addition, in preclinical studies of BHV-3500, no significant cardiovascular safety or systemic toxicity issues were observed, in contrast to sumatriptan, which displays dose-dependent vasoconstriction.
Clinical Development Plans
We are planning to commence a toxicology development program in the first half of 2017 to support the submission of an IND for BHV-3500. This preclinical program will include intranasal and subcutaneous dose toxicity studies. If these studies support the submission of an IND, we would then plan to commence a Phase 1 clinical trial in the second half of 2017 to assess safety, tolerability and pharmacokinetics of BHV-3500 in healthy volunteers.
Our Glutamate Platform
We are developing three product candidates, trigriluzole, BHV-0223 and BHV-5000, that modulate the glutamate system via two distinct mechanisms which form the basis of our glutamate platformglutamate transporter modulators (trigriluzole and BHV-0223) and glutamate NMDA receptor antagonists (BHV-5000).
Glutamate is an important neurotransmitter present in over 90% of all brain synapses and is a naturally occurring molecule that nerve cells use to send signals to other cells in the central nervous system. Glutamate plays an essential role in normal brain functioning and its levels must be tightly regulated. Abnormalities in glutamate function can disrupt nerve health and communication, and in extreme cases may lead to nerve cell death. Nerve cell dysfunction and death leads to devastating diseases, including ataxia, ALS and other neurodegenerative disorders. Glutamate clearance is necessary for proper synaptic activation and to prevent neuronal damage from excessive activation of glutamate receptors. Excitatory amino-acid transporters, or EAATs, help regulate glutamate clearance, and are responsible for most of the glutamate uptake within the brain.
The mechanism of action of our glutamate platform is depicted below. Glutamate must be tightly regulated once released from a pre-synaptic neuron and acts as a signaling neurotransmitter to stimulate the post-synaptic neuron via stimulation of glutamate receptors (e.g., NMDA, AMPA or Kainate receptors). Glial cells surrounding the synaptic junction are predominantly responsible for clearing
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glutamate through transporters, the EAATs. There are five distinct types of glutamate transporters. (1) As depicted in the glial cell to the right of the figure below, BHV-0223 and trigriluzole increase the activity of the EAATs to increase the clearance of glutamate and decrease glutamate release from the pre-synaptic neuron. Trigriluzole and BHV-0223 also inhibit presynaptic ion channels that may inhibit the release of glutamate from presynaptic neurons. (2) As depicted in the postsynaptic neuron to the bottom of the figure below, BHV-5000 blocks glutamate signaling that is mediated by post-synaptic NMDA receptors. Modulating glutamate also has the potential to be neuroprotective and increase the release of neurotrophic factors, including brain derived neurotrophic factor, or BDNF, which are endogenous molecules that help to support the survival of existing neurons, and encourage the growth and differentiation of new neurons and synapses.
Glutamate Transporter Modulation
Abnormal glutamate release or dysfunction of glutamate clearance can cause overstimulation of glutamate receptors which can lead to a dangerous neural injury called excitotoxicity, which has been associated with a wide range of neurodegenerative diseases. The FDA has approved anti-excitotoxicity drugs that act on the glutamatergic system by blocking NMDA receptors, such as memantine (Namenda) for Alzheimer's disease, lamotrigine (Lamictal) for epilepsy and bipolar disorder and riluzole (Rilutek) for ALS. Although these drugs show the therapeutic potential of glutamate receptor antagonists in the treatment of a range of neurological diseases, many of these approved drugs have serious side effects and other drawbacks that we have attempted to solve with our development of BHV-0223 and trigriluzole.
We are currently developing trigriluzole as the potential first FDA-approved drug treatment option for patients suffering from ataxia, initially focusing on SCA. According to a 2016 report by Orphanet cataloging the prevalence and incidence of rare diseases, SCA affects approximately 22,000 individuals in the United States. If the results of our ongoing Phase 2/3 trial in SCA are positive, we will seek to expand to adjacent ataxias that have similar pathophysiology and represent significant potential for market expansion. According to Orphanet, in the United States, approximately 6,400 patients suffer from Friedreich's ataxia, 3,200 to 28,000 patients have sporadic ataxia, and 84,000 have acquired ataxias. There are currently no FDA-approved medications for the treatment of SCA or any other cerebellar ataxias. Our regulatory approval strategy for trigriluzole for ataxias will focus on obtaining additional orphan drug designations and exclusivity whenever they are available.
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In addition, preclinical and small-scale pilot studies are underway to explore trigriluzole's use in the treatment of a pipeline of other indications such as essential tremor, neurodegenerative disorders, including ALS and Alzheimer's disease, and neuropsychiatric disorders, including anxiety and depression. We are also developing analogs of trigriluzole and other-related prodrugs for potential use in these separate indications.
We are currently developing BHV-0223 for the treatment of ALS. According to the ALS Association, ALS affects up to 20,000 individuals in the United States and according to industry data, we estimate 15,000 individuals are clinically diagnosed, with 7,500 ALS patients actively treated with generic riluzole or branded Rilutek. As the only drug approved by the FDA for the treatment of ALS, riluzole is the established standard of care. However, while the market is highly genericized, there have not been further clinical improvements or advances in ALS drug therapeutics since the FDA's approval of riluzole in 1995. In addition, the use of riluzole is limited by a number of non-desirable attributes. We believe that BHV-0223, if approved, could gain meaningful market share, based on its favorable formulation attributes and a pricing model similar to that of branded Rilutek.
Our Product Candidate Trigriluzole for Ataxias
Trigriluzole is an NCE and tripeptide prodrug of the active metabolite, riluzole. Based on its mechanism of action, preclinical data and clinical studies, trigriluzole has potential for therapeutic benefit in a range of neurological and neuropsychiatric illnesses. Initial development will focus on its use in SCA, an orphan neurological indication that currently has no approved therapies and for which the active metabolite has demonstrated preliminary efficacy in two prior randomized controlled trials conducted by third parties. We acquired trigriluzole from ALS Biopharma, LLC, or ALS Biopharma, and Fox Chase Chemical Diversity Center, Inc., or FCCDC, along with an estate of over 300 prodrugs. A prodrug is a compound that, after administration, is metabolized in the body into an active drug. Trigriluzole is actively transported by virtue of recognition of its tripeptide moiety by the PepT1 transporter in the gut, and is responsible for the increased bioavailability of the drug. Once inside the body, the prodrug, trigriluzole is cleaved by enzymes in the blood to the active metabolite riluzole. To mitigate the limitations of riluzole, several classes of prodrugs were designed, synthesized, and evaluated in multiple in vitro stability assays that predict in vivo drug levels. Trigriluzole is a third generation of prodrug development and the product of six years of intensive chemistry efforts.
Riluzole is currently only indicated for ALS and has a number of non-desirable attributes that have limited its clinical use. Key limitations of riluzole include:
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prescribing information, cases of clinical hepatitis, one of which has been fatal, have been reported in patients taking riluzole.
The prodrug design and selection pathway that was pursued with trigriluzole is intended to address all of these limitations of riluzole. In addition, a prodrug can be engineered to enhance absorption and protect from diminished absorption when taken with meals. The trigriluzole preclinical development strategy was based on optimizing in vivo and in vitro features, such as stability in gastrointestinal and stomach fluids; stability in liver microsomes; favorable safety pharmacology with respect to off-target effects (particularly liver effects); metabolic cleavage in the plasma to release the active moiety; and enhanced gastrointestinal absorption properties via selection of linker moiety. In in vivo studies in rodents, the intended benefits of this optimization program were observed, including delayed peak concentrations and greater exposure.
After six years of chemistry development and preclinical testing, the resulting lead prodrug from the chemistry program was trigriluzole. Trigriluzole is chemically comprised of riluzole linked via an amide bond to a tripeptide that is a substrate for gut transporters (PepT1) and which contributes to its improved bioavailability. The tripeptide moiety is cleaved by plasma aminopeptidases, releasing riluzole and naturally occurring amino acids, which we believe are readily managed by endogenous metabolic routes. We believe that the estate of compounds we acquired, combined with our internally developed intellectual property, will provide a significant barrier to entry from competitors. Trigriluzole is stable in fluids from the gastrointestinal tract and expected to have a differentiated profile with regard to any liability for hepatic effects.
SCA was chosen as the lead indication based on a strong preclinical rationale as well as demonstration of preliminary efficacy of trigriluzole's active metabolite, riluzole, in two randomized controlled trials in patients with SCA and other ataxias conducted by third parties (Ristori 2010; Romano 2015). If the results of our ongoing Phase 2/3 trial in SCA are positive, we intend to conduct registrational trials to support approval in adjacent ataxia indications, such as Friedreich's ataxia and sporadic ataxia. In addition, based on preclinical studies and early-stage clinical trial results of riluzole, the active metabolite of trigriluzole, we believe trigriluzole or an optimized alternative prodrug from our pipeline may have potential therapeutic benefit in broader neurological conditions, such as essential tremor, Alzheimer's disease, obsessive compulsive disorder, bipolar disorder and generalized anxiety disorder, and in other diseases such as metastatic melanoma.
Overview of Ataxias and Limitations of Current Treatment
Ataxias are a group of degenerative diseases of the nervous system, including hereditary ataxias and sporadic ataxias. According to the National Ataxia Foundation, the word "ataxia" originates from a Greek word meaning "without order" or "incoordination" and aptly describes many of the symptoms that are experienced by people who suffer from the many forms of ataxia, including problems with coordination, balance and movement which can affect a person's fingers, hands, arms, legs, body, speech and eye movements. Ataxias are generally classified as being either hereditary or sporadic. Hereditary ataxias are degenerative disorders that progress over a number of years. The hereditary ataxias include autosomal dominant forms, such as SCA, episodic ataxias and dentratorubral-pallidoluysian atrophy, and autosomal recessive forms, such as Friedreich's ataxia, fragile X-associated tremor/ataxia syndrome and ataxia-telangiectasia. Sporadic ataxias are generally idiopathic, do not run in families and have an onset later in
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life. Sporadic ataxias share many clinical features of the hereditary forms, which is thought to be attributable to similar underlying cerebellar dysfunction.
Although symptoms may vary, the typical clinical course of SCA might be described as follows. Balance and coordination are affected first. Incoordination of hands, arms, and legs, and slurring of speech are other common, early symptoms. Over time, individuals with SCA may develop numbness, tingling, or pain in the arms and legs (sensory neuropathy), uncontrolled muscle tensing (dystonia), muscle wasting (atrophy), and muscle twitches (fasciculations). Walking becomes difficult and is characterized by walking with feet placed further apart to compensate for poor balance. Impaired coordination of the arms and hands affects the ability to perform tasks requiring fine motor control such as writing and eating. Rarely, rigidity, tremors, and involuntary jerking movements (chorea) have been reported in people who have been affected for many years. As time goes on, ataxia can affect speech and swallowing. Finally, individuals with SCA may also have difficulty processing, learning, and remembering information (cognitive impairment). Notably, there can also be significant clinical variation in the order and extent of symptom expression between mutations, within a common mutation, and even within a kindred that shares the same genotype. Non-cerebellar involvement may also occur in many SCA subtypes (such as cognition, pyramidal, extrapyramidal, motor neuron, peripheral nerve or macular involvement). Signs and symptoms of SCA typically begin in early adulthood, but can appear anytime from childhood to late adulthood; SCA is degenerative and progresses over a number of years. The neurodegeneration is attributed to the production of abnormal proteins that cause the affected nerve cells, predominantly cerebellar purkinje fibers, to eventually function poorly and ultimately degenerate. As SCA progresses, coordination problems become more pronounced. Atrophy of the cerebellum and sometimes brainstem may be apparent on brain imaging. The diagnosis of SCA requires the exclusion of acquired, non-genetic causes of ataxia, such as alcoholism, vitamin deficiencies, multiple sclerosis, vascular disease, tumors, and paraneoplastic disease. A definitive diagnosis requires genetic testing or occurrence within a kindred that has an identified mutation. Lifespan is significantly shortened due to complications related to neurological deficits.
There are currently no FDA-approved medications for the treatment of SCA or any other cerebellar ataxia, and treatment is supportive. In general, multidisciplinary care provides supportive measures and the goal of this treatment is to improve quality of life and survival.
The Potential Benefits of Trigriluzole Compared to Riluzole
We believe trigriluzole offers the following potential advantages, compared to orally dosed riluzole:
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Our Clinical Program for Trigriluzole in Spinocerebellar Ataxia
Based on the results of our Phase 1 trial with trigriluzole and two third-party academic trials that have shown preliminary efficacy of riluzole in cerebellar ataxias, we are advancing trigriluzole into a Phase 2/3 clinical trial for SCA. We believe this trial, if successful, may be sufficient to support our application for regulatory approval of trigriluzole.
A summary of these third-party publications regarding the active metabolite of trigriluzole, riluzole, is provided below. In these two publications, the authors conducted studies of riluzole compared to placebo to assess improvement in patients with ataxias using two different ataxia rating scales. In each study, the authors observed statistically significant improvements in the riluzole treatment groups compared to the placebo groups.
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which is the active metabolite of trigriluzole, may confer acute therapeutic effects after eight weeks of dosing in diverse forms of cerebellar ataxia.
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Development and Regulatory Pathway
Our clinical program for trigriluzole is based on a regulatory pathway under section 505(b)(2) of the U.S. Food Drug and Cosmetic Act that allows reference to data on riluzole for the purpose of safety assessments. In addition, under current FDA interpretations, we believe trigriluzole also qualifies as an NCE and thereby is eligible for conventional regulatory data exclusivities. In December 2016, we began enrollment in a Phase 2/3 clinical trial of trigriluzole in adult subjects with SCA.
The Phase 2/3 trial is a randomized, double-blind, placebo-controlled trial being conducted at approximately 15 sites in the United States, followed by an open-label extension phase. Approximately 120 subjects will be randomized to receive a once-daily dose of either placebo or 140 mg trigriluzole. Patients will be stratified by diagnosis (genotype) and baseline severity (as measured by the patient's gait SARA score of £ 4 and >4). The randomization phase will last eight weeks. The primary outcome measure of the trial is the change from baseline in patient SARA score after eight weeks of treatment. The choice of the SARA, a validated scale, as the primary outcome measure was based on the consensus of a panel of national experts, based largely on the validation of the instrument in multiple populations, its effective use in demonstrating efficacy in a trial with riluzole (as shown in the Romano study discussed above), favorable psychometric properties, and its ability to assess a broad spectrum of ataxia-related symptoms. A secondary outcome measure will be patient time to perform an eight-meter walk test. Exploratory outcome measures will include improvement as measured using the Unified Huntington's Disease Rating Scale Part IV on functional assessment, Clinical Global Impression of Improvement and the Patient Global Impression of Change. Qualifying subjects will have genotypically confirmed diagnosis of the most common SCA subtypes. They must have moderate symptom severity (i.e., SARA scores of 8 to 30 inclusive and be able to walk eight meters without assistance). In addition, subjects completing the eight-week treatment phase are eligible to participate in a 48-week open-label extension phase. We enrolled the first patient on December 15, 2016. Enrollment is expected to conclude in 2018, with topline results available in the first quarter of 2018. The design of the trial was informed predominantly by an advisory panel of the leading ataxia experts that we hosted in February 2016 as well as the observations from peer-reviewed publications in the scientific literature. The FDA has stated its concern that our use of the SARA scale, as currently constructed, as a primary endpoint is not appropriate in this trial. We plan to continue to interact with the FDA to discuss their concerns with the SARA and will consider incorporating any feedback in our analysis of the clinical trial data that we collect and measure with the SARA.
The following chart shows a summary of the trial design for our Phase 2/3 trial of trigriluzole:
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Previous Clinical Trials with Trigriluzole
In July 2016, we began a Phase 1 randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability and pharmacokinetics of single and multiple ascending doses of trigriluzole in normal healthy volunteers. In this study, the initial safety and tolerability of trigriluzole at single doses ranging from 9.5 mg to 200 mg and multiple doses ranging from 35 mg to 200 mg daily were assessed. Fifty-eight healthy volunteers have been dosed with trigriluzole and 20 have been dosed with placebo. Based on preliminary data, both single and multiple doses up to 200 mg have been well tolerated without evidence of novel, clinically significant safety signals or lab abnormalities. There is no apparent dose response regarding the frequency or severity of AEs. In the blinded group, including subjects treated with both placebo and trigriluzole, the most common AEs were headache (five subjects, two with moderate severity and three with mild severity) and constipation (two subjects). No pattern of AEs or lab abnormalities has become apparent to provide specific cautions or to suggest cautions beyond what is appropriate for the active metabolite, riluzole. Preliminary results suggest approximately 25% to 30% greater systemic exposure of the active metabolite via oral administration of trigriluzole as compared to riluzole tablets. In addition, the time to peak concentration of the active metabolite via oral administration of trigriluzole was extended relative to that achieved with oral riluzole tablets, thus suggesting the mitigation of first-pass metabolism. A cross-over arm of the trial assessing fed and fasted conditions suggested no food effect. These pharmacokinetic properties differentiate from direct oral administration of the active metabolite. These preliminary safety, tolerability and pharmacokinetic data support advancement of trigriluzole into Phase 2/3 clinical testing.
Trigriluzole: Next Indications
Given the novel chemical properties of trigriluzole and its unique mechanism of action, we believe trigriluzole, or another optimized prodrug of riluzole, has the potential for broad applicability across several neurological indications where modulation of brain glutamate has been implicated in underlying disease states. SCA was chosen as the lead indication based on a strong preclinical rationale, the results of the Ristori and Romano studies outlined above, and data from our own Phase 1 trial with trigriluzole. If we observe positive efficacy results in SCA, we believe this will provide further proof-of-concept that trigriluzole has therapeutic potential in other disorders of glutamate dysfunction and we plan to explore trigriluzole in adjacent cerebellar disorders, such as Friedreich's ataxia and sporadic ataxia, and other orphan indications. We also may select another optimized prodrug from our pipeline to develop for the treatment of broader applications.
A brief description of potential indications that we could pursue in the future with trigriluzole or other optimized prodrugs from our pipeline is summarized below. We will determine the timing and prioritization of additional indications as warranted by emerging data.
Other Orphan Indications
If the results of our Phase 2/3 trial in SCA are positive, we believe the trial will provide validation for the role of trigriluzole in a range of other ataxias. Additionally, preliminary data from the Ristori and Romano randomized controlled trials showed improvement in some patients with Friedreich's ataxia, multisystem atrophy of the cerebellar type, sporadic ataxia, antibody-associated ataxia and fragile X-associated tremor/ataxia syndrome. We intend to explore additional trials in other ataxia indications, such as Friedreich's ataxia and sporadic ataxia.
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individuals in the United States have Friedreich's ataxia. Treatment is supportive and no pharmacotherapies are approved by the FDA for the treatment of Friedreich's ataxia.
Other (Non-Orphan) Cerebellar Disorders
Broader Neuropsychiatric Indications
Based upon preclinical and preliminary clinical work, we also believe there are several potential expansions for trigriluzole, or another optimized prodrug of riluzole from our pipeline, including potential for therapeutic application in a broad range of neuropsychiatric conditions, such as anxiety disorders, mood disorders and neurodegenerative disorders.
Anxiety Disorders
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in refractory OCD failed to demonstrate the efficacy of the adjunctive use of riluzole in 60 pediatric patients with refractory OCD. A third randomized controlled third party trial demonstrated statistically significant therapeutic effects with the adjunctive use of riluzole as compared to adjunctive placebo in 50 adults with refractory OCD. These clinical effects are consistent with findings such as genetic associations of glutamate transporter genes with OCD and increased glutamate concentrations in brain and cerebrospinal fluid of patients with OCD. Taken together, we believe there is a clear rationale for advancement of trigriluzole or another optimized prodrug of riluzole from our pipeline into a Phase 2 proof-of-concept trial in OCD.
Mood Disorders
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observed positive effects in 14 largely treatment-resistant patients after six weeks of treatment with 100-200 mg per day of riluzole. In this study, early changes observed on magnetic resonance spectroscopy, which measures patients' brain glutamate levels, correlated with clinical improvement.
Neurodegenerative Disorders
Other Indications Being Pursued by our Collaborators
Our collaborators are exploring the potential applicability of trigriluzole beyond cerebellar and neuropsychiatric indications, including in melanoma (Rutgers University) and glioblastoma (Johns Hopkins University). The oncology collaborations with Rutgers and Johns Hopkins are based upon the mechanistic rationale that some tumors overexpress glutamate receptors, the central role that glutamate may have in cancer metabolism and the effect of glutamate on the tumor microenvironment. Additional proof-of-concept work with trigriluzole is needed in these other indications to establish the likelihood of success in these other disease indications.
Our Product Candidate BHV-0223 for ALS
Overview of Amyotrophic Lateral Sclerosis and Limitations of Current Treatments
ALS is a progressive neurodegenerative motor neuron disease that affects nerve cells in the brain and the spinal cord. The disease belongs to a group of disorders known as motor neuron diseases, which are characterized by the gradual degeneration and death of motor neurons. ALS affects up to 20,000 individuals in the United States and typically presents in patients with painless muscle weakness, trouble swallowing and muscle atrophy that ultimately progresses to paralysis, impaired breathing and death.
Since the FDA's approval of riluzole in 1995, there have not been further clinical improvements or advances in ALS drug therapeutics. Several therapies are currently in clinical trials. Riluzole extends survival and/or time to tracheostomy. Riluzole itself has pharmacokinetic and pharmaceutic limitations that have restricted its broader clinical application. Riluzole tablets have 60% bioavailability, attributed to high first-pass metabolism in the liver that is thought to be mediated via metabolism by the heterogeneously expressed CYP1A2 enzyme. This metabolic route is also thought to contribute to the high pharmacokinetic variability associated with riluzole. In addition, riluzole is associated with reduced exposure when taken with meals, or a negative food effect, resulting in the guidance to take riluzole within a period of fasting (one hour before or two hours after a meal) for each of two daily doses. In addition,
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riluzole has dose-dependent effects on liver function tests that necessitate periodic liver function test monitoring and is associated with transient liver transaminase elevations. At riluzole daily doses of 100 mg, drug discontinuation is required in 2% to 4% of subjects. However, this has not been observed with lower doses, an important observation as the planned commercial dose of BHV-0223 represents a lower drug load than the FDA-approved dose of riluzole while delivering similar exposures. The drug substance of riluzole itself has other intrinsic limitations that complicate the ability to produce non-tablet formulations, including very low solubility in water, poor oral palatability, pH dependent chemical stability and intense oral numbness if administered directly to the oral mucosa.
Our Clinical Program for BHV-0223 in ALS
BHV-0223 is a formulation of riluzole designed to advance beyond the limitations of riluzole tablets for application in ALS. BHV-0223 is a sublingually absorbed and oral disintegrating tablet, or ODT, of riluzole, that makes use of proprietary Zydis ODT technology that we have exclusively licensed world-wide rights from Catalent U.K. Swindon Zydis Limited, or Catalent, for use with riluzole. Catalent's ODT technology allows us to develop a form of riluzole that is fast-dissolving and which we expect will mitigate many of the shortcomings associated with the solid oral dosage form of riluzole. Based on over 20 years of global clinical experience with riluzole, we expect that BHV-0223 is likely to be well tolerated in chronic dosing.
We believe BHV-0223 offers the following potential advantages, compared to the solid oral dosage form of riluzole, in the treatment of ALS:
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We recently completed a Phase 1 trial, in which we assessed the safety, tolerability and pharmacokinetics of BHV-0223. This study was a randomized, cross-over, controlled trial employing single and multiple doses of BHV-0223 (10 mg, 17.5 mg and 35 mg strengths delivered sublingually) as well as 50 mg Rilutek delivered orally. Sublingual dosing of 35 mg BHV-0223 delivered an exposure profile that was comparable to that achieved with oral delivery of 50 mg Rilutek tablets. BHV-0223, 35 mg dose, demonstrated a mean 15% greater extent of absorption compared to Rilutek on a dose-normalized basis, a comparable absolute peak concentration and increased early exposure consistent with sublingual absorption. In addition, pharmacokinetic variability appeared lower with sublingual BHV-0223 as compared to 50 mg Rilutek. For example, no subjects in the 35 mg BHV-0223 arm achieved low peak concentrations (i.e., <50 ng/mL) as compared to one-third of subjects who received 50 mg Rilutek. Based on pharmacokinetic modeling, 40 mg of BHV-0223 is the optimized dose strength for the purpose of fulfilling formal regulatory criteria for bioequivalence and is the dose strength that we have chosen to advance in future clinical trials.
In the Phase 1 trial, BHV-0223 was observed to be generally well tolerated following sublingual administration of doses ranging from 10 mg to 35 mg in healthy subjects. There were no clinically significant laboratory abnormalities or SAEs observed. The vast majority of AEs were mild in intensity, including oral hypoaesthesia. Overall, we believe these results demonstrate the potential of BHV-0223 in delivering riluzole via sublingual absorption in a well tolerated manner that can potentially offer patients with ALS a more favorable route of administration as compared to oral riluzole tablets.
The figures above show results from our Phase 1 trial comparing pharmacokinetics in healthy subjects dosed with sublingual BHV-0223 35 mg versus generic Rilutek 50 mg tablets, in a cross-over manner. In the left panel, mean concentrations of patients dosed with BHV-0223 35 mg were similar over time in the same subjects dosed with generic Rilutek 50 mg tablets. The right panel shows the mean concentrations of individual pharmacokinetic profiles superimposed. Notably, subjects dosed with generic Rilutek 50 mg tablets (lower portion of right hand panel) had greater pharmacokinetic variability and more than 30% of subjects showed low peak concentrations (i.e., <50 ng/mL) compared to the same subjects who were administered sublingual BHV-0223 35 mg (upper portion of right hand panel).
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Future Development and Regulatory Pathway
We intend to pursue regulatory approval of BHV-0223 for the treatment of patients with ALS in the United States under Section 505(b)(2) of the U.S. Federal Food, Drug and Cosmetic Act. Our IND for BHV-0223 went into effect in August 2015. In December 2016, the FDA granted orphan drug designation of BHV-0223 for the treatment of ALS, with eligibility for orphan exclusivity contingent on a showing that BHV-0223 is clinically superior to Rilutek, a previously approved form of riluzole, as well as any other versions of riluzole that may be approved for the same indication before BHV-0223 is approved. Clinical superiority may be demonstrated by showing that a drug has greater effectiveness than the approved drug, greater safety in a substantial portion of the target population, or otherwise makes a major contribution to patient care. We are planning to launch a pivotal bioequivalence study in 2017 comparing BHV-0223 to riluzole in healthy subjects. We plan to include a dosing arm to assess the impact of meals on drug absorption in order to potentially support dosing instructions that can avoid the need for the dietary restrictions that accompany Rilutek. If this trial is successful, we plan to subsequently submit an NDA to the FDA in 2018.
We also intend to conduct a clinical trial in healthy subjects to assess the effect of BHV-0223 on transaminase levels and other markers of liver function. We believe that these trials, if successful, may also be sufficient to demonstrate the clinical superiority of BHV-0223 to Rilutek.
Glutamate NMDA Receptor Antagonism
An N -methyl-D-aspartate, or NMDA, receptor antagonist, is a type of glutamate antagonist that works to inhibit the action of NMDA receptors which may play a role in degenerative diseases that affect the brain. BHV-5000 is an oral prodrug of the intravenous drug lanicemine, also referred to as BHV-5500, both of which we in-licensed from AstraZeneca. In addition to being orally available, BHV-5000 is a first-in-class, low-trapping, NMDA receptor antagonist with differentiating pharmacologic properties from other agents in development targeting this receptor. The unique property of low-trapping antagonists is their ability to uncouple from the NMDA receptor more freely than other agents, a property that is thought to contribute to their mitigated risk of dissociative effects as has been observed in the clinic. Lanicemine, the active metabolite of BHV-5000, binds within the NMDA channel pore and functionally blocks the flow of charged ions through the NMDA receptor complex. Lanicemine was initially advanced by AstraZeneca into clinical trials for the potential treatment of stroke, but this development was discontinued as initial results did not warrant continued development for this indication. We are developing BHV-5000 as a potential best-in-class NMDA receptor antagonist for the treatment of breathing irregularities associated with Rett syndrome, and we also intend to explore its application in other neurological or neuropsychiatric indications.
Our Product Candidate BHV-5000 for Rett Syndrome
Overview of Rett Syndrome and Limitations of Current Treatments
Rett syndrome is a severe neurodevelopmental disorder resulting from an X-linked dominant gene mutation (MECP2). As a result, it occurs almost exclusively in females. After six to 18 months of apparently normal development, patients with Rett syndrome show global deceleration of psychomotor development and subsequent loss of acquired cognitive and motor skills, such as the loss of speech. Patients may also develop pathognomonic stereotyped hand movement or display autonomic dysfunction such as breathing irregularities, including brain-mediated episodes of transient respiratory suppression, or apneic periods. With intensive care, patients may survive into adulthood, yet they are severely physically and cognitively impaired. Rett syndrome occurs in all racial and ethnic groups and occurs worldwide in approximately 1 in every 10,000 live female births. There are approximately 15,000 females with Rett syndrome in the United States. No approved treatments for Rett syndrome are currently available and care is supportive.
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Our Clinical Program for BHV-5000 in Rett Syndrome
BHV-5000 and lanicemine have been observed to ameliorate the phenotype in transgenic mouse models of Rett syndrome, models which recapitulate key clinical features, such as irregular breathing, apneic periods, abnormal EEG with altered seizure threshold. Based on the preclinical experience, we have chosen to advance BHV-5000 into clinical trials for the treatment of breathing irregularities associated with Rett syndrome. The orally bioavailable prodrug BHV-5000, which was developed as an advancement on the intravenously administered lanicemine, offers an improved route of administration over lanicemine, and has thus been positioned as the lead candidate in this series. After ingestion, BHV-5000 is rapidly cleaved by the enzyme dipeptidyl peptidase-4 (DPP-4), yielding the active metabolite lanicemine. AstraZeneca studied BHV-5000 in a Phase 1 single and multiple ascending dose trial. Doses up to 95 mg of BHV-5000 were studied and were observed to be well tolerated without any clinically relevant safety issues. Among the AEs reported were three cases of euphoria, three cases of hallucination, or visual distortion, and eight cases of nystagmus, a visual condition. These adverse events are consistent with NMDA receptor antagonism. After oral ingestion, systemic concentrations of BHV-5000 were observed to be very low, typically below the limit of quantification.
Preclinical Studies and Previous Clinical Trials with Lanicemine and BHV-5000
As noted above, BHV-5000 and lanicemine have been observed to ameliorate the phenotype in transgenic mouse models of Rett syndrome. In particular, BHV-5000 has been observed to reduce the number of apneic episodes that are driven by dysfunctions in the central nervous system. These preclinical findings are consistent with those reported for the NMDA receptor antagonist, ketamine, and have been observed at concentrations that have been well tolerated by healthy volunteers in clinical trials. The potential relevance of the preclinical models with this mechanism of action are supported by anecdotal reports on the incidental use of ketamine in patients with Rett syndrome that have been associated with clinical improvements.
The figure below shows results from a preclinical study with BHV-5000 in a transgenic mouse model. Transgenic (heterozygous for MECP2 mutation) and wild-type mice were administered a single dose of saline or BHV-5000 followed by measurement of apneic episodes. Acute administration of BHV-5000 was associated with a marked reduction in the number of apneic episodes.
Lanicemine has been administered to approximately 770 subjects in single or multiple doses in 18 clinical trials conducted by AstraZeneca and has been observed to be generally well tolerated. In clinical experience with lanicemine, the most common adverse event was dizziness. CNS-type AEs from Phase 1 trials also included headache, somnolence, asthenia, impaired concentration and dysesthesias. In one
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study, formal assessment of cognitive function in healthy volunteers revealed improvement in some components of memory, decreased vigilance and decreased calmness. Hypotension and hypertension have been reported as AEs, with low mean increases in blood pressure reported in some studies (e.g., 4 - 8 mmHg supine systolic blood pressure; 2 - 4 mmHg supine diastolic blood pressurewhich occurred at doses higher than considered necessary for therapeutic effects). AEs related to dissociation were infrequent but more common in the lanicemine group compared to placebo. AEs potentially associated with abuse potential were low but more common in the lanicemine group than the placebo group. No pattern of clinically meaningful differences between lanicemine and placebo were noted on physical exam, clinical laboratory test results or ECG results.
Approximately 40 healthy volunteers have been dosed with single or multiple doses of BHV-5000 in clinical trials conducted by AstraZeneca, and it was observed to be well tolerated without any clinically relevant safety issues. We believe BHV-5000 has no pharmacologic activity of its own and is rapidly metabolized to lanicemine in humans. After oral ingestion, systemic concentrations of BHV-5000 are very low, typically below the limit of quantification.
Nonclinical Toxicology Experience with Lanicemine and BHV-5000
In nonclinical studies, the major dose limiting effects in both rats and dogs were central nervous system effects, which appeared rapidly and included ataxia, head weaving, depressed activity, and, at very high doses, convulsions. At pharmacologically effective doses, lanicemine did not elicit adverse effects on learning, memory or attention. Small increases in heart rate and blood pressure at very high doses were observed. In the rat with daily dosing, effects on adrenal gland, heart tissue, thyroid and kidney were apparent at very high dosesmore than 10-fold the proposed maximum clinical exposure. These effects were not seen in dogs and intermittent dosing in the rat was not associated with effects on the kidney or heart. At very high doses, evidence of neuron degeneration was apparent in very few neurons, a finding that is associated with glutamate antagonists. Based on these preclinical findings, which were consistent with other NMDA receptor antagonists, such as ketamine, lanicemine was advanced into clinical trials. Toxicology studies with BHV-5000, up to 2 weeks in rats and dogs, revealed findings consistent with lanicemine, which was expected given the negligible concentrations of BHV-5000 as compared to the active metabolite, lanicemine.
Future Clinical Development of BHV-5000
The clinical program for BHV-5000 will build upon AstraZeneca's previous development efforts for lanicemine. In support, BHV-5000 is rapidly metabolized to lanicemine and, in a Phase 1 trial, concentrations of BHV-5000 were detectable in only a few subjects who received the highest dose. As a result, we intend to rely on long-term GLP toxicology, reproductive toxicology and carcinogenicity studies of lanicemine to potentially expedite the safety package for BHV-5000. We are in the process of developing a commercial formulation of BHV-5000 with acceptable shelf-life and stability at room temperature. Once this is completed, we intend to conduct a brief Phase 1 trial to characterize and confirm BHV-5000's pharmacokinetic attributes, which we plan to complete by the end of 2017. Subject to the satisfactory completion of the Phase 1 trial, we intend to initiate a Phase 2/3 placebo-controlled, randomized, double-blind clinical trial in patients with Rett syndrome in 2018. We intend to enroll approximately 120 patients in the trial, and the patients will be randomly assigned to 24 weeks of treatment of either placebo or one of two dose levels of BHV-5000. The primary outcome measure will be reduction in respiratory abnormalities (number of apneic episodes), an endpoint that has been advanced with regulatory authorities and used by other sponsors. Reduction in apneic episodes is considered a meaningful benefit for patients and caregivers, both improving quality of life and potentially reducing secondary cardio-respiratory complications. In addition, we will observe impacts on other symptom domains as secondary outcome measures.
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BHV-5000: Next Indications
We believe that modulation of NMDA receptor activity has the potential for broad applicability across a number of CNS disorders. Our goal is to rapidly advance BHV-5000 into the treatment of breathing irregularities associated with Rett syndrome and then pursue development for other neurological or neuropsychiatric indications with high unmet medical needs. If the results of our proposed Phase 2/3 trial in Rett syndrome are positive, we believe this will serve as proof-of-concept for BHV-5000 across neuroscience indications, and we would then explore development of BHV-5000 in other conditions such as depression, neuropathic pain and other disorders involving NMDA receptor dysfunction.
Major Depressive Disorder
Major depressive disorder, or MDD, is the leading cause of disability worldwide, according to the World Health Organization. In the United States, the prevalence rate is approximately 7%. Despite the approval of over two dozen agents, therapeutic effects are limited. More than one-third of patients who complete an initial course of antidepressant treatment will not achieve a satisfactory response, and as many as 20% of patients have chronic depression despite multiple interventions. The only class of agents approved for this population of inadequate responders (also deemed treatment resistant depression) is atypical antipsychotic medications (e.g., aripiprazole, quetiapine, olanzapine-fluoxetine combination and brexpiprazole), agents associated with significant short-term and long-term side effect burdens (sedation, metabolic syndrome, obesity, extrapyramidal side effects that can include akathisia and elevated risk of tardive dyskinesia). Other agents in clinical stages of development for major depressive disorder include rapastinel (Allergan, in Phase 2 testing), esketamine (Johnson & Johnson, in Phase 3 testing), and ALKS-5461 (a combined formulation of buprenorphine and samidorphin developed by Alkermes, which has reported positive Phase 3 data).
Clinical findings of antidepressant effects of the NMDA receptor antagonist ketamine have provided a link between the NMDA receptor function and depression and a rationale for testing BHV-5000 as an antidepressant. In nonclinical studies, BHV-5000's active metabolite is active in models of depression and anxiety. These data prompted a line of investigation with lanicemine that included four randomized controlled trials conducted by AstraZeneca in patients with treatment resistant depression, overall suggesting an adequate safety and tolerability profile and potential for therapeutic benefit. However, the clinical data to date has not established clear efficacy and additional trials are needed.
Neuropathic Pain
Neuropathic pain is a chronic condition caused by dysfunctional or damaged nerves. Neuropathic pain can be a debilitating and common problem affecting approximately 10% of adults in the United States. Despite the availability of multiple approved drugs, including Lyrica, and guidelines for the treatment of neuropathic pain, treatment of this condition remains a major therapeutic challenge. Existing analgesics are often ineffective, can cause serious side effects and have abuse potential that limits widespread use. Increased NMDA receptor activity is known to contribute to central sensitization in neuropathic pain. NMDA receptor antagonists have been shown to reduce hyperalgesia and pain in animal models of neuropathic pain induced by nerve injury and diabetic neuropathy. Clinically used NMDA receptor antagonists, including ketamine and dextromethorphan, can be effective in patients suffering from neuropathic pain syndromes. The clinical use of robust NMDA antagonists, such as ketamine, is limited due to dissociative, psychotomimetic and abuse potential properties. Novel NMDA receptor antagonists, such as BHV-5000, that are not associated with the psychotomimetic effects and abuse potential could lead to better management of neuropathic pain without causing serious side effects.
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Kleo Pharmaceuticals, Inc.
In 2016, we invested $3.0 million to acquire a minority interest in Kleo Pharmaceuticals, Inc., or Kleo, a privately held, preclinical-stage company founded by a professor of chemistry and pharmacology at Yale University that is developing small molecule immunotherapies that emulate biologics to fight cancers and infectious diseases. Kleo has in-licensed technology from Yale University related to antibody recruiting molecules, or ARMs, and synthetic antibody mimics, or SyAMs. ARMs and SyAMs are bifunctional molecules composed of two active heads attached with a linker in-between that are designed to direct your immune system to fight specific disease-causing cells. We have also entered into a clinical development master services agreement with Kleo to assist Kleo with clinical development as its programs mature into clinical development.
As of December 31, 2016, we owned approximately 18.6% of Kleo's outstanding capital stock. In connection with our initial $3.0 million investment in 2016, we agreed to invest an additional $5.5 million in Kleo through December 2017. In March 2017, we satisfied our first purchase obligation by purchasing 1,375,000 shares of Kleo common stock for cash consideration of $1.4 million. Separately, we also purchased 500,000 shares of Kleo common stock in March 2017 from one of Kleo's officers in exchange for aggregate consideration of $249,750 in cash and 32,500 of our common shares.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary drugs. While we believe that our knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their safety, efficacy, convenience, price, the level of generic competition and the availability of coverage and reimbursement from government and other third-party payors.
Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
CGRP Receptor Antagonist Platform
With regard to rimegepant and BHV-3500, our compounds targeting acute treatment of migraine and migraine prevention, respectively, we face competition from companies that develop and/or sell the following types of migraine treatments:
Triptans
Clinicians use a number of pharmacologic agents for the acute treatment and/or prevention of migraine. Aside from the NSAID diclofenac, only one other class of acute migraine-specific medication,
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serotonin 5-HT1B/1D receptor agonists, or triptans, has been developed and approved for the acute treatment of migraine over the past 15 years. The initial introduction of triptans represented a shift toward drugs more selectively targeting the suspected pathophysiology of migraine. We anticipate that the 5-HT1F receptor antagonist lasmiditan in development by CoLucid Pharmaceuticals, Inc. (which agreed to be acquired by Eli Lilly and Company in January 2017) could be approved as early as 2019. Lasmiditan does not directly target the CGRP receptor, but we expect that it would be approved prior to rimegepant. Lasmiditan was designed to act through non-vasoconstrictive mechanisms to treat migraine in patients who have cardiovascular risk factors, stable cardiovascular disease, or those who are dissatisfied with current triptan therapies. Although the efficacy of lasmiditan is expected to be similar to triptans, we believe that rimegepant will differentiate on both durability of efficacy and safety. Rimegepant was well tolerated in the Phase 2b clinical trial, while lasmiditan reported a comparatively high rate of AEs and SAEs in its clinical testing.
Other Oral CGRP Candidates in Development
Since we will be pursuing approval of our orally available, small molecule rimegepant for the acute treatment of migraine, the most relevant comparator candidate in development is ubrogepant. Ubrogepant is being developed by Allergan and is already in Phase 3 testing, having completed positive Phase 2b trials. Allergan is a global pharmaceutical company with over 16,000 employees and has access to greater financial resources than we do. According to Allergan's annual public filings, it expects product launch of ubrogepant in 2020, which we would expect to precede the potential approval of rimegepant. However, we believe that rimegepant has the potential to be best-in-class based upon the published rimegepant and ubrogepant clinical trial results. Although these agents have not been compared within a single study, the placebo-adjusted outcomes comparing each product candidate's Phase 2b data favor rimegepant on almost all pain and non-pain outcomes compared to ubrogepant.
Other Acute Treatments for Migraine
Ergot alkaloids (such as Dihydroergotamine (DHE)), analgesics, including opioids, non-steroidal anti-inflammatory drugs, or NSAIDs, acetaminophen and antiemetics also are used in the treatment of migraine. DHE is also a potent vasoconstrictor and has been displaced by the introduction of the triptans. Opioid use for migraine is associated with increased disability and health care utilization. Opioids, while effective for headache pain, are not approved for migraine and carry risk of abuse and addiction.
Migraine Prevention Treatments
Agents currently used to reduce the frequency of migraine episodes were first approved for other uses. Botox is the only product that has been approved by the FDA for the prevention of chronic migraine. For those patients who do not qualify as having chronic migraine, but still have significant disability due to migraine, there are five products approved by the FDA for use: topiramate (Topamax) and valproic acid (Depakote), both anticonvulsant medicines, propranolol (Inderal) and timolol (Blocadren), both beta-blockers, and amitriptyline, a tricyclic. Some other beta blockers, such as atenolol, metoprolol and nadalol are also prescribed off-label for prevention, as well as calcium channel blockers such as diltiazem and tricyclic antidepressants such as amitriptyline.
We believe that BHV-3500 will differentiate from the current anti-CGRP mAbs currently pursuing indications for acute treatment or prevention of, migraine. More specifically, there are currently four anti-CGRP mAbs under clinical development: LY2951742 (developed by Arteaus Therapeutics (USA), with rights subsequently acquired by Eli Lilly and Co.); ALD-403 (developed by Alder Biopharmaceuticals (USA)); LBR-101, now TEV-48125 (developed by Labrys BiologicsPfizer (USA), then acquired by Teva Pharmaceuticals); and AMG334 (developed by Amgen, Inc. (USA)).
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Glutamate Platform
With respect to trigriluzole, which we are currently developing for the treatment of ataxias, with SCA as our initial indication, there are currently no approved drug treatments for SCA or any other cerebellar ataxia, in the United States. We are aware of companies with clinical stage programs in development for potential treatments for SCA and other cerebellar disorders, including Bioblast Pharma, which is in Phase 2 development of trehalose, which targets SCA 3 and acts as a protein stabilizer; Steminent Biotherapeutics, which is currently conducting a Phase 2 trial of allogeneic adipose-derived mesenchymal stem cells that target polyglutamine SCAs; EryDel which is planning a Phase 3 trial for IEDAT01, which delivers dexamethasone sodium phosphate through red blood cells, Shinogi & CO., Ltd., which is investigating Rovatirelin, a non-peptide mimetic of thyrotropin-releasing hormone, in a Phase 3 trial in Japan; Shire Plc, which is exploring Cuvitru, an intravenous immune globulin that is approved for the treatment of primary immunodeficiency disorders, in Phase 2 development. Mitsubishi Tanabe received approval for taltirelin, an oral thyrotropin releasing hormone, in Japan in 2009 but has not filed with the FDA to seek approval in the United States.
With respect to BHV-0223, which we are developing for the treatment of ALS, we believe our primary competitor is Covis Pharmaceuticals, which sells Rilutek, the brand name for riluzole, which is currently the only approved drug for the treatment of ALS in the United States. Riluzole is also generically available. At least two other companies are marketing or plan to market new formulations of riluzole: MonoSol Rx has filed an IND to begin clinical development of a riluzole oral soluble film, and Italfarmaco SpA, a private Italian company, markets an oral liquid suspension formulation of riluzole in the United Kingdom and elsewhere in Europe under the brand name Teglutik. We are aware of several companies that are exploring potential treatments for ALS, mostly agents with novel mechanisms of action being administered with riluzole. We are not aware of any company marketing or developing a sublingual formulation of riluzole.
With respect to BHV-5000, which we are developing for the treatment of breathing irregularities associated with Rett syndrome, there are currently no approved treatments for Rett syndrome in the United States. We are aware of companies with clinical stage programs in development for potential treatments for Rett syndrome, including Newron Pharmaceuticals SpA which is launching a Phase 2/3 clinical trial of sarizotan, an agent with serotonin subtype-1A (5-HT1A) receptor agonist and dopamine subtype-2 (D2) receptor antagonist activities, and Neuren Pharma, which has completed a Phase 2a trial of trofinetide, in adult patients and a Phase 2 trial in pediatric patients with Rett syndrome.
If we expand our development of trigriluzole, BHV-0223 or BHV-5000 into additional neuropsychiatric or other indications, we would face substantial competition from companies that develop or sell products that treat those indications.
Manufacturing
We do not have any manufacturing facilities or personnel. We currently rely, and expect to continue to rely, on third parties for the manufacturing of our product candidates for preclinical and clinical testing, as well as for commercial manufacturing if our product candidates receive marketing approval.
All of our product candidates are small molecules and are manufactured in reliable and reproducible synthetic processes from readily available starting materials. The chemistry does not require unusual equipment in the manufacturing process. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities.
Commercialization
We intend to develop and, if approved by the FDA, to commercialize our product candidates in the United States, and we may enter into distribution or licensing arrangements for commercialization rights
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for other regions. Members of our management team and board of directors have deep experience leading neuroscience research and have been involved in the development and commercialization of drugs such as Zoloft, Abilify, Opdivo and Soliris.
With respect to rimegepant and BHV-3500, we plan to build a specialty team of sales and medical marketing professionals to focus on targeting neurological specialists and headache centers in the United States, potentially in combination with a larger pharmaceutical partner, to maximize patient coverage in the United States and to support global expansion.
With respect to the product candidates in our glutamate modulation platform, we currently intend to build a neurological specialty sales force to manage orphan drug commercialization for these product candidates on our own.
Intellectual Property
We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking and maintaining patents intended to cover our products and compositions, their methods of use and any other inventions that are important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain the proprietary position of our products and our other development programs.
Patents and Patent Applications
Our patent estate, on a worldwide basis, includes 10 families of patents and patent applications which contain claims directed to composition of matter, methods of use or formulations related to our product candidates.
Rimegepant and BHV-3500
The intellectual property rights related to rimegepant and BHV-3500 are in-licensed from BMS and are covered by five families of U.S. and certain selected foreign patents, with statutory expiration dates ranging from 2023 to 2033. U.S. Patent 8,314,117 covers the composition of matter of rimegepant (BHV-3000), and has a statutory expiration date of October 12, 2030, not including patent term adjustment or any potential patent term extension. U.S. Patent 8,481,546 covers the composition of matter of BHV-3500, and has a statutory expiration date of March 2, 2031, not including patent term adjustment or any potential patent term extension. These or other patents cover rimegepant and BHV-3500 and their use in treating migraine and, in certain ex-U.S. jurisdictions, other neurological conditions. The license also includes several patent families of related compounds directed to the CGRP receptor. See "License Agreement with Bristol-Myers Squibb Company" below.
Trigriluzole
We own several families of patent applications containing claims directed to prodrugs of riluzole. These patent applications include several U.S. applications and corresponding PCT applications. These families of patent applications contain claims directed to trigriluzole and numerous other prodrugs of riluzole. In addition, the use of these compounds for treating ALS, spinocerebellar ataxia, depression and other diseases is described and claimed in these patent applications. We own these patent applications subject to a license agreement with ALS Biopharma, LLC and Fox Chase Chemical Diversity Center, Inc.
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See "Agreement with ALS Biopharma and Fox Chase Chemical Diversity Center" below. If a patent covering trigriluzole issues from one of these pending patent application families, it would have a statutory expiration date in 2036. Other patent applications provide coverage for alternative formulations of riluzole prodrugs and their uses.
BHV-0223
BHV-0223, a sublingual or ODT form of riluzole, and its use for treating various forms of pain, ALS and depression are currently covered in the United States by several pending U.S. patent applications, with corresponding PCT applications which we intend to nationalize in selected jurisdictions before the applicable deadlines. If a patent covering BHV-0223 issues from one of these pending patent application families, it would have a statutory expiration date in 2035. We have an agreement with Catalent whereby Catalent assigned its rights to a patent application family containing claims directed to the formula for BHV-0223, which is described above, as well as licensed to us certain rights to the Zydis ODT technology. See "Agreements with Catalent" below. In addition to patent protection, although not an NCE, BHV-0223 may also be entitled to certain regulatory exclusivity. In addition to the patent applications we own, we have also licensed one issued patent and several pending patent applications from Yale University which provide protection for the use of riluzole in treating generalized anxiety disorder and other neurological uses, respectively. See "License Agreement with Yale University" below. Further, we have licensed several patents from Rutgers University covering the use of riluzole for treating various forms of cancer and an animal model for tumors which may cover the use of BHV-0223 for treating the specific cancers. See "License Agreement with Rutgers, The State University of New Jersey" below.
BHV-5000
We have also in-licensed one patent family related to certain uses of lanicemine and a patent application family containing claims directed to BHV-5000 from AstraZeneca. See "License Agreement with AstraZeneca" below. They contain claims directed to the use of the base compound, lanicemine, in treating depression, and the structure of the prodrug form, BHV-5000, as well as the use of the prodrug in treating a variety of neurological diseases including Rett syndrome and depression. The issued patents related to uses of lanicemine have a statutory expiration date in 2019 and the patent applications related to BHV-5000 would, if issued, have a statutory expiration date in 2033.
Additional Licensed Patent Applications
We have also licensed a family of patent applications related to the treatment of depression with a combination of ketamine and scopolamine from Massachusetts General Hospital. See "License Agreement with The General Hospital Corporation d/b/a Massachusetts General Hospital" below.
Patent Protection and Terms
The term of individual patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent's term may, in certain cases, be extended by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory review. Patent term extension is not available for all approved products and, even if an approved product is eligible, only one patent covering the approved product may be extended, the extension can only be based on a single approved product, and the total extension granted cannot extend the remaining term of the patent beyond 14 years from product approval.
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Furthermore, the patent positions of biotechnology and pharmaceutical products and processes like those we intend to develop and commercialize are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in such patents has emerged to date in the United States. The patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries can diminish our ability to protect our inventions and enforce our intellectual property rights, can make it easier to challenge the validity, enforceability or scope of any patents that may issue, and, more generally, could affect the value of intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.
Third-Party Patent Filings
Numerous U.S. and foreign issued patents and patent applications owned by third parties exist in the fields in which we are developing products. In addition, because patent applications can take many years to issue, there may be applications unknown to us, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Moreover, we may be aware of patent applications, but incorrectly predict the likelihood of those applications issuing with claims of relevance to us.
Under U.S. law, a person may be able to patent a discovery of a new way to use a previously known compound, even if such compound itself is patented, provided the newly discovered use is novel and non-obvious. Such a method-of-use patent, however, if valid, only protects the use of a claimed compound for the specified methods claimed in the patent. This type of patent does not prevent persons from using the compound for any previously known use of the compound. Further, this type of patent does not prevent persons from making and marketing the compound for an indication that is outside the scope of the patented method.
License Agreements
License Agreement with Bristol-Myers Squibb Company
Overview
In July 2016, we entered into an exclusive, worldwide license agreement with BMS for the development and commercialization rights to rimegepant and BHV-3500, as well as other CGRP-related intellectual property. Subject to certain limitations and certain retained rights of BMS, the license included an exclusive license under certain BMS patent rights and BMS know-how to the extent necessary to research, discover, develop, make, have made, use, sell, offer to sell, export and import licensed compounds and licensed products in the field of prevention, treatment or control of any disease, disorder or condition in humans. In exchange for these rights, we agreed to pay BMS initial payments, milestone payments and tiered royalties on net sales of licensed products under the agreement. Our initial payments to BMS totaled $9.0 million and were paid within 90 days after entering into the agreement. The milestone payments due to BMS under the agreement consist of development and commercial milestones. The development milestones due under the agreement depend on the licensed product being developed. Development milestones due under the agreement with respect to rimegepant or a derivative thereof total up to $127.5 million, and, for any product other than rimegepant or a derivative thereof, total up to $74.5 million. Commercial milestones total up to $150.0 million for each licensed product. If we receive revenue from sublicensing any of our rights under the agreement, we are also obligated to pay a portion of that revenue to BMS as well. The tiered royalty payments are based on annual worldwide net sales of licensed products under the agreement, with percentages in the low to mid teens.
Under the BMS agreement, we agreed to refrain, either ourselves or via our sublicensees or third parties, from engaging in the development and commercialization of specified competitive compounds for a period of seven years. Further, BMS has retained the right to use the licensed compounds for internal research purposes and for the generation of analogs and derivatives of licensed compounds. Our right to
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sublicense our rights under the BMS agreement, other than to an affiliate or to certain third-party manufacturers, is subject to BMS's prior written consent, which cannot be unreasonably withheld or delayed. While we will be responsible for preparing, prosecuting and maintaining the licensed patents and applications and for defending them in post-grant proceedings, BMS must consent before a licensed patent or application is abandoned in a major jurisdiction. We will also be responsible for listing licensed patents in the Orange Book and for determining which patents will be extended based on any regulatory delays.
Our Development, Regulatory and Commercialization Obligations
Under the agreement, we are obligated to use commercially reasonable efforts to develop licensed products using the patent rights we have licensed from BMS, including setting forth a development plan with specific development activities and timelines, updating the development plan each year, providing BMS with annual reports of our progress and keeping BMS informed of material changes that may affect the development plan. With respect to any of the licensed products, we are solely responsible for all development, regulatory and commercial activities and costs. We are also obligated to use commercially reasonable efforts to achieve specified regulatory and commercial milestones, and maintain a sufficient supply of our products to satisfy our expected commercialization efforts in each country in which we sell such products. Following our first commercial sale of a product, we must provide BMS with periodic reports of our commercial activities. In connection with the agreement, BMS agreed to use commercially reasonable efforts to assign and transfer any INDs for the licensed compounds to us.
Equity Consideration
As part of this agreement, we agreed to issue BMS common shares in the amount of $12.5 million upon the occurrence of specified events, including upon an initial public offering. In satisfaction of this obligation, we expect that we will issue 1,345,374 common shares to BMS in connection with the closing of this offering.
Right of First Negotiation
After we receive topline data from a Phase 3 trial of our most advanced product candidate licensed under the agreement, we must provide notice and a summary of the data to BMS. BMS will then have 60 days to exercise its right of first negotiation to regain its intellectual property rights or enter into a license agreement with us with respect to such product candidate. If we do not execute an agreement with BMS during this time period after using good faith efforts, we will have the right to retain our rights or sublicense our rights to third parties subject to the terms of the agreement.
Non-Competition
Until 2023, neither we nor our affiliates may, ourselves or through or in collaboration with a third party, engage directly or indirectly in the clinical development or commercialization of specified competitive compounds. In the event that we are or become non-compliant with this provision due to licensing, collaboration or acquisition activity, we must either divest ourselves of the competitive compound within a certain period of time or negotiate with BMS to have the competitive compound included as a licensed product under our agreement with BMS. The failure to so divest or reach terms with BMS may result in the termination of our license with BMS.
Term and Termination
The agreement will terminate on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to each licensed product in each country. The patents related to the licensed products have statutory expiration dates ranging from 2023 to 2033. BMS has the right to terminate the agreement upon our insolvency or bankruptcy, our uncured material breach,
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including our failure to meet our development and commercialization obligations, our challenge to any BMS patent rights, or our failure to close a financing within specified parameters. We have the right to terminate the agreement if BMS materially breaches the agreement or if, after we provide notice, we choose not to move forward with development and commercialization in a specific country. In the event that BMS exercises its right to terminate the agreement following our insolvency, our breach of the agreement or our failure to develop or commercialize the licensed compounds, or if we terminate the agreement after providing notice, all rights and licenses granted to us will terminate, and all patent rights and know-how transferred pursuant to the agreement will revert to BMS. In addition, upon such termination, we agree to, at BMS's election, (i) assign all regulatory filings, approvals and regulatory documents necessary to further develop and commercialize the reverted products or (ii) withdraw or inactivate such filings and approvals.
Agreement with ALS Biopharma, LLC and Fox Chase Chemical Diversity Center Inc.
In August 2015, we entered into an agreement with ALS Biopharma and FCCDC pursuant to which ALS Biopharma and FCCDC assigned to us their worldwide patent rights to a family of over 300 prodrugs of glutamate modulating agents, including trigriluzole, as well as other innovative technologies. In addition, we received a non-exclusive license to certain trade secrets and know-how of ALS Biopharma. We took assignment of these patent rights subject to the provisions of the Bayh Dole Act, as applicable, to the extent that any invention included with the assigned patent rights was funded in whole or in part by the United States government. In addition, certain of the patent rights that do not cover trigriluzole were co-owned by Rutgers, and thus, we took assignment of these patent rights subject to the co-ownership interest of Rutgers. Under the agreement, we are obligated to use commercially reasonable efforts to diligently commercialize and develop markets for the patent products.
As consideration for this assignment of patent rights, we paid ALS Biopharma $2.5 million between August 2015 and November 2016 as funding for research to be performed by ALS Biopharma in connection with a mutually agreed upon research plan. We are also obligated to pay regulatory milestone payments of $3.0 million upon a specified regulatory approval for the first licensed product under the agreement as well as additional milestone payments of $1.0 million for each licensed product that completes the specified regulatory milestone thereafter. We are also obligated to make royalty payments of a low single-digit percentage based on net sales of products licensed under the agreement, payable on a quarterly basis.
Equity Consideration
As part of the agreement, we also issued to ALS Biopharma 50,000 common shares as well as warrants to purchase a total of 600,000 common shares with an exercise price of $5.60 per share, of which 275,000 shares were immediately exercisable at issuance and the remaining 325,000 shares became exercisable upon our achievement of a specified regulatory milestone. In connection with the issuance of the warrants, ALS Biopharma became a party to our Shareholders Agreement and, upon achievement of a regulatory milestone, has received board observer rights. We also agreed to grant specified preemptive rights to ALS Biopharma to participate in equity offerings that are open to our other shareholders.
Term and Termination
The agreement terminates on a country-by-country basis as the last patent rights expire in each such country. Our current patent rights consist of owning several families of patent applications. If a patent covering trigriluzole issues from one of these pending patent applications, it would have a statutory expiration date in 2036. ALS Biopharma has the right to terminate the agreement or its applicability to one or more countries upon 30 days' prior written notice to us if we fail to make an undisputed payment within the 60-day period after receipt of a termination notice or if we commit a material breach of the agreement that is not cured within the 60-day period after receipt of a termination notice. We have the right to
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terminate the agreement if ALS Biopharma commits a material breach of the agreement that is not cured within the 60-day period after written notice thereof from us or, as to a specific country, if no valid claims exist in such country. Both we and ALS Biopharma may terminate the agreement as to a specific country if we are enjoined from exercising our patent rights under the agreement in such country. If we affirmatively abandon our development, research, licensing or sale of all products covered by one or more claims of any patent or patent application assigned under the agreement, or if we cease operations, we have agreed to reassign the applicable patent rights back to ALS Biopharma.
License Agreement with AstraZeneca AB
Overview
In October 2016, we entered into an exclusive license agreement with AstraZeneca pursuant to which AstraZeneca granted us a license to certain patent rights and know-how for all human uses for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights, including BHV-5000 and lanicemine.
Under the AstraZeneca agreement, we have the right to sublicense our rights under the agreement subject to AstraZeneca's prior written consent, such consent not to be unreasonably withheld, conditioned or delayed. We will be responsible for preparing, filing, prosecuting and maintaining the licensed patents and applications, and for Orange Book listing any listable patents. We have the right to enforce the licensed patents and to defend challenges to the validity or enforceability of the licensed patents. AstraZeneca, however, retains the right to apply for patent term extensions for the licensed patents. We may not assign our rights or delegate our obligations under the AstraZeneca agreement without AstraZeneca's consent, including in the event of a change of control.
In exchange for these rights, in addition to the agreement to issue equity consideration noted below, we agreed to pay AstraZeneca an upfront payment, milestone payments and royalties on net sales of licensed products under the agreement. We made the upfront payment to AstraZeneca of $5.0 million upon signing the agreement. The milestone payments due to AstraZeneca under the agreement consist of regulatory and commercial milestones. The regulatory milestones due under the agreement depend on the indication of the licensed product being developed as well as the territory where regulatory approval is obtained. Development milestones due under the agreement with respect to Rett syndrome total up to $30.0 million, and, for any indication other than Rett syndrome, total up to $60.0 million. Commercial milestones are based on net sales of all products licensed under the agreement and total up to $120.0 million. We have agreed to pay tiered royalties of mid single-digit to low double-digit percentages based on net sales of products licensed under the agreement. If we receive revenue from sublicensing any of our rights under the agreement, we are also obligated to pay a portion of that revenue to AstraZeneca.
Our Development, Regulatory and Commercialization Obligations
Under the agreement, we are obligated to use commercially reasonable efforts to develop, and obtain and maintain regulatory approvals for, licensed products using the rights we have licensed from AstraZeneca, including providing AstraZeneca with annual reports of our development activities. With respect to any of the licensed products, we are solely responsible for all development, regulatory and commercial activities and costs. Following our first commercial sale of a product, we must provide AstraZeneca with periodic reports of our commercial activities. AstraZeneca agreed to use commercially reasonable efforts to transfer all of its regulatory documentation related to BHV-5000 and lanicemine in each country to us, including all INDs, NDAs and approvals, promptly following the effective date of the agreement.
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Right of First Negotiation
After we receive topline data from the first Phase 2b study of a product candidate licensed under the agreement, we must provide notice and a summary of the data to AstraZeneca. AstraZeneca will then have a period of time to exercise its right of first negotiation to regain its intellectual property rights or enter into a sublicense agreement with us. If AstraZeneca does not give notice of its intent to exercise its right of first negotiation during this time period, or we do not execute a definitive agreement within an additional time period, we will have the sole right, in our discretion, to negotiate and execute any agreement with third parties, or to retain our rights.
Equity Consideration
As part of the consideration, we agreed to issue to AstraZeneca common shares in the amount of $5.0 million if we completed a financing within specified parameters. This condition was satisfied upon the closing of our Series A preferred share financing, at which time we issued 538,150 Series A preferred shares to AstraZeneca. In addition, we agreed to issue to AstraZeneca common shares in the amount of $5.0 million upon the completion of specified events, including upon an initial public offering. In satisfaction of this obligation, we expect that we will issue an additional 538,149 common shares to AstraZeneca in connection with the closing of this offering.
Term and Termination
The agreement will terminate upon the expiration of the last royalty term for the last licensed product under the agreement. Each royalty term begins on the date of the first commercial sale of the applicable licensed product in the applicable country and ends on the later of 10 years from such first commercial sale or the expiration of the last to expire of the applicable patents in that country. The patent applications related to BHV-5000 would, if issued, have a statutory expiration date in 2033. Either party may terminate the agreement upon the other party's uncured material breach or upon insolvency or bankruptcy. AstraZeneca also has the right to terminate the agreement in certain circumstances. We have the right to terminate the agreement without cause. In the event the agreement is terminated in its entirety for any reason, all rights and licenses granted to us by AstraZeneca under the agreement, and all sublicenses granted by us under the agreement, immediately terminate, and we are required to assign to AstraZeneca all of the regulatory documentation applicable to any licensed compound or licensed product owned or controlled by us or our affiliates, to transfer control of any clinical studies involving licensed products to AstraZeneca and continue such studies at our cost for six months, and to assign to AstraZeneca all of our agreements with third parties that are reasonably necessary for the exploitation of the licensed products.
Agreement with Catalent U.K Swindon Zydis Limited
In March 2015, we entered into a development and license agreement with Catalent pursuant to which we obtained certain license rights to the Zydis technology in BHV-0223. BHV-0223 was developed under this agreement. Catalent has manufactured BHV-0223 for clinical testing and we expect them to do so for commercial supply. We made an upfront payment of $0.3 million to Catalent upon entering into the agreement and are obligated to pay Catalent up to $1.6 million upon the achievement of specified regulatory and commercial milestones. We are also obligated to make royalty payments of a low single-digit percentage based on net sales of products licensed under the agreement.
Under the agreement, we are responsible for conducting clinical trials and for preparing and filing regulatory submissions. We have the right to sublicense our rights under the agreement subject to Catalent's prior written consent. Catalent has the right to enforce the patents covering the Zydis technology and to defend any allegation that a formulation using Zydis technology, such as BHV-0223, infringes a third party's patent.
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The development and license agreement terminates on a country-by-country basis upon the later of (i) 10 years after the launch of the most recently launched product in such country and (ii) the expiration of the last valid claim covering each product in such country, unless earlier voluntarily terminated by us. Our current patent rights with respect to BHV-0223 consist of owning several patent applications. If a patent covering BHV-0223 issues from one of these pending patent applications, it would have a statutory expiration date in 2035. The agreement automatically extends for one-year terms unless either party gives advance notice of intent to terminate. In addition, Catalent may terminate the agreement either in its entirety or terminate the exclusive nature of the agreement on a country-by-country basis if we fail to meet specified development timelines, which we may extend in certain circumstances.
License Agreement with Yale University
In September 2013, we entered into an exclusive license agreement with Yale to obtain rights under certain patent rights for the commercial development, manufacture, distribution, use and sale of products and processes resulting from the development of those patent rights related to the use of riluzole in treating various neurological conditions such as general anxiety disorder, post-traumatic stress disorder and depression. As part of the consideration for this license, we issued Yale 250,000 of our common shares and granted Yale the right to purchase up to 10% of the securities issued in each of our equity offerings. Under the terms of the agreement, in the event of a change of control, as defined in the agreement to include our initial public offering, we will be obligated to pay to Yale the lesser of (i) 5% of the dollar value of all initial and future potential consideration paid or payable by the acquirer or (ii) $1.5 million as a change-of-control payment. In the event of an initial public offering, the change-of-control payment to Yale is reduced by the value of Yale's equity investment in our company.
In addition, we agreed to pay Yale regulatory milestone payments of up to $2.0 million and annual royalty payments of a low-single digit percentage based on net sales of products from the licensed patents, subject to a minimum amount of up to $1.0 million per year. If we grant any sublicense rights under the agreement, we must pay Yale a low single-digit percentage of sublicense income that we receive.
The agreement also requires us to meet certain due diligence requirements based upon specified milestones. We can elect to extend the due diligence requirements by a maximum of one year upon payments of up to $150,000 to Yale. We are also required to reimburse Yale for any fees that Yale incurs related to the filing, prosecution, defending and maintenance of patent rights licensed under the agreement. In the event that we fail to make any payments, commit a material breach, fail to maintain adequate insurance or if we challenge the patent rights of Yale, Yale can terminate the agreement. We can terminate the agreement with 90-days' notice if Yale commits a material breach or in a specific country if there are no valid patent rights. The agreement expires on a country-by-country basis upon the later of expiration of the patent rights or ten years from the date of first sale. Any patent that has issued or does issue from one of the pending patent applications under this agreement would have a statutory expiration date in 2026.
License Agreement with The General Hospital Corporation d/b/a Massachusetts General Hospital
In September 2014, we entered into a license agreement with The General Hospital Corporation d/b/a Massachusetts General Hospital, or MGH, pursuant to which MGH granted us a license under certain patent rights for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights, related to treating depression with a combination of ketamine and scopolamine. Under this agreement, we paid MGH an upfront license fee of $20,000. We are also obligated to pay MGH annual license maintenance fees up to $50,000, beginning in 2017. In addition, we are obligated to pay MGH future milestone payments of up to $750,000 upon the achievement of specified clinical and regulatory milestones and up to $2.5 million upon the achievement of specified commercial milestones. We have also agreed to pay MGH royalties of a low single-digit percentage based on net sales of products licensed under the agreement. We are also required to
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reimburse MGH for any fees that MGH incurs related to the filing, prosecution, defending and maintenance of patent rights licensed under the agreement. If we receive revenue from sublicensing any of our rights under the agreement, we are also obligated to pay a portion of that revenue to MGH.
The agreement expires upon the expiration of the patent rights licensed under the agreement, which could occur as early as 2033, unless earlier terminated by either party.
License Agreement with Rutgers, The State University of New Jersey
In June 2016, we entered into an exclusive license agreement with Rutgers, The State University of New Jersey, licensing several patents and patent applications related to the use of riluzole to treat various cancers. Certain of the Rutgers patent rights were developed using federal funding. Accordingly, the U.S. Government has certain rights in the Rutgers patents and applications. We have the right to sublicense our rights under the Rutgers Agreement. We are responsible for prosecuting and maintaining the patents and applications in the Rutgers patent rights, and Rutgers has an opportunity to review and comment on correspondences with government patent offices. We have the right to prepare any documents related to the application for an extension of the term of any licensed patent and to list any listable patents in the Orange Book. We have the first right to enforce the licensed patents.
Under this agreement, we are required to pay Rutgers annual license maintenance fees of up to $25,000 per year until the first commercial sale of a licensed product. We are also obligated to pay Rutgers payments totaling up to $825,000 upon the achievement of specified clinical and regulatory milestones. We also agreed to pay Rutgers royalties of a low single-digit percentage based on net sales of licensed products sold by us, our affiliates or sublicensees, subject to a minimum of up to $100,000 per year. If we grant any sublicense rights under the license agreement, we must pay Rutgers a low double-digit percentage of sublicense income we receive. In the event that we experience a change of control or sale of substantially all of our assets prior to the initiation of a Phase 3 trial related to products licensed under the agreement, and such change of control or sale results in a full liquidation of our company, we will be obligated to pay Rutgers a change-of-control fee equal to 0.3% of the total value of the transaction, but not less than $100,000.
The agreement also requires us to meet certain due diligence requirements based upon specified milestones. We can elect to extend the due diligence requirements by a maximum of one year upon payments to Rutgers of up to $500,000 in the aggregate.
The agreement expires on a country-by-country basis upon the later of expiration of the last patent rights to expire in such country, which could occur as early as 2024, or ten years from the date of first commercial sale of a licensed product, unless terminated by either party.
Government Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including imposition of a clinical hold, refusal by the FDA to approve applications, withdrawal of an approval, import/export delays, issuance of warning letters and other types of enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.
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The clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among other things, of our product candidates are governed by extensive regulation by governmental authorities in the United States and other countries. The FDA, under the FDCA, regulates pharmaceutical products in the United States. The steps required before a drug may be approved for marketing in the United States generally include:
The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain. The FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.
Preclinical and Human Clinical Trials in Support of an NDA
Preclinical studies include laboratory evaluations of the product candidate, as well as in vitro and animal studies to assess the potential safety and efficacy of the product candidate. The conduct of preclinical trials is subject to federal regulations and requirements including GLP regulations. The results of the preclinical studies, together with manufacturing information and analytical data, among other things, are submitted to the FDA as part of the IND, which must become effective before clinical trials may be commenced. The IND will become effective automatically 30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the trials as outlined in the IND prior to that time. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed. The FDA may nevertheless initiate a clinical hold after the 30 days if, for example, significant public health risks arise.
Clinical trials involve the administration of the product candidate to human subjects under the supervision of qualified investigators in accordance with GCP requirements. Each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at each of the sites at which the trial will be conducted. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution.
Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap or be combined. These phases generally include the following:
Phase 1. Phase 1 clinical trials represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers. In Phase 1, the product candidate is usually tested for safety, including adverse effects, dosage tolerance, absorption, distribution, metabolism, excretion and pharmacodynamics.
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Phase 2. Phase 2 clinical trials usually involve studies in a limited patient population to (1) evaluate the efficacy of the product candidate for specific indications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks.
Phase 3. If a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 clinical trials, the clinical trial program will be expanded to Phase 3 clinical trials to further demonstrate clinical efficacy, optimal dosage and safety within an expanded patient population at geographically dispersed clinical trial sites.
Phase 4. clinical trials may be conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical trials could result in enforcement action or withdrawal of approval.
A Phase 2/3 trial design, which we are using in our trigriluzole and BHV-5000 development programs, is often used in the development of pharmaceutical and biological products. The trial includes Phase 2 elements, such as an early interim analysis of safety or activity, and Phase 3 elements, such as larger patient populations with less restrictive enrollment criteria. The early interim analysis of clinical or physiologic activity and/or safety allows the study to be stopped, changed or continued before a large number of patients have been enrolled, while still allowing all data from enrolled patients to count in the analysis used to support approval.
Submission and Review of an NDA
The results of preclinical studies and clinical trials, together with detailed information on the product's manufacture, composition, quality, controls and proposed labeling, among other things, are submitted to the FDA in the form of an NDA, requesting approval to market the product. The application must be accompanied by a significant user fee payment, which typically increases annually, although waivers may be granted in limited cases. The FDA has substantial discretion in the approval process and may refuse to accept any application or decide that the data is insufficient for approval and require additional preclinical, clinical or other studies.
Once an NDA has been accepted for filing, which occurs, if at all, 60 days after submission, the FDA sets a user fee goal date that informs the applicant of the specific date by which the FDA intends to complete its review. We will be required to pay a user fee to the FDA to review the NDA, unless we receive a waiver or qualify for an exemption. This is typically 10 months from the date that the FDA receives the application-filing for standard review NDAs ( i.e. , NDAs seeking approval of drugs that are not new molecular entities). The review process can be extended by FDA requests for additional information or clarification. The FDA reviews NDAs to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA typically will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities comply with cGMPs. Additionally, the FDA will typically inspect one or more clinical trial sites for compliance with GCP and integrity of the data supporting safety and efficacy.
During the approval process, the FDA also will determine whether a risk evaluation and mitigation strategy, or REMS, is necessary to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the application must submit a proposed REMS, and the FDA will not approve the application without an approved REMS, if required. A REMS can substantially increase the costs of obtaining approval. The FDA could also require a special warning, known as a boxed warning, to be included in the product label in order to highlight a particular safety risk. The FDA may also convene an advisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data. The FDA may delay approval of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA may require post-marketing testing and surveillance to monitor safety or efficacy of a product.
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On the basis of the FDA's evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA will issue either an approval of the NDA or a Complete Response Letter, detailing the deficiencies in the submission and the additional testing or information required for reconsideration of the application. Even with submission of this additional information, the FDA may ultimately decide that the application does not satisfy the regulatory criteria for approval.
Post-Approval Requirements
Approved drugs that are manufactured or distributed in the United States pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims and some manufacturing and supplier changes are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for marketed products and the establishments at which such products are manufactured, as well as new application fees for certain supplemental applications.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance programs to further assess and monitor the product's safety and effectiveness after commercialization. The FDA may also require a REMS, which could involve requirements for, among other things, medication guides, special trainings for prescribers and dispensers, patient registries, and elements to assure safe use.
In addition, entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. The FDA has promulgated specific requirements for drug cGMPs. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may issue enforcement letters or withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Corrective action could delay product distribution and require significant time and financial expenditures. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including investigation by federal and state authorities.
Section 505(b)(2) NDAs
As an alternative path to FDA approval for modifications to formulations or uses of drugs previously approved by the FDA, an applicant may submit an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments. A Section 505(b)(2) NDA is an application that contains full reports of investigations of safety and effectiveness, but where at least some of the information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This type of application permits reliance for such approvals on literature or on an FDA finding of safety, effectiveness or both for an approved drug product. As such, under Section 505(b)(2), the FDA may rely, for approval of an NDA, on data not developed by the applicant. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved branded reference drug. The FDA may then approve the new product candidate for the new indication sought by the 505(b)(2) applicant.
Our clinical programs for trigriluzole for the treatment of SCA and BHV-0223 for the treatment of ALS are each based on a regulatory pathway under section 505(b)(2) of the FDCA that allows reference to data on riluzole for the purpose of safety assessments.
Orange Book Listing
In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant's product or an approved method of using the product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, known as the Orange Book. Any applicant who files an Abbreviated New Drug Application, or ANDA, seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify, for each patent listed in the Orange Book for the referenced drug, to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA, (2) such patent has expired, (3) if such patent has not expired, the date on which it expires or (4) such patent is invalid, unenforceable, or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. The fourth certification described above is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a "section viii" statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of- use rather than certify to a listed method-of-use patent. This section viii statement does not require notice to the patent holder or NDA owner. There might also be no relevant patent certification.
If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the applicant. Even if the 45 days expire, a patent infringement
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lawsuit can be brought and could delay market entry, but it would not extend the FDA-related 30-month stay of approval.
The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired as described in further detail below.
Non-Patent Exclusivity
In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent exclusivity, during which the FDA cannot approve an ANDA or 505(b)(2) application that relies on the listed drug.
A drug, including one approved under a 505(b)(2) application, may obtain a three-year period of non-patent market exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant. Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2) application for the protected modification until after that three-year exclusivity period has run. However, the FDA can accept an application and begin the review process during the three-year exclusivity period. A 505(b)(2) NDA may also be subject to a five-year exclusivity period for a new chemical entity, whereby the FDA will not accept for filing, with limited exception, a product seeking to rely upon the FDA's findings of safety or effectiveness for such new chemical entity.
Orphan Drugs
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition affecting fewer than 200,000 individuals in the United States, or in other limited cases. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process, though companies developing orphan drugs may be eligible for certain incentives, including tax credits for qualified clinical testing. In addition, an NDA for a product that has received orphan drug designation is not subject to a prescription drug user fee unless the application includes an indication other than the rare disease or condition for which the drug was designated. A Company must request orphan drug designation before submitting an NDA.
Generally, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same active moiety for the same indication for seven years, except in limited circumstances, such as another drug's showing of clinical superiority over the drug with orphan exclusivity. Competitors, however, may receive approval of different active moieties for the same indication or obtain approval for the same active moiety for a different indication. In some cases, orphan drug status is contingent on a product with an orphan drug designation showing that it is clinically superior to a previously approved product or products.
In May 2016, we received orphan drug designation from the FDA for trigriluzole for the treatment of SCA. In December 2016, the FDA granted orphan drug designation for BHV-0223 for the treatment of ALS, with eligibility for orphan drug exclusivity contingent on a showing that BHV-0223 is clinically superior to Rilutek, a previously approved form of riluzole, as well as any other versions of riluzole that may be approved for the same indication before BHV-0223 is approved. We intend to seek orphan drug designation and exclusivity for our other product candidates whenever it is available. However, we cannot guarantee that we will obtain orphan drug designation for any other products in any jurisdiction. Even if we are able to obtain orphan drug designation for a product, such as trigriluzole in the treatment of SCA and BHV-0223 in the treatment of ALS, we cannot be sure that such product will be approved, that we will be able to obtain orphan drug exclusivity upon approval, if ever, or that we will be able to maintain any
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exclusivity that is granted. In addition, doctors may prescribe products for off-label uses and undermine our exclusivity. Orphan drug exclusivity could also block the approval of one of our products for seven years if a competitor obtains approval for the same active moiety for the same indication before we do, unless we are able to demonstrate that our product is clinically superior.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatory authorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union and other geographies, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Coverage, Reimbursement and Pricing
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the United States and foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the availability of coverage and the adequacy of reimbursement from third-party payors. Third-party payors include government authorities, and private entities, such as managed care organizations, private health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication. Moreover, a third-party payor's decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. For example, the payor's reimbursement payment rate may not be adequate or may require co-payments that patients find unacceptably high. Additionally, coverage and reimbursement for products can differ significantly from payor to payor. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. However, one third-party payor's decision to cover a particular product does not ensure that other payors will also provide coverage for the product, or will provide coverage at an adequate reimbursement rate. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Further, some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they provide reimbursement for use of such therapies.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of products and services, in addition to their safety and efficacy. To obtain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost-effectiveness of our product. These studies will be in addition to the studies required to obtain regulatory approvals. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not
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be sufficient to allow a company to sell its products at a profit. Thus, obtaining and maintaining reimbursement status is time-consuming and costly.
The U.S. and foreign governments regularly consider reform measures that affect health care coverage and costs. For example, the U.S. and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription products. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, contains provisions that may reduce the profitability of products, including, for example, increased rebates for products sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. The Centers for Medicare and Medicaid Services, or CMS, may develop new payment and delivery models, such as bundled payment models. For example, the U.S. Department of Health and Human Services, or HHS, set a goal of moving 30% of Medicare payments to alternative payment models tied to the quality or value of services by 2016 and 50% of Medicare payments into these alternative payment models by the end of 2018. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our products.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, the focus on cost containment measures, particularly in the United States, has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if we attain favorable coverage and reimbursement status for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
European Union Coverage Reimbursement and Pricing
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies, or so called health technology assessments, in order to obtain reimbursement or pricing approval. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company.
Healthcare Laws and Regulations
Physicians, other healthcare providers, and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors are and will be subject to various federal, state and foreign fraud and abuse laws and other healthcare laws and regulations. These laws and regulations may impact, among other things, our arrangements with third-party payors, healthcare professionals who participate in our clinical research programs, healthcare professionals and others who purchase, recommend or prescribe our approved products, and our proposed sales, marketing, distribution, and education programs. The U.S.
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federal and state healthcare laws and regulations that may affect our ability to operate include, without limitation, the following:
We will be required to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations. Recent healthcare reform legislation has strengthened these federal and state healthcare laws. For example, the ACA amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes to clarify that liability under these statutes does not require a person or entity to have actual knowledge of the statutes or a specific intent to violate them. Moreover, the ACA provides that the government may assert
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that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Violations of these laws can subject us to criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, and exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and reputational harm, we may be required to curtail or restructure our operations. Moreover, we expect that there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our future operations and business.
Healthcare Reform
The legislative landscape in the United States continues to evolve. There have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In March 2010, the ACA was enacted, which includes measures that have significantly changed health care financing by both governmental and private insurers. The provisions of the ACA of importance to the pharmaceutical and biotechnology industry are, among others, the following:
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Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA. In addition, the current administration and Congress will likely continue to seek legislative and regulatory changes, including repeal and replacement of certain provisions of the ACA. In January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In March 2017, following the passage of the budget resolution for fiscal year 2017, the U.S. House of Representatives introduced legislation known as the American Health Care Act, which, if enacted, would have amended or repealed significant portions of the ACA. However, consensus over the scope and content of the American Health Care Act could not be reached by its proponents in the U.S. House of Representatives. Thus, the proposed legislation has been withdrawn and the prospects for legislative action on this bill are uncertain. Congress could consider other legislation to repeal or replace certain elements of the ACA.
In addition, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted. For example, as a result of the Budget Control Act of 2011, providers are subject to Medicare payment reductions of 2% per fiscal year through 2025 unless additional Congressional action is taken. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015 also introduced a quality payment program under which certain individual Medicare providers will be subject to certain incentives or penalties based on new program quality standards. Payment adjustments for the Medicare quality payment program will begin in 2019. At this time, it is unclear how the introduction of the quality payment program will impact overall physician reimbursement under the Medicare program. Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.
Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.
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The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.
Employees
As of December 31, 2016, we employed 12 employees, and as of February 28, 2017, we employed 18 employees. All of our employees are located in New Haven, Connecticut. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
Facilities
Our principal offices occupy approximately 2,000 square feet of leased office space in New Haven, Connecticut, pursuant to a lease agreement that expires in October 2018. We believe that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
Legal Proceedings
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results or financial condition.
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Directors and Executive Officers
The following table sets forth information concerning our directors and executive officers, including their ages as of February 28, 2017:
Name
|
Age | Position | ||
---|---|---|---|---|
Executive Officers: |
||||
Vlad Coric, M.D. |
46 | Chief Executive Officer and Director | ||
Robert Berman, M.D. |
54 | Chief Medical Officer | ||
James Engelhart |
53 | Chief Financial Officer | ||
John Tilton |
49 | Chief Commercial Officer | ||
Charles Conway, Ph.D. |
55 | Chief Scientific Officer | ||
Kimberly Gentile |
51 | Vice President of Operations | ||
Non-Management Directors: |
|
|
||
Declan Doogan, M.D. |
64 | Chairman of the Board of Directors | ||
Gregory H. Bailey, M.D. |
61 | Director | ||
John W. Childs |
75 | Director | ||
Albert Cha, M.D., Ph.D. |
44 | Director | ||
Eric Aguiar, M.D. |
55 | Director |
Executive Officers
Vlad Coric, M.D.
Dr. Coric has served as our chief executive officer and director since October 2015. From January 2007 to September 2015, he served as a group director of global clinical research at Bristol-Myers Squibb Company, focusing both in oncology global clinical research and neuroscience global clinical research. He has been involved in multiple drug development programs including marketed drugs such as Abilify (aripiprazole; partial dopamine agonist), Opdivo (nivolumab; anti-PD1), Yervoy (Ipilimumab; anti-CTLA-4), Daklinza (daclatasvir; NS5A inhibitor) and Sunvepra (asunaprevir; NS3 inhibitor). Since July 2001, Dr. Coric has also continued to serve as an associate clinical professor of psychiatry at Yale School of Medicine. He previously served as the chief of the Yale Clinical Neuroscience Research Unit and the director of the Yale Obsessive-Compulsive Disorder Research Clinic. He has served as president of the Connecticut Psychiatric Society. Dr. Coric received his M.D. from Wake Forest University School of Medicine. He completed his internship at Yale-New Haven Hospital and residency training at the Yale Psychiatry Residency Training Program, where he also served as the program-wide chief resident for the Yale Department of Psychiatry, and chief resident on the PTSD firm at the West-Haven Connecticut Veterans Administration Hospital. Dr. Coric was an honors scholar in neurobiology and physiology at the University of Connecticut where he received a B.S. degree. We believe that Dr. Coric's operational experience with our company gained from serving as our chief executive officer, as well as his extensive experience in the biopharmaceutical industry, qualifies him to serve as a member of our board of directors.
Robert Berman, M.D.
Dr. Berman has served as our chief medical officer since November 2015. From December 2013 to November 2015, he served as president of Biohaven Medical Services LLC and, prior to that, served as a group director of global clinical research at Bristol-Myers Squibb Company from September 2003 to November 2013. Prior to his time at BMS, Dr. Berman was an associate director of clinical sciences, early development at Pfizer from November 2000 to September 2003. Since October 2012, Dr. Berman has also continued to serve as an adjunct professor of psychiatry at Yale University of Medicine. Dr. Berman
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received his B.A. in molecular biophysics and biochemistry from Yale University and his M.D. from Mount Sinai School of Medicine of New York University.
James Engelhart
Mr. Engelhart has served as our chief financial officer since May 2016. Prior to this, from August 2014 to May 2016, he served as executive director of finance, Americas for Alexion Pharmaceuticals, Inc., and from March 2006 to July 2014, he served as a finance director for Energizer Holdings, Inc. From May 1998 to March 2006, Mr. Engelhart served in increasingly senior finance roles for Bristol-Myers Squibb Company and held finance roles in R&D Operations and International Operations at Schering-Plough from 1992 to 1998. Mr. Engelhart started his career as an auditor with Coopers & Lybrand LLP from 1986 through 1991. Mr. Engelhart received his B.S. in accounting from Villanova University and is a CPA (inactive).
John Tilton
Mr. Tilton has served as our chief commercial officer since April 2016. Prior to this, from November 2006 to March 2016, he served in increasingly senior marketing and business roles with Alexion Pharmaceuticals, Inc., including serving as its executive director, global sales and marketing operations from January 2011 to March 2016. Prior to Alexion Pharmaceuticals, Mr. Tilton served as a director, division operations at Pfizer from August 2005 to November 2006, as a regional sales manager for Agouron Pharmaceuticals from November 1999 to August 2005 and as division manager at Sanofi from 1993 to 1999. Mr. Tilton received his BSBA in finance from the University of South Carolina-Columbia.
Charles Conway, Ph.D.
Dr. Conway has served as our chief scientific officer since January 2017. From January 2000 to January 2017, he held positions of increasing responsibility in drug discovery at Bristol-Myers Squibb Company, or BMS, most recently serving as associate directorbiology analytics. Dr. Conway led BMS's biology program efforts working on the CGRP antagonist program for over 10 years and was part of the full development team advancing rimegepant into the clinic. Dr. Conway has extensive experience in the field of pain research and is an inventor on three granted U.S. patents for the treatment of pain. Prior to his time at BMS, Dr. Conway was a postgraduate research anesthesiologist at the University of California San Diego. Dr. Conway received his B.S. in experimental psychology from the University of Central Missouri and his Ph.D. in neuroscience from the University of California Santa Barbara.
Kimberly Gentile
Ms. Gentile has served as our vice president, clinical operations since February 2014. Before coming to Biohaven, Ms. Gentile served as associate director, project manager, global clinical operations at Bristol-Myers Squibb Company from 2000 to February 2014. Prior to this, she was a senior clinical trial manager at SCIREX Corporation from 1996 to June 2000. Ms. Gentile received her B.S. in Psychology from Salem State University.
Non-Management Directors
Declan Doogan, M.D.
Dr. Doogan has served as a director of our company since its inception in September 2013. Dr. Doogan has served as the chief executive officer and director of Portage Biotech, Inc. (PTGEF: OTCBB) since June 2013, a director of Portage Pharmaceuticals Limited since July 2013, and a director of Sosei Group Corporation since June 2007. Dr. Doogan has over 30 years of industry experience in both major pharma and biotech. He was the Senior Vice-President and Head of Worldwide Development at Pfizer. He has held a number of executive positions in Pfizer in the US, the UK and Japan. Since leaving
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Pfizer in 2007, he has been engaged in executive roles in small pharma. Dr. Doogan was chief medical officer and acting CEO of Amarin (AMRN: NASDAQ). He has also been Chief Medical Officer for Prometheus Laboratories, a molecular diagnostics company in San Diego. Dr. Doogan holds a number of board appointments, principally in pharma companies, and has also held professorship at Harvard School of Public Health, Glasgow University Medical School and Kitasato University (Tokyo). Dr. Doogan received his medical degree from Glasgow University in 1975. He is a Fellow of the Royal College of Physicians and the Faculty of Pharmaceutical Medicine and holds a Doctorate of Science at the University of Kent in the UK. We believe that Dr. Doogan's extensive operational experience in the pharmaceutical and biotech industries qualifies him to serve as a member of our board of directors.
Gregory H. Bailey, M.D.
Dr. Bailey has served as a director of our company since January 2014. Dr. Bailey is a co-founder and has served as managing partner of MediqVentures since January 2014, the chairman and director of Portage Biotech, Inc. (PTGEF: OTCBB) since June 2013 and a director of Portage Pharmaceuticals Limited since June 2013. He has been a managing partner of Palantir Group, Inc., a merchant bank involved in a number of biotech company startups and financings since April 2002. Dr. Bailey was a founder of SalvaRx Group Plc (LSE: SALV) and has served on its board of directors since May 2015. Dr. Bailey was also the co-founder of Ascent Healthcare Solutions, VirnetX Inc. (VHC:AMEX), Portage Biotech Inc. and DuraMedic Inc. He was the initial financier and an independent director of Medivation, Inc. (MDVN:NASDAQ), from 2005 to December 2012. Dr. Bailey served as the Managing Director and co-Head of Life Sciences at MDB Capital Group LLC from May 2004 to December 2006. Dr. Bailey practiced emergency medicine for ten years before entering finance. He received his medical degree from the University of Western Ontario. We believe that Dr. Bailey's extensive venture capital industry experience and technical background, along with his experience with public companies and biopharmaceutical companies, qualifies him to serve as a member of our board of directors.
John W. Childs
Mr. Childs has served as a director of our company since January 2014. Mr. Childs has been chairman and partner of J.W. Childs Associates, L.P., a private equity firm, since 1995. From 1991 to 1995, Mr. Childs was senior managing director of Thomas H. Lee Partners and from 1987 to 1990 was a managing director of Thomas H. Lee Partners. Prior to 1987, Mr. Childs was associated with the Prudential Insurance Company of America ("Prudential") for 17 years where he held various executive positions in the investment area, ultimately serving as senior managing director in charge of the Capital Markets Group at which time he was responsible for Prudential's approximately $77 billion fixed income portfolio, including all of the Capital Markets Group's investments in leveraged acquisitions. He is currently a director and chairman of the board of Sunny Delight Beverages Co., and serves as a director of Esselte Ltd., WS Packaging Group, Inc., and SIMCOM, Inc. Mr. Childs holds a B.A. from Yale University and an M.B.A. from Columbia University. We believe that Mr. Childs' extensive operational and capital markets experience qualifies him to serve as a member of our board of directors.
Albert Cha, M.D., Ph.D.
Dr. Cha has served as a director of our company since February 2017. In 2000, Dr. Cha joined Vivo Capital, a healthcare investment firm, where he has served in various positions, and he currently serves as a managing partner. He currently serves on the boards of directors of Ascendis Pharma A/S (NASDAQ: ASND), Kalvista Pharmaceuticals (NASDAQ: KALV), and several private companies. Dr. Cha holds B.S. and M.S. degrees in Electrical Engineering from Stanford University and an M.D. degree and Ph.D. degree in Neuroscience from the University of California at Los Angeles. We believe that Dr. Cha's scientific background and experience as an investor in life science companies qualifies him to serve as a member of our board of directors.
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Eric Aguiar, M.D.
Dr. Aguiar has served as a director of our company since February 2017. Dr. Aguiar has been a partner at Aisling Capital since January 2016 and prior to that was a partner at Thomas, McNerney and Partners, a healthcare venture capital and growth equity fund, since 2007. Prior to joining that firm, he was a Managing Director of HealthCare Ventures, a healthcare focused venture capital firm, from 2001 to 2007. Dr. Aguiar currently serves on the board of directors of Invitae Corporation (NYSE: NVTA). Dr. Aguiar is a member of the Board of Overseers of the Tufts School of Medicine and a member of the Council on Foreign Relations. Dr. Aguiar received his medical degree with honors from Harvard Medical School. He graduated with honors from Cornell University as a College Scholar. He was also a Luce Fellow and is a Chartered Financial Analyst. We believe that Dr. Aguiar's medical and finance background and experience as an investor in life science companies qualifies him to serve as a member of our board of directors.
Board Composition
Our board of directors currently consists of six directors. Dr. Doogan is the chairman of the board. There are no family relationships between any of our executive officers and directors.
Each director is currently elected to the board for a one-year term, to serve until the election and qualification of successor directors at the annual meeting of shareholders, or until the director's earlier removal, resignation or death.
Our directors were elected to and currently serve on the board pursuant to a voting agreement among us and several of our largest shareholders. This agreement will terminate upon the closing of this offering, after which there will be no further contractual obligations regarding the election of our directors.
In accordance with our memorandum and articles of association to be in effect upon the closing of this offering, our board of directors will be divided into three classes, each of which will consist, as nearly as possible, of one-third of the total number of directors constituting our entire board and which will serve staggered three-year terms. At each annual meeting of shareholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:
If the number of directors changes, any increase or decrease will be apportioned among the classes so as to maintain the number of directors in each class as nearly as possible. Any additional directors of a class elected to fill a vacancy resulting from an increase in such class will hold office for a term that coincides with the remaining term of that class. Decreases in the number of directors will not shorten the term of any incumbent director.
These board provisions could make it more difficult for third parties to gain control of our company by making it difficult to replace members of the board of directors.
Director Independence
Our board of directors has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his ability to exercise
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independent judgment in carrying out his responsibilities. As a result of this review, our board of directors has determined that Drs. Doogan, Aguiar and Cha, representing three of our six directors, are "independent directors" as defined under applicable stock exchange rules.
In addition, certain phase-in periods with respect to director independence will be available to us under New York Stock Exchange rules. We do expect to take advantage of certain of these provisions. The phase-in periods allow us to have less than a majority of independent directors upon the listing date of our common shares, so long as our board is majority independent within one year of the effective date of the registration statement.
Committees of the Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and responsibilities described below. From time to time, the board may establish other committees to facilitate the management of our business.
Audit Committee
Our audit committee reviews our internal accounting procedures and consults with and reviews the services provided by our independent registered public accountants. Our audit committee consists of three directors, Drs. Aguiar, Cha and Doogan. Dr. Aguiar is the chairman of the audit committee and our board of directors has determined that Dr. Aguiar is an "audit committee financial expert" as defined by SEC rules and regulations. Our board of directors has determined that all members of the audit committee are independent directors under New York Stock Exchange listing rules and under Rule 10A-3 under the Exchange Act. We intend to continue to evaluate the requirements applicable to us and we intend to comply with the future requirements to the extent that they become applicable to our audit committee. The principal duties and responsibilities of our audit committee include:
Compensation Committee
Our compensation committee reviews and determines the compensation of our executive officers. Upon completion of this offering, our compensation committee will consist of three directors, Drs. Cha, Aguiar and Doogan, each of whom is a non-employee member of our board of directors as defined in Rule 16b-3 under the Exchange Act. Dr. Cha will be the chairman of the compensation committee. Our board of directors has determined that the composition of our compensation committee satisfies the
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applicable independence requirements under, and the functioning of our compensation committee complies with the applicable requirements of, the New York Stock Exchange rules and SEC rules and regulations. We intend to continue to evaluate and intend to comply with all future requirements applicable to our compensation committee. The principal duties and responsibilities of our compensation committee will include:
Nominating and Corporate Governance Committee
Upon the completion of this offering, our nominating and corporate governance committee will consist of five directors, Drs. Doogan, Aguiar, Bailey and Cha and Mr. Childs. Dr. Doogan will be the chairman of the nominating and corporate governance committee. Subject to our compliance with the phase-in provisions below, our board of directors has determined that the composition of our nominating and corporate governance committee satisfies the applicable independence requirements under, and the functioning of our nominating and corporate governance committee complies with the applicable requirements of, the New York Stock Exchange standards and SEC rules and regulations. Upon the listing of our common shares on the NYSE, a majority of the members of our nominating and corporate governance committee will satisfy the applicable independence requirements of the NYSE. We are permitted to phase in our compliance with the independent nominating and corporate governance committee requirements of the NYSE, which requires all members to be independent within one year of listing. We will comply with the phase-in requirements of the NYSE rules, and within one year of our listing on the NYSE, all members of our nominating and corporate governance committee will be independent under NYSE rules. We will continue to evaluate and will comply with all future requirements applicable to our nominating and corporate governance committee. The nominating and corporate governance committee's responsibilities will include:
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Code of Business Conduct and Ethics for Employees, Executive Officers and Directors
Effective upon the effectiveness of the registration statement of which this prospectus forms a part, we have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors. Following the closing of this offering, the Code of Conduct will be available on our website at www.biohavenpharma.com . The nominating and corporate governance committee of our board of directors will be responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.
Compensation Committee Interlocks and Insider Participation
None of our directors who currently serve as members of our compensation committee is, or has at any time during the past year been, one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving on our board of directors or compensation committee.
Non-Employee Director Compensation
We have not historically paid cash retainers or other compensation with respect to service on our board of directors, except for reimbursement of direct expenses incurred in connection with attending meetings of our board of directors or committees of our board of directors. Although prior to this offering we have never had a formal non-employee director compensation policy, we have typically granted stock options to our non-employee directors on an annual basis, as reflected in the tables below under "2016 Director Compensation Table" and "Non-Employee Director Equity Outstanding at 2016 Year End."
In April 2017, each of our non-employee directors received an option to purchase 20,000 common shares under the 2014 Plan, except for Dr. Doogan, our chairman, who received an option to purchase 30,000 common shares, each at an exercise price of $10.82 per share, which was the fair market value of a common share on the date of grant, as determined by our board of directors. Twenty-five percent of the shares underlying each option vested on the date of grant and the remaining shares vest in three equal installments on each of the first, second and third anniversaries of the date of grant, subject to the director's continued service, and will fully vest upon a change in control.
We expect that our board of directors will adopt a director compensation policy for non-employee directors following the closing of this offering.
2016 Director Compensation Table
The following table sets forth information regarding compensation earned for service on our board of directors during the year ended December 31, 2016 by our directors who were not also our employees. Our non-employee directors did not receive any cash compensation for their service on our board of directors during the year ended December 31, 2016. Dr. Coric, our Chief Executive Officer, is also a director, but does not receive any additional compensation for his service as a director. Dr. Coric's compensation as an
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executive officer is set forth below under "Executive Compensation2016 Summary Compensation Table."
Name
|
Option Awards
($) (1) |
All Other
Compensation ($) (2) |
Total
($) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Declan Doogan, M.D. |
189,428 | | 189,428 | |||||||
Gregory H. Bailey, M.D. |
142,829 | 467,036 | 609,865 | |||||||
John W. Childs |
142,829 | 467,036 | 609,865 | |||||||
Kamlesh Shah (3) |
56,828 | | 56,828 |
Non-Employee Director Equity Outstanding at 2016 Year End
The following table provides information about outstanding stock options and warrants held by each of our non-employee directors as of December 31, 2016. All of the options were granted under our 2014 Equity Incentive Plan.
Non-Employee Director
|
Option Awards |
Guarantor
Warrants |
|||||
---|---|---|---|---|---|---|---|
Declan Doogan, M.D. |
475,000 | (1) | | ||||
Gregory H. Bailey, M.D. |
400,200 | (2) | 107,500 | (5) | |||
John W. Childs |
400,200 | (2) | 107,500 | (5) | |||
Kamlesh Shah (4) |
290,000 | (3) | |
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Our named executive officers for the year ended December 31, 2016 include our principal executive officer and the next two most highly compensated executive officers during the year ended December 31, 2016:
Summary Compensation Table
The following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the year ended December 31, 2016.
Name and Principal Position
|
Year |
Salary
($) (2) |
Bonus
($) (2)(3) |
Option
Awards ($) (4) |
All Other
Compensation ($) (2)(5) |
Total
($) |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Vlad Coric, M.D. |
2016 | 350,000 | 245,000 | 189,428 | | 784,428 | |||||||||||||
Chief Executive Officer |
|||||||||||||||||||
Robert Berman, M.D. |
2016 | 315,000 | 98,438 | 102,291 | 5,331 | 521,060 | |||||||||||||
Chief Medical Officer |
|||||||||||||||||||
James Engelhart |
2016 | 222,592 | (1) | 137,025 | 118,298 | 4,908 | 482,823 | ||||||||||||
Chief Financial Officer |
Narrative to Summary Compensation Table
We review compensation annually for all employees, including our executives. In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our shareholders, and a long-term commitment to our company. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.
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Our board of directors has historically determined our executives' compensation. Our board of directors typically reviews and discusses management's proposed compensation with our chief executive officer for all executives other than our chief executive officer. Based on those discussions and its discretion, our board of directors, without members of management present, discusses and ultimately approves the compensation of our executive officers. To date, our board of directors has not engaged a compensation consultant or adopted a peer group of companies for purposes of determining executive compensation.
Annual Base Salary
We and our wholly owned subsidiary, Biohaven Pharmaceuticals, Inc., have each entered into employment agreements with each of our named executive officers that establish annual base salaries, which are generally determined, approved and reviewed periodically by our board of directors in order to compensate our named executive officers for the satisfactory performance of duties to our company. Annual base salaries are intended to provide a fixed component of compensation to our named executive officers, reflecting their skill sets, experience, roles and responsibilities. Base salaries for our named executive officers have generally been set by our board of directors at levels deemed necessary to attract and retain individuals with superior talent. The following table presents the base salaries for each of our named executive officers for 2016 and 2017. The 2016 base salaries became effective on January 1, 2016 and the 2017 base salaries became effective on January 1, 2017. Following the completion of this offering, our compensation committee will generally be responsible for approving base salaries for our executive officers.
Name
|
2016 Annual
Base Salary ($) |
2017 Annual
Base Salary ($) (2) |
|||||
---|---|---|---|---|---|---|---|
Vlad Coric, M.D. |
350,000 | 364,000 | |||||
Robert Berman, M.D. |
315,000 | 324,450 | |||||
James Engelhart (1) |
290,000 | 301,600 |
Annual Bonus
We seek to motivate and reward our executive officers for achievements relative to our corporate goals and expectations for each fiscal year. Each named executive officer has a target bonus opportunity as specified in the officer's respective employment agreement with Biohaven Pharmaceuticals, Inc., defined as a percentage of his annual salary. For 2016, the target bonus was as follows:
Name
|
2016
Target Bonus (% of Salary) |
|||
---|---|---|---|---|
Vlad Coric, M.D. |
35 | |||
Robert Berman, M.D. |
25 | |||
James Engelhart |
35 |
For 2016, our board of directors considered a variety of factors and personal and corporate achievements in determining the discretionary bonus amounts to be paid to each named executive officer.
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Based on these factors, in its sole discretion, our board of directors determined to award the following bonuses to each of our named executive officers in December 2016:
Name
|
2016
Bonus ($) |
|||
---|---|---|---|---|
Vlad Coric, M.D. |
245,000 | |||
Robert Berman, M.D. |
98,438 | |||
James Engelhart |
137,025 |
In April 2017, our board of directors approved the following target bonuses for our executive officers for 2017:
Name
|
2017
Target Bonus (% of Salary) |
|||
---|---|---|---|---|
Vlad Coric, M.D |
50 | |||
Robert Berman, M.D |
35 | |||
James Engelhart |
35 |
Long-Term Incentives
Our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our executive officers. Our board of directors has historically been responsible for approving equity grants, although following the completion of this offering, our compensation committee will generally be responsible for approving equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our executives generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize executives with respect to achieving certain corporate goals or to reward executives for exceptional performance.
Prior to this offering, we have granted all equity awards pursuant to the 2014 Plan, the terms of which are described below under "Equity Benefit Plans." All options are granted with a per share exercise price equal to no less than the fair market value of a common share on the date of the grant of such award.
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In December 2016, our board of directors awarded the following options to purchase common shares to our named executive officers:
Name
|
Number of
Common Shares Underlying Option |
|||
---|---|---|---|---|
Vlad Coric, M.D. |
50,000 | |||
Robert Berman, M.D. |
27,000 | |||
James Engelhart |
31,225 |
Each of these options has an exercise price of $9.2911 per share. Twenty-five percent of the shares underlying each option vested on the date of grant and the remaining shares vest in three equal installments on each of the first, second and third anniversaries of the date of grant, subject to continued employment with us.
In April 2017, our board of directors awarded the following options to purchase common shares to our named executive officers under the 2014 Plan:
Name
|
Number of
Common Shares Underlying Option |
|||
---|---|---|---|---|
Vlad Coric, M.D. |
40,000 | |||
Robert Berman, M.D. |
20,000 | |||
James Engelhart |
40,000 |
Each of these options has an exercise price of $10.82 per share, which was the fair market value of a common share on the date of grant, as determined by our board of directors. Twenty-five percent of the shares underlying each option vested on the date of grant and the remaining shares vest in three equal installments on each of the first, second and third anniversaries of the date of grant, subject to continued employment with us, and will fully vest on a change in control.
Other Compensation and Benefits
Except for the benefits described above, we do not provide tax gross-ups, perquisites or personal benefits to our named executive officers. We do, however, pay the premiums for life, medical and dental insurance for all of our employees, including our named executive officers. We also sponsor a tax-qualified 401(k) retirement plan in which our eligible employees are entitled to participate. We match contributions by our employees, including our named executive officers, to our 401(k) plan.
Employment Agreements
We and our wholly owned subsidiary, Biohaven Pharmaceuticals, Inc., have each entered into employment agreements with each of our named executive officers. Prior to the completion of this offering, the employment agreements between our named executive officers and Biohaven Pharmaceuticals, Inc. are being amended. The key terms of the agreements with our named executive officers, including the expected terms of the amended employment agreements with Biohaven Pharmaceuticals, Inc., are described below. For a discussion of the severance pay and other benefits provided in connection with a termination of employment of our named executive officers, please see "Payments Upon Termination or Change in Control" below.
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Dr. Coric
We entered into an employment agreement with Dr. Coric, our chief executive officer, in October 2015, and prior to the completion of this offering, Dr. Coric and Biohaven Pharmaceuticals, Inc. are expected to enter into an amended employment agreement. Each of the employment agreements provides for an initial three-year term of employment, with automatic one-year renewal periods, unless either party provides notice of non-renewal at least 90 days before the renewal date. In addition, Dr. Coric's employment is "at-will" and may be terminated at any time by us or Biohaven Pharmaceuticals, Inc., respectively, or Dr. Coric. Under the terms of the amended agreement with Biohaven Pharmaceuticals, Inc., Dr. Coric is expected to be entitled to receive an initial annual base salary of $450,000, an annual target bonus of 50% of his annual base salary and coverage of the cost to Dr. Coric related to company-sponsored employee benefit plans up to the equivalent of 20% of his annual base salary. The agreements include certain confidentiality, inventions assignment, non-competition and non-solicitation provisions.
Dr. Berman
We entered into an employment agreement with Dr. Berman, our chief medical officer, in November 2015, and prior to the completion of this offering, Dr. Berman and Biohaven Pharmaceuticals, Inc. are expected to enter into an amended employment agreement. Each of the employment agreements provides for an initial three-year term of employment, with automatic one-year renewal periods, unless either party provides notice of non-renewal at least 90 days before the renewal date. In addition, Dr. Berman's employment is "at-will" and may be terminated at any time by us or Biohaven Pharmaceuticals, Inc., respectively, or Dr. Berman. Under the terms of the amended agreement with Biohaven Pharmaceuticals, Inc., Dr. Berman is expected to be entitled to receive an initial annual base salary of $340,000, an annual target bonus of 35% of his annual base salary and coverage of the cost to Dr. Berman related to company-sponsored employee benefit plans up to the equivalent of 20% of his annual base salary. The agreements include certain confidentiality, inventions assignment, non-competition and non-solicitation provisions.
Mr. Engelhart
We entered into an employment agreement with Mr. Engelhart, our chief financial officer, in May 2016, and prior to the completion of this offering, Mr. Engelhart and Biohaven Pharmaceuticals, Inc. are expected to enter into an amended employment agreement. Each of the employment agreements provides for an initial three-year term of employment, with automatic one-year renewal periods, unless either party provides notice of non-renewal at least 90 days before the renewal date. In addition, Mr. Engelhart's employment is "at-will" and may be terminated at any time by us or Biohaven Pharmaceuticals, Inc., respectively, or Mr. Engelhart. Under the terms of the amended agreement with Biohaven Pharmaceuticals, Inc., Mr. Engelhart is expected to be entitled to receive an initial annual base salary of $340,000, an annual target bonus of 35% of his annual base salary and coverage of the cost to Mr. Engelhart related to company-sponsored employee benefit plans up to the equivalent of 20% of his annual base salary. The agreements include certain confidentiality, inventions assignment, non-competition and non-solicitation provisions.
Payments upon Termination of Employment or Change in Control
Each named executive officer is entitled to severance payments if his employment is terminated under specified circumstances.
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Employment Agreements with Biohaven Pharmaceutical Holding Company Ltd.
Under the employment agreements between us and each of Dr. Coric, Dr. Berman and Mr. Engelhart, if we terminate the executive's employment or fail to elect the executive to his respective officer position, or if the executive's employment is terminated due to death or disability, or if the executive terminates his employment for "Good Reason," the executive is entitled to a lump sum severance payment in the amount of $350,000 for Dr. Coric, $157,500 for Dr. Berman and $290,000 for Mr. Engelhart, and all stock options held by the executive will be deemed to be fully vested and exercisable on the termination date, and the executive may exercise such stock options for a period of two years following the termination date (or if earlier, the end of the term of the option). These severance payments are in addition to any severance payments due to the named executive officers under their agreements with Biohaven Pharmaceuticals, Inc.
Employment Agreements with Biohaven Pharmaceuticals, Inc.
Under the amended employment agreements between Biohaven Pharmaceuticals, Inc. and each of Dr. Coric, Dr. Berman and Mr. Engelhart, which are expected to be entered into prior to the completion of this offering, if the executive's employment with Biohaven Pharmaceuticals, Inc. is terminated without "just cause," due to death or disability, or if the executive terminates his employment for "Good Reason," each in the absence of a "Change in Control," the executive is entitled to receive severance payments, in equal monthly installments at the applicable base salary rate in effect on the first day of the calendar month immediately preceding the termination date, for 15 months following termination for Dr. Coric, for 12 months following termination for Mr. Engelhart, and for nine months following termination for Dr. Berman. In addition, upon such termination, each executive is entitled to continued health and life insurance coverage during the period during which the executive receives severance payments, reduced to the extent the executive receives comparable benefits elsewhere during the period, all time-based vesting equity awards held by the executive as of the date that he signs the amended employment agreement will be deemed to be fully vested and exercisable on the termination date, and the executive may exercise such awards for a period of two years following the termination date (or if earlier, the end of the term of the option). Upon termination due to disability, the amount of severance paid to the executive is reduced by any disability benefits the executive receives under Biohaven Pharmaceuticals, Inc.'s disability insurance policies.
Under the amended employment agreements between Biohaven Pharmaceuticals, Inc. and each of Dr. Coric, Dr. Berman and Mr. Engelhart, if the executive's employment with Biohaven Pharmaceuticals, Inc. is terminated without "just cause" (not due to death or disability), or if the executive terminates his employment for "Good Reason," each within 12 months following a "Change in Control," the executive will be entitled to receive severance payments, at the applicable base salary rate in effect, and bonus at the full bonus percentage, in equal monthly installments on the first day of the calendar month immediately preceding the termination date, for 18 months following termination for Dr. Coric and for 12 months following termination for Dr. Berman and Mr. Engelhart. In addition, upon such termination, each executive is entitled to continued health and life insurance coverage during the period during which the executive receives severance payments, reduced to the extent the executive receives comparable benefits elsewhere during the period, all time-based vesting equity awards held by the executive as of the date of his termination will be deemed to be fully vested and exercisable on the termination date, and the executive may exercise such awards for the period set forth in his award agreement plus an additional 12 months following the termination date (or if earlier, the end of the term of the award). Upon termination due to disability, the amount of severance paid to the executive is reduced by any disability benefits the executive receives under Biohaven Pharmaceuticals, Inc.'s disability insurance policies.
For purposes of these agreements, "just cause" means the executive's gross negligence, willful misconduct, conviction for a felony (including the entry of a plea of nolo contendere) for illegal or criminal behavior in carrying out his duties as required under the terms of his employment agreement.
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For purposes of these agreements, "Good Reason" means the occurrence of any of the following events without the executive's consent: (1) a material reduction in the executive's base salary; (2) a material reduction in the executive's duties, authority and responsibilities relative to the executive's duties, authority, and responsibilities in effect immediately prior to such reduction; (3) the relocation of the executive's principal place of employment, without the executive's consent, in a manner that lengthens his one-way commute distance by 50 or more miles from his then-current principal place of employment immediately prior to such relocation; (4) any material breach of the employment agreement by the applicable of us, Biohaven Pharmaceuticals, Inc. or successors to either entity; or (5) the liquidation, dissolution, merger, consolidation or reorganization of the applicable of us or Biohaven Pharmaceuticals, Inc. or transfer of all or a significant portion of the business and/or assets of either entity, unless the successor or successors shall have assumed all duties and obligations of the applicable of us or Biohaven Pharmaceuticals, Inc. under the employment agreement; provided, however, that, any such termination by the executive shall only be deemed for Good Reason if: (a) the executive gives the applicable of us or Biohaven Pharmaceuticals, Inc. written notice of his intent to terminate for Good Reason within thirty (30) days following the first occurrence of the condition(s) that he believes constitute(s) Good Reason, which notice shall describe such condition(s); (b) the applicable of us or Biohaven Pharmaceuticals, Inc. fails to remedy such condition(s) within thirty (30) days following receipt of the written notice; (c) the applicable of us or Biohaven Pharmaceuticals, Inc. has not, prior to receiving such notice from the executive, already informed the executive that his employment with the applicable of us or Biohaven Pharmaceuticals, Inc. is being terminated and (d) the executive voluntarily terminates his employment within 30 days following the end of the 30-day cure period.
The severance payments described above are in addition to any severance payments due to the named executive officers under their employment agreements with us.
Outstanding Equity Awards at End of 2016
The following table provides information about outstanding stock options held by each of our named executive officers at December 31, 2016. All of these options were granted under our 2014 Equity Incentive Plan.
|
Option Awards | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Option
Expiration Date |
|||||||||
Vlad Coric, M.D. |
187,500 | 62,500 | (1) | 0.61 | 11/26/2024 | ||||||||
|
50,000 | 50,000 | (2) | 5.60 | 10/23/2025 | ||||||||
|
37,500 | 37,500 | (2) | 5.60 | 10/23/2025 | ||||||||
|
12,500 | 37,500 | (3) | 9.29 | 12/10/2026 | ||||||||
Robert Berman, M.D. |
168,750 |
56,250 |
(1) |
0.61 |
11/26/2024 |
||||||||
|
37,500 | 37,500 | (2) | 5.60 | 10/23/2025 | ||||||||
|
37,500 | 37,500 | (2) | 5.60 | 10/23/2025 | ||||||||
|
6,750 | 20,250 | (3) | 9.29 | 12/10/2026 | ||||||||
James Engelhart |
46,875 |
15,625 |
(1) |
0.61 |
11/26/2024 |
||||||||
|
12,500 | 12,500 | (2) | 5.60 | 10/23/2025 | ||||||||
|
7,806 | 23,419 | (3) | 9.29 | 12/10/2026 |
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Stock Option Exercises and Stock Vested During 2016
None of our named executive officers exercised stock options during 2016 or held stock awards that vested in 2016.
Pension Benefits
Other than our 401(k) plan, our named executive officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by us during 2016.
Nonqualified Deferred Compensation
Our named executive officers did not participate in, or otherwise receive any benefits under, any nonqualified deferred compensation plan sponsored by us during 2016.
Equity Benefit Plans
2017 Equity Incentive Plan
Our board of directors adopted our 2017 Equity Incentive Plan, or 2017 Plan, in April 2017, and our shareholders are expected to approve the 2017 Plan prior to the completion of this offering. The 2017 Plan will become effective as of the date of the underwriting agreement in connection with this offering pursuant to which the common shares is priced for this offering. Once the 2017 Plan is effective, no further grants will be made under the 2014 Plan.
Share Awards. The 2017 Plan provides for the grant of incentive share options, or ISOs, nonstatutory share options, or NSOs, share appreciation rights, restricted share awards, restricted share unit awards, performance-based share awards, and other forms of equity compensation, which we refer to collectively as share awards. Additionally, the 2017 Plan provides for the grant of performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of us and our affiliates.
Share Reserve. Initially, the aggregate number of common shares that may be issued pursuant to share awards under the 2017 Plan after the 2017 Plan becomes effective is 7,611,971 shares which is the sum of (1) 2,712,741 new shares, plus (2) the number of shares reserved for issuance under the 2014 Plan, plus (3) any shares subject to outstanding share awards that would have otherwise been returned to the 2014 Plan. Additionally, the number of common shares reserved for issuance under our 2017 Plan may be increased by our board of directors on January 1 of each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by a number of common shares determined by our board of directors in an amount not to exceed 4% of the total number of shares of our capital shares outstanding on December 31 of the preceding calendar year.
Section 162(m) Limits. No person may be granted share awards covering more than 3,000,000 common shares under our 2017 Plan during any calendar year pursuant to share options, share appreciation rights and other share awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value on the date the share award is granted. Additionally, no person may be granted in a calendar year a performance share award covering more than 3,000,000 shares or a performance cash award having a maximum value in excess of $3,000,000. Such limitations are designed to help assure that any deductions to which we would otherwise be entitled with
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respect to such awards will not be subject to the $1,000,000 limitation on the income tax deductibility of compensation paid to any covered executive officer imposed by Section 162(m) of the Code.
Reversion of Shares. If a share award granted under the 2017 Plan expires or otherwise terminates without being exercised in full, or is settled in cash, the common shares not acquired pursuant to the share award again will become available for subsequent issuance under the 2017 Plan. In addition, the following types of shares under the 2017 Plan may become available for the grant of new share awards under the 2017 Plan: (1) shares that are forfeited to or repurchased by us prior to becoming fully vested; (2) shares withheld to satisfy income or employment withholding taxes; or (3) shares used to pay the exercise or purchase price of a share award. Shares issued under the 2017 Plan may be previously unissued shares or reacquired shares bought by us on the open market. As of the date hereof, no awards have been granted and no common shares have been issued under the 2017 Plan.
Non-Employee Director Compensation Limit. Under the 2017 Plan, the maximum number of common shares subject to share awards granted under the 2017 Plan or otherwise during any one calendar year to any of our non-employee directors, taken together with any cash fees paid by us to such non-employee director during such calendar year for services on the board of directors, will not exceed $1,000,000 in total value (calculating the value of any such share awards based on the grant date fair value of such share awards for financial reporting purposes).
Administration. Our board of directors, or a duly authorized committee thereof, has the authority to administer the 2017 Plan. Our board of directors may also delegate to one or more of our officers the authority to (1) designate employees (other than other officers) to be recipients of certain share awards, and (2) determine the number of common shares to be subject to such share awards. Subject to the terms of the 2017 Plan, our board of directors or the authorized committee, referred to herein as the plan administrator, determines recipients, dates of grant, the numbers and types of share awards to be granted and the terms and conditions of the share awards, including the period of their exercisability and vesting schedule applicable to a share award. Subject to the limitations set forth below, the plan administrator will also determine the exercise price, strike price or purchase price of awards granted and the types of consideration to be paid for the award.
The plan administrator has the authority to modify outstanding awards under our 2017 Plan. Subject to the terms of our 2017 Plan, the plan administrator has the authority to reduce the exercise, purchase or strike price of any outstanding share award, cancel any outstanding share award in exchange for new share awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any adversely affected participant.
Share Options. ISOs and NSOs are granted pursuant to share option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a share option, within the terms and conditions of the 2017 Plan, provided that the exercise price of a share option generally cannot be less than 100% of the fair market value of our common shares on the date of grant. Options granted under the 2017 Plan vest at the rate specified by the plan administrator.
The plan administrator determines the term of share options granted under the 2017 Plan, up to a maximum of 10 years. Unless the terms of an optionholder's share option agreement provide otherwise, if an optionholder's service relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionholder may generally exercise any vested options for a period of 3 months following the cessation of service. The option term may be extended in the event that exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholder's service relationship with us or any of our affiliates ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 12 months in the event of disability
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and 18 months in the event of death. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common shares issued upon the exercise of a share option will be determined by the plan administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of common shares previously owned by the optionholder, (4) a net exercise of the option if it is an NSO, and (5) other legal consideration approved by the plan administrator.
Unless the plan administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order. An optionholder may designate a beneficiary, however, who may exercise the option following the optionholder's death.
Tax Limitations on Incentive Share Options. The aggregate fair market value, determined at the time of grant, of our common shares with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our share plans and the share plans of any of our affiliates may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own shares possessing more than 10% of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least 110% of the fair market value of the shares subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.
Restricted Share Awards. Restricted share awards are granted pursuant to restricted share award agreements adopted by the plan administrator. Restricted share awards may be granted in consideration for (1) cash, check, bank draft or money order, (2) services rendered to us or our affiliates, or (3) any other form of legal consideration. Common shares acquired under a restricted share award may, but need not, be subject to a share repurchase option in our favor in accordance with a vesting schedule to be determined by the plan administrator. A restricted share award may be transferred only upon such terms and conditions as set by the plan administrator. Except as otherwise provided in the applicable award agreement, restricted shares that have not vested will be forfeited or repurchased by us upon the participant's cessation of continuous service for any reason.
Restricted Share Unit Awards. Restricted share unit awards are granted pursuant to restricted share unit award agreements adopted by the plan administrator. Restricted share unit awards may be granted in consideration for any form of legal consideration. A restricted share unit award may be settled by cash, delivery of shares, a combination of cash and shares as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted share unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted share unit award. Except as otherwise provided in the applicable award agreement, restricted share units that have not vested will be forfeited upon the participant's cessation of continuous service for any reason.
Share Appreciation Rights. Share appreciation rights are granted pursuant to share appreciation grant agreements adopted by the plan administrator. The plan administrator determines the strike price for a share appreciation right, which generally cannot be less than 100% of the fair market value of our common shares on the date of grant. Upon the exercise of a share appreciation right, we will pay the participant an amount equal to the product of (1) the excess of the per share fair market value of our common shares on the date of exercise over the strike price, multiplied by (2) the number of common shares with respect to which the share appreciation right is exercised. A share appreciation right granted under the 2017 Plan vests at the rate specified in the share appreciation right agreement as determined by the plan administrator.
The plan administrator determines the term of share appreciation rights granted under the 2017 Plan, up to a maximum of 10 years. Unless the terms of a participant's share appreciation right agreement provides otherwise, if a participant's service relationship with us or any of our affiliates ceases for any
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reason other than disability or death, the participant may generally exercise any vested share appreciation right for a period of 3 months following the cessation of service. The share appreciation right term may be further extended in the event that exercise of the share appreciation right following such a termination of service is prohibited by applicable securities laws. If a participant's service relationship with us, or any of our affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested share appreciation right for a period of 12 months in the event of disability and 18 months in the event of death. In no event may a share appreciation right be exercised beyond the expiration of its term.
Performance Awards. The 2017 Plan permits the grant of performance-based share and cash awards that may qualify as performance-based compensation that is not subject to the $1,000,000 limitation on the income tax deductibility of compensation paid to a covered executive officer imposed by Section 162(m) of the Code. To help assure that the compensation attributable to performance-based awards will so qualify, our compensation committee can structure such awards so that shares or cash will be issued or paid pursuant to such award only after the achievement of certain pre-established performance goals during a designated performance period.
The performance goals that may be selected include one or more of the following: (1) earnings (including earnings per share and net earnings); (2) earnings before interest and taxes; (3) earnings before interest, taxes and depreciation; (4) earnings before interest, taxes, depreciation and/or amortization; (5) earnings before interest, taxes, depreciation, amortization and legal settlements; (6) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (7) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and share-based compensation; (8) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), share-based compensation and changes in deferred revenue; (9) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), share-based compensation, other non-cash expenses and changes in deferred revenue; (10) total shareholder return; (11) return on equity or average shareholders' equity; (12) return on assets, investment, or capital employed; (13) return on operating revenue; (14) margin (including gross margin); (15) income (before or after taxes); (16) operating income (before or after taxes); (17) operating income after taxes; (18) operating income before interest and taxes; (19) operating income before interest, taxes, depreciation and amortization; (20) pre-tax profit; (21) operating cash flow; (22) sales or revenue targets; (23) increases in revenue or product revenue; (24) improvement in or attainment of working capital levels; (25) economic value added (or an equivalent metric); (26) cash flow; (27) cash flow per share; (28) cash balance; (29) cash burn; (30) cash collections; (31) debt reduction; (32) implementation or completion of projects or processes (including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, and product supply); (33) shareholders' equity; (34) capital expenditures; (35) debt levels; (36) operating profit or net operating profit; (37) workforce diversity; (38) net income or growth of net income or operating income; (39) billings; (40) bookings; (41) employee retention; (42) initiation of studies by specific dates; (43) budget management; (44) submission to, or approval by, a regulatory body (including, but not limited to the U.S. Food and Drug Administration) of an applicable filing or a product; (45) regulatory milestones; (46) safety performance; (47) sustainability or environmental performance; (48) progress of internal research or development programs; (49) acquisition of new customers; (50) customer retention and/or repeat order rate; (51) improvements in sample and test processing times; (52) progress of partnered programs; (53) partner satisfaction; (54) timely completion of clinical trials; (55) submission of 510(k)s or pre-market approvals and other regulatory achievements; (56) milestones related to research development (including, but not limited to, preclinical and clinical studies), product development and manufacturing or new product innovation; (57) expansion of sales in additional geographies or markets; (58) research progress, including the development of programs; (59) strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; (60) strategic corporate objectives relating to: increase in revenue with certain customers, customer groups,
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or customer types; (61) financings; (62) brand recognition or acceptance; (63) share price; (64) share price performance; (65) market share; (66) expenses and cost reduction goals and (67) to the extent that an award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by our board of directors. The performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (1) in the award agreement at the time the award is granted or (2) in such other document setting forth the performance goals at the time the goals are established, we will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (a) to exclude restructuring and/or other nonrecurring charges; (b) to exclude exchange rate effects; (c) to exclude the effects of changes to generally accepted accounting principles; (d) to exclude the effects of any statutory adjustments to corporate tax rates; (e) to exclude the effects of any items that are unusual in nature or occur infrequently as determined under generally accepted accounting principles; (f) to exclude the dilutive effects of acquisitions or joint ventures; (g) to assume that any business divested by us achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (h) to exclude the effect of any change in the outstanding common shares by reason of any share dividend or split, share repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (i) to exclude the effects of share based compensation and the award of bonuses under our bonus plans; (j) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (k) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; (l) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item; and (m) to exclude the effects of the timing of acceptance for review and/or approval of submissions to the FDA or any other regulatory body. In addition, we retain the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of the goals. The performance goals may differ from participant to participant and from award to award.
Other Share Awards. The plan administrator may grant other awards based in whole or in part by reference to our common shares. The plan administrator will set the number of shares under the share award and all other terms and conditions of such awards.
Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a share split or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance under the 2017 Plan, (2) the class and maximum number of shares by which the share reserve may increase automatically each year, (3) the class and maximum number of shares that may be issued upon the exercise of ISOs, (4) the class and maximum number of shares subject to share awards that can be granted in a calendar year (as established under the 2017 Plan pursuant to Section 162(m) of the Code) and (5) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding share awards.
Corporate Transactions. In the event of certain specified significant corporate transactions, the plan administrator has the discretion to take any of the following actions with respect to share awards:
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Our plan administrator is not obligated to treat all share awards, even those that are of the same type, in the same manner.
Under the 2017 Plan, a corporate transaction is generally the consummation of (1) a sale or other disposition of all or substantially all of our assets, (2) a sale or other disposition of at least 50% of our outstanding securities, (3) a merger, consolidation or similar transaction following which we are not the surviving corporation, or (4) a merger, consolidation or similar transaction following which we are the surviving corporation but the common shares outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.
Change in Control. In the event that the surviving corporation or successor corporation (or its parent company) in a change in control transaction does not assume or substitute for any outstanding share award held by any participant whose continuous service has not terminated before the effective time of the change in control, then contingent upon the closing of the transaction, the participant will fully vest in and, to the extent applicable, have the right to exercise all of his or her share awards. In addition, all restrictions on share awards will lapse, and, with respect to any share award with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. Unless otherwise determined by our board of directors, we will notify the participant in writing or electronically that any options or share appreciation rights held by the participant with accelerated vesting will be exercisable for a period of time determined by the board in its sole discretion, and the options or share appreciation rights will terminate upon the expiration of that period. In addition, the plan administrator may provide, in an individual award agreement or in any other written agreement between a participant and us that the share award will be subject to additional acceleration of vesting and exercisability in the event of a change in control. Under the 2017 Plan, a change in control is generally (1) the acquisition by a person or entity of more than 50% of our combined voting power other than by merger, consolidation or similar transaction; (2) a consummated merger, consolidation or similar transaction immediately after which our shareholders cease to own more than 50% of the combined voting power of the surviving entity; (3) a consummated sale, lease or exclusive license or other disposition of all or substantially of our assets; (4) a complete dissolution or liquidation of the Company, except for a liquidation into a parent corporation, or (5) when a majority of our board of directors becomes comprised of individuals who were not serving on our board of directors on the date of adoption of the 2017 Plan, or the incumbent board, or whose nomination, appointment, or election was not approved by a majority of the incumbent board still in office.
Amendment and Termination. Our board of directors has the authority to amend, suspend, or terminate our 2017 Plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. No ISOs may be granted after the 10th anniversary of the date our board of directors adopted our 2017 Plan.
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2014 Equity Incentive Plan
Our board of directors adopted and our shareholders approved our 2014 Equity Incentive Plan, or 2014 Plan, on November 24, 2014. The 2014 Plan was subsequently amended by our board of directors, most recently as of October 28, 2016. As of February 28, 2017, options to purchase 4,335,344 common shares were outstanding under the 2014 Plan, with a weighted average exercise price per share of $4.23. As of April 24, 2017, 372 shares remained available for future issuance pursuant to the grant of options or other share awards under the 2014 Plan. After the effective date of the 2017 Plan, no additional share awards will be granted under the 2014 Plan, and all outstanding share awards granted under the 2014 Plan that are repurchased, forfeited, expired or are cancelled will become available for grant under the 2017 Plan in accordance with its terms.
Share Awards. The 2014 Plan provides for the grant of incentive share options, or ISOs, nonqualified share options, or NSOs, restricted share awards and other share-based awards. ISOs may be granted only to employees. NSOs, restricted share awards and other share-based awards may be granted to directors, officers and employees of the company. We have only granted share options under the 2014 Plan.
Share Reserve. The aggregate number of common shares reserved for issuance pursuant to share awards under the 2014 Plan is 4,889,230 shares. The maximum number of shares that may be issued upon the exercise of ISOs under our 2014 Plan is 4,889,230 shares. These amounts are subject to adjustment for share splits, share dividends and other changes in our capital structure. We may use authorized and unissued shares or reacquired shares in connection with grants under the 2014 Plan. Shares underlying the unexercised or undistributed portion of any terminated or expired award are available for further awards under the 2014 Plan.
Administration. The compensation committee of our board of directors (or if no compensation committee, the board) has the authority to administer the 2014 Plan. Subject to the terms of the 2014 Plan, the plan administrator determines recipients of awards, dates of grant, the purchase price of shares subject to awards, whether each option is a NSO or ISO, the numbers and types of awards to be granted and the terms and conditions of awards, including the period of their exercisability, the forms of award agreements and vesting schedule applicable to an award. The plan administrator has the authority to interpret and prescribe and rescind rules and regulations and make all other determinations regarding the administration of the 2014 Plan. The plan administrator has the authority to modify, amend or terminate outstanding share awards under our 2014 Plan, including substituting another award of the same or a different type and changing the date of exercise or vesting, provided that the participant's consent will be required unless the plan administrator determines that the action would not materially adversely affect the participant.
Share Options. ISOs and NSOs are granted pursuant to share option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a share option, within the terms and conditions of the 2014 Plan, provided that the exercise price of a share option cannot be less than 100% of the fair market value of our common shares on the date of grant. Options granted under the 2014 Plan vest at the rate specified by the plan administrator.
The plan administrator determines the term of share options granted under the 2014 Plan, up to a maximum of 10 years. Unless the terms of an optionholder's share option agreement provide otherwise, an option will terminate 30 days following cessation of the optionholder's service with us or an affiliate for any reason other than cause, death or disability, immediately upon cessation of service for cause, or one year following cessation of service due to death or disability. Acceptable consideration for the purchase of common shares issued upon the exercise of a share option will be determined by the plan administrator, in its discretion, and may include (1) cash or a check, (2) a promissory note, to the extent permitted by applicable law, (3) consideration received under a cashless exercise program, (4) the tender of common shares previously owned by the optionholder, (5) net exercise or (6) any combination of these methods.
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Unless the plan administrator provides otherwise, options generally are not transferable except by will or the laws of descent and distribution.
Tax Limitations On Incentive Share Options. The aggregate fair market value, determined at the time of grant, of our common shares with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our share plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own shares possessing more than 10% of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least 110% of the fair market value of the shares subject to the option on the date of grant, and (2) the option is not exercisable after the expiration of five years from the date of grant.
Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a recapitalization, reorganization or share split, appropriate adjustments will be made to the number and class of shares that may be delivered under the 2014 Plan, and/or the number, class and price of shares covered by each outstanding share award.
Change in Control. In the event of certain change-in-control transactions affecting us (as described below), subject to the provisions of the applicable award agreement, the plan administrator may, in its discretion, provide that all outstanding unvested options will vest and become exercisable and any restrictions applicable to any restricted share awards will terminate and lapse immediately prior to the consummation of the change in control. In addition, the plan administrator has the discretion to take any of the following actions with respect to share awards:
For purposes of the treatment above, a "change in control" generally means a single transaction or series of related transactions, other than an initial public offering of our shares, pursuant to which a person or persons unaffiliated with us, other than our existing shareholders:
Our plan administrator is not obligated to treat all share awards, all share awards held by a participant, or all share awards of the same type, in the same manner.
Amendment and Termination. The 2014 Plan will terminate on the tenth anniversary of the date it was adopted by our board of directors. However, our board of directors has the authority to amend, suspend, or terminate our 2014 Plan in whole or in part at any time, provided that any amendment that is
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necessary to comply with any applicable tax or regulatory requirement will be subject to approval by our shareholders, and such action does not materially adversely affect the existing rights of any participant without such participant's written consent.
2017 Employee Share Purchase Plan
Our board of directors adopted our 2017 Employee Share Purchase Plan, or ESPP, in April 2017, and our shareholders are expected to approve the ESPP prior to the completion of this offering. The ESPP will become effective immediately upon the execution and delivery of the underwriting agreement related to this offering. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. The ESPP is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code.
Share Reserve. Following this offering, the ESPP authorizes the issuance of 339,139 common shares pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of common shares reserved for issuance will automatically increase on January 1 of each calendar year, from January 1, 2018 (assuming the ESPP becomes effective in 2017) through January 1, 2027, by the lesser of (1) 1% of the total number of common shares outstanding on December 31 of the preceding calendar year, and (2) 600,000 shares; provided , that prior to the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). As of the date hereof, no common shares have been purchased under the ESPP.
Administration. Our board of directors has delegated concurrent authority to administer the ESPP to our compensation committee. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase common shares on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which common shares will be purchased for employees participating in the offering. An offering under the ESPP may be terminated under certain circumstances.
Payroll Deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our common shares under the ESPP. Unless otherwise determined by our board of directors, common shares will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a common share on the first date of an offering or (b) 85% of the fair market value of a common share on the date of purchase.
Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as determined by our board of directors, including: (1) being customarily employed for more than 20 hours per week; (2) being customarily employed for more than five months per calendar year; or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our common shares based on the fair market value per common share at the beginning of an offering for each year such a purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value pursuant to Section 424(d) of the Code.
Changes to Capital Structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend,
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combination of shares, exchange of shares, change in corporate structure or similar transaction, the board of directors will make appropriate adjustments to (1) the number of shares reserved under the ESPP, (2) the maximum number of shares by which the share reserve may increase automatically each year, (3) the number of shares and purchase price of all outstanding purchase rights, and (4) the number of shares that are subject to purchase limits under ongoing offerings.
Corporate Transactions. In the event of certain significant corporate transactions, including: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of 50% of our outstanding securities, (3) the consummation of a merger or consolidation where we do not survive the transactions and (4) the consummation of a merger or consolidation where we do survive the transaction but the common shares outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction, any then-outstanding rights to purchase our shares under the ESPP may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such purchase rights, then the participants' accumulated payroll contributions will be used to purchase common shares within 10 business days prior to such corporate transaction, and such purchase rights will terminate immediately.
ESPP Amendments, Termination. Our board of directors has the authority to amend or terminate our ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder's consent. We will obtain shareholder approval of any amendment to our ESPP as required by applicable law or listing requirements.
Limitation of Liability and Indemnification of Officers and Directors
We expect to adopt the amended memorandum and articles of association, which will become effective prior to the effectiveness of the registration statement of which this prospectus forms a part, and which will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by British Virgin Islands law.
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal.
The amended memorandum and articles of association are expected to provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. The amended memorandum and articles of association are also expected to provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he is or was one of our employees or agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise. Our amended memorandum and articles of association will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.
Further, prior to the completion of this offering, we expect to enter into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained under British Virgin Islands law. These indemnification agreements will require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements will also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit, or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
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The limitation of liability and indemnification provisions that are expected to be included in our amended memorandum and articles of association and in indemnification agreements that we enter into with our directors and executive officers may discourage shareholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other shareholders. Further, a shareholder's investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors. The underwriting agreement provides for indemnification by the underwriters of us and our officers, directors and employees for certain liabilities arising under the Securities Act, or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell common shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy. Prior to 180 days after the date of this offering, subject to early termination, the sale of any shares under such plan would be prohibited by the lock-up agreement that the director or officer has entered into with the underwriters.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions since January 1, 2014 to which we have been a participant in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of our share capital, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are described under "Executive Compensation."
Participation in this Offering
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. Based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, these entities would purchase up to an aggregate of 4,666,667 of the 8,333,333 shares in this offering based on these indications of interest. However, because indications of interest are not binding agreements or commitments to purchase, these entities may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase any shares in this offering. It is also possible that these entities could indicate an interest in purchasing more of our common shares. In addition, the underwriters could determine to sell fewer shares to any of these entities than the entities indicate an interest in purchasing or not to sell any shares to these entities.
Furthermore, at our request, the underwriters have reserved for sale at the initial public offering price up to 416,667 common shares, or 5% of the common shares offered by this prospectus, for our employees, directors and other persons associated with us. If purchased by these persons, these shares will not be subject to a lock-up restriction, except in the case of shares purchased by any director or officer, which will be subject to the lock-up restrictions described in the "Underwriting" section of this prospectus.
Relationship with Yale University
In 2013, we entered into a license agreement with, and issued common shares to, Yale University, pursuant to which Yale became a holder of more than 5% of our outstanding voting securities. During the years ended December 31, 2014, 2015 and 2016, we made payments to Yale of $24,000, $84,000 and $4,000, respectively, under the Yale license agreement. Yale ceased to be a holder of 5% of our outstanding shares as of December 31, 2014.
Dr. Coric, our Chief Executive Officer, is an associate clinical professor of psychiatry at Yale. While previously employed by Yale, Dr. Coric was a co-inventor of some of the patents that we license from Yale. Under Yale's policies, as a co-inventor Dr. Coric is entitled to receive a share of any royalties that we pay to Yale under the agreement with respect to the covered intellectual property. No royalty payments have been made to date.
Loan Guaranty Warrants
In connection with our credit agreement with Wells Fargo entered into in August 2016, Wells Fargo required that we obtain a personal guaranty of our loan obligations from one of our directors, Mr. Childs. Another one of our directors, Dr. Bailey, provided a further guaranty related to the credit agreement. In exchange for their guaranties, in January 2017, we issued a warrant to each director to purchase 107,500 common shares at an exercise price of $9.2911 per share. At the time of our entering into the credit agreement, Mr. Childs was also the beneficial owner of more than 5% of our outstanding common shares.
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Transactions with Portage Biotech, Inc.
In January 2014, we sold and issued 5,752,000 common shares to Portage Biotech, Inc., or Portage, at a purchase price of $0.61 per share for gross proceeds of $3.5 million. As a result of this transaction, Portage became a beneficial owner of more than 5% of our outstanding shares. In July 2015, we sold and issued 446,500 common shares to Portage at a purchase price of $5.60 per share for gross proceeds of $2.5 million. In February 2016, we sold and issued 143,000 common shares to Portage at a purchase price of $7.00 per share for gross proceeds of $1.0 million. Declan Doogan, the chairman of our board of directors, is the chief executive officer of Portage. Kamlesh Shah, one of our former directors who resigned in February 2017, is the chief financial officer of Portage.
Purchases of Common Shares By Directors
In July 2015, Mr. Childs, one of our directors and a beneficial owner of more than 5% of our common shares, purchased 268,000 common shares at a purchase price of $5.60 per share for gross proceeds to us of $1.5 million. In February 2016, Mr. Childs purchased 286,000 common shares at a purchase price of $7.00 per share for gross proceeds to us of $2.0 million. In May 2016, Mr. Childs purchased 714,500 common shares at a purchase price of $7.70 per share for gross proceeds to us of $5.5 million.
In May 2016, Dr. Bailey, one of our directors, purchased 39,000 common shares at a purchase price of $7.70 per share for gross proceeds to us of $0.3 million.
Transactions with Biohaven Pharmaceuticals, Inc.
In January 2014, we entered into a Master Services Agreement, or MSA, with Biohaven Pharmaceuticals, Inc., or BPI, pursuant to which we engaged BPI as our clinical research organization, or CRO, to perform services on our behalf, including conducting clinical trials, performing scientific research and assisting with the preparation of regulatory filings. The MSA was amended and restated in June 2014. From January 2014 until December 31, 2016, the sole beneficial stockholders of BPI were Dr. Coric, our Chief Executive Officer; Dr. Berman, our Chief Medical Officer; and Dr. Doogan, the chairman of our board of directors.
During the years ended December 31, 2014, 2015 and 2016, we made payments to BPI under the MSA in the amount of $1.2 million, $2.8 million and $13.3 million, respectively. The vast majority of these amounts funded the operations of BPI, including the costs of third-party service providers.
On December 31, 2016, we entered into stock purchase agreements with each of the stockholders of BPI under which we acquired all of the outstanding capital stock of BPI for an aggregate purchase price of $0.6 million. We paid the purchase price by the issuance of a promissory note to each stockholder of BPI in the principal amount of $0.2 million. The notes, which bear interest at a fixed rate of 4.5% per year, are payable in five annual installments, the first four of which are interest only, with the final payment due on December 31, 2021 to include the principal balance outstanding and all accrued but unpaid interest, and are mandatorily payable upon the consummation of this offering.
In addition, the stock purchase agreements require us to indemnify and hold harmless (on an after-tax basis) each of the selling stockholders of BPI from and against, among other things, all federal, state and local income, self-employment, withholding and other similar taxes, plus any related liabilities, interest, penalties, losses, damages, costs, expenses (including fees for legal or accounting services) (whether or not such claim for taxes by a taxing authority is ultimately successful), other than U.S. federal capital gains taxes and state and local income taxes on the purchase price received by the selling stockholder and any U.S. federal, state and local income taxes on the stated interest on the promissory notes delivered to the selling stockholders of BPI in payment of the purchase price.
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Sales of Series A Preferred Shares
In October 2016 and February 2017, we sold an aggregate of 8,610,391 of our Series A preferred shares at a price of $9.2911 per share for an aggregate purchase price of $80.0 million, 2,113,313 shares of which were sold to directors, executive officers and entities affiliated with our directors. The table below summarizes these sales.
Purchaser
|
Series A
Preferred Shares Purchased |
Aggregate
Purchase Price |
|||||
---|---|---|---|---|---|---|---|
John W. Childs 2013 Revocable Trust |
1,035,938 | $ | 9,625,004 | ||||
Gregory H. Bailey, M.D. |
1,076,299 | 10,000,002 | |||||
James Engelhart |
1,076 | 9,997 | |||||
| | | | | | | |
Total |
2,113,313 | $ | 19,635,003 | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Investor Rights Agreement and Shareholders' Agreement
In connection with our Series A preferred share financing described above, we entered into an investor rights agreement and an amended and restated shareholders' agreement with the holders of preferred shares, including each of the persons and entities listed in the table above, as well as certain of our officers, directors and holders of 5% of our shares.
The investors' rights agreement, among other things:
For more information regarding the registration rights provided in this agreement, please refer to the section titled "Description of Share CapitalRegistration Rights." The provisions of this agreement other than those relating to registration rights will terminate upon the closing of this offering.
The shareholders' agreement, among other things:
The shareholders' agreement will terminate upon the closing of this offering.
Indemnification Agreements
Our amended and restated memorandum and articles of association will contain provisions limiting the liability of directors and providing that we will indemnify each of our directors to the fullest extent permitted under the BVI Companies Act. Our amended and restated memorandum and articles of association will also provide our board of directors with discretion to indemnify our officers and employees when determined appropriate by the board.
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In addition, we intend to enter into indemnification agreements with each of our directors and executive officers prior to the completion of this offering. For more information regarding these agreements, see "Executive CompensationLimitations on Liability and Indemnification Matters."
Related Person Transaction Policy
Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. We have adopted a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions. The policy will become effective immediately upon the execution of the underwriting agreement for this offering. For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our board of directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant shareholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our Code of Business Conduct and Ethics, which we have adopted and which will become effective as of the completion of this offering, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our board of directors, will take into account the relevant available facts and circumstances including, but not limited to:
The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our shareholders, as our audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.
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The following table sets forth the beneficial ownership of our common shares as of February 28, 2017 for:
The percentage ownership information shown in the column titled "Before Offering" in the table is based upon 22,447,060 common shares outstanding as of February 28, 2017, after giving effect to the conversion of all of our Series A preferred shares into 9,358,560 common shares, which will occur automatically upon the closing of this offering. The percentage ownership information shown in the column titled "After Offering" in the table is based on 32,663,916 common shares outstanding after this offering, assuming 8,333,333 common shares being sold in the offering and after giving effect to the issuance of an aggregate of 1,883,523 common shares to BMS and AstraZeneca in connection with the offering.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include common shares issuable pursuant to the exercise of stock options or warrants that are exercisable on or before April 29, 2017, which is 60 days after February 28, 2017. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. Based on an assumed initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, these entities would purchase up to an aggregate of 4,666,667 of the 8,333,333 shares in this offering based on these indications of interest. However, because indications of interest are not binding agreements or commitments to purchase, these shareholders may determine to purchase fewer shares than they indicate an interest in purchasing or not to purchase any shares in this offering. It is also possible that these entities could indicate an interest in purchasing more of our common shares. In addition, the underwriters could determine to sell fewer shares to any of these entities than the entities indicate an interest in purchasing or not to sell any shares to these entities. The following table does not reflect any potential purchases by these entities in this offering, nor does it give effect to any shares that may be acquired by our shareholders, directors or executive officers pursuant to the directed share program.
Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
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Except as otherwise noted below, the address for persons listed in the table is c/o Biohaven Pharmaceutical Holding Company Ltd., 234 Church Street, New Haven, CT 06510.
|
|
Percentage of
Shares Beneficially Owned |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Number of
Shares Beneficially Owned |
|||||||||
Name of Beneficial Owner
|
Before
Offering |
After
Offering |
||||||||
Principal Shareholders: |
||||||||||
Portage Biotech, Inc. (1) |
6,341,500 | 28.3 | % | 19.4 | % | |||||
Vivo Capital Fund VIII, L.P. (2) |
1,506,818 | 6.7 | 4.6 | |||||||
RA Capital Healthcare Fund, L.P. (3) |
1,143,137 | 5.1 | 3.5 | |||||||
Executive Officers and Directors: |
|
|
|
|||||||
Vlad Coric, M.D. (4) |
1,587,500 | 7.0 | 4.8 | |||||||
Robert Berman, M.D. (5) |
1,550,500 | 6.8 | 4.7 | |||||||
James Engelhart (6) |
97,955 | * | * | |||||||
John Tilton (7) |
34,948 | * | * | |||||||
Charles Conway, Ph.D. (7) |
13,500 | * | * | |||||||
Kimberly Gentile (7) |
65,250 | * | * | |||||||
Declan Doogan, M.D. (8) |
1,587,500 | 7.0 | 4.8 | |||||||
Gregory H. Bailey, M.D. (9) |
1,466,599 | 6.4 | 4.4 | |||||||
John W. Childs (10) |
2,655,738 | 11.6 | 8.0 | |||||||
Albert Cha, M.D., Ph.D. (2) (11) |
1,514,318 | 6.7 | 4.6 | |||||||
Eric Aguiar, M.D. (7) |
7,500 | * | * | |||||||
All current directors and executive officers as a group (11 persons) (12) |
10,581,308 | 43.7 | 30.7 |
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The following descriptions are summaries of the material terms of our amended memorandum and articles of association to be in effect following the closing of this offering. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, the memorandum and articles of association. Please note that this summary is not intended to be exhaustive. For further information, please refer to the full version of our memorandum and articles of association which is included as an exhibit to the registration statement of which this prospectus is part.
General
We are a company incorporated in the British Virgin Islands on September 25, 2013, and our affairs are governed by the provisions of our memorandum of association and articles of association, as amended and restated from time to time, and by the provisions of applicable British Virgin Islands law.
Authorized Share Capital
Upon the completion of this offering, our amended and restated memorandum and articles of association will authorize us to issue up to 200,000,000 common shares, no par value, and 10,000,000 preferred shares, no par value, all of which preferred shares will be undesignated. Our board of directors may establish the rights and preferences of the preferred shares from time to time. As of February 28, 2017, after giving effect to the conversion of all outstanding preferred shares into common shares, there would have been 22,447,060 common shares issued and outstanding, held of record by 61 shareholders.
Common Shares
Holders of common shares are entitled to cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors.
Holders of common shares are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of funds legally available therefor, subject to the preferential rights in respect of any preferred shares. See "Dividend Policy." Holders of common shares do not have any preemptive or other rights to subscribe for additional shares pursuant to our memorandum and articles of association.
All holders of common shares are entitled to share ratably in any assets for distribution to shareholders upon the liquidation, dissolution or winding up of the company, subject to the preferential rights in respect of any preferred shares.
The memorandum and articles of association permit the board of directors to authorize the redemption, purchase or other acquisition of the common shares. All outstanding common shares are fully paid and nonassessable.
Holders of common shares have no conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common shares. The rights, preferences and privileges of the holders of common shares are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred shares that we may designate in the future.
Preferred Shares
Following the completion of this offering, our board of directors will have the authority, without further action by our shareholders, to issue up to 10,000,000 preferred shares in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
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Our board of directors may authorize the issuance of preferred shares with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common shares. The purpose of authorizing our board of directors to issue preferred shares and determine its rights and preferences is to eliminate delays associated with a shareholder vote on specific issuances. The issuance of preferred shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the market price of our common shares and the voting and other rights of the holders of our common shares. It is not possible to state the actual effect of the issuance of any preferred shares on the rights of holders of common shares until the board of directors determines the specific rights attached to the preferred shares.
Options
Our 2014 Equity Incentive Plan, as amended, or the 2014 Plan, provides for us to sell or issue common shares or restricted common shares, or to grant incentive stock options or nonqualified stock options for the purchase of common shares, to employees, members of the board of directors and consultants. As of December 31, 2016, options to purchase 3,864,425 common shares were outstanding. For additional information regarding the terms of the 2014 Plan, see "Executive CompensationEquity Incentive Plans."
Warrants
On August 10, 2015, as partial consideration in connection with a license agreement, we issued a warrant to ALS Biopharma LLC, or ALS Biopharma, to purchase 275,000 common shares at an exercise price of $5.60 per share. The warrant was immediately exercisable upon issuance and is exercisable for a period of 10 years from the issuance date.
On August 10, 2015, as partial consideration in connection with a license agreement, we issued a warrant to ALS Biopharma to purchase 325,000 common shares at an exercise price of $5.60 per share. The warrant became exercisable in May 2016 upon the achievement of a specified regulatory milestone and is exercisable for a period of 10 years from the issuance date.
In connection with our credit agreement with Wells Fargo, we issued warrants to two of our directors, John Childs and Gregory Bailey, to purchase 107,500 common shares each, at an exercise price of $9.2911 per share. The warrants were immediately exercisable upon issuance and may be exercised from the issuance date through the earlier of (i) the fifth anniversary of the issuance date or (ii) the second anniversary of our initial public offering.
Registration Rights
We and the holders of our existing convertible preferred shares and certain holders of our common shares have entered into an amended and restated investors' rights agreement. The registration rights provisions of this agreement provide those holders with demand, piggyback and Form S-3 registration rights with respect to the common shares currently held by them, acquired by them in the future and issuable to them upon conversion of our convertible preferred shares.
Demand Registration Rights
At any time beginning October 28, 2021, the holders of at least 50% of the registrable securities then outstanding have the right to demand that we file a registration statement on Form S-1 with respect to at least 40% of the registrable securities then outstanding, or a less percent if the anticipated offering price, net of selling expenses, would exceed $10.0 million. These registration rights are subject to specified conditions and limitations, including the right of the underwriters, if any, to limit the number of shares included in any such registration under specified circumstances. Upon such a request, we are required to effect the registration as soon as practicable, but in any event no later than 60 days after the receipt of such
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request. Because the investor rights agreement terminates on the third anniversary of this offering, no common shares will be entitled to these demand registration rights.
Piggyback Registration Rights
If we propose to register any of our securities under the Securities Act either for our own account or for the account of other stockholders, the holders of registrable securities will each be entitled to notice of the registration and will be entitled to include their common shares in the registration statement. These piggyback registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under specified circumstances. Approximately 23,000,000 common shares will be entitled to these piggyback registration rights.
Registration on Form S-3
At any time after we become eligible to file a registration statement on Form S-3, the holders of at least 10% of the registrable securities then outstanding will each be entitled, upon any such holders' written request, to have such shares registered by us on a Form S-3 registration statement at our expense. These Form S-3 registration rights are subject to other specified conditions and limitations, including the condition that the anticipated aggregate offering price, net of selling expenses, exceeds $5.0 million. Upon receipt of this request, the holders of all registrable securities then outstanding will each be entitled to participate in this registration, and we will be required to effect the registration within 45 days after the receipt of such request from the initiating holders. Approximately 11,000,000 common shares will be entitled to these S-3 registration rights.
Expenses of Registration
We will pay all expenses relating to any demand, piggyback or Form S-3 registration, other than underwriting discounts and commissions, subject to specified conditions and limitations.
Termination of Registration Rights
The registration rights granted under the investors' rights agreement will terminate upon the earlier of the third anniversary of the closing of this offering, the closing of a deemed liquidation event as defined in our memorandum and article of association or at such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all such holders of registrable securities' shares without limitation during a three-month period without registration.
Limitations on the Right to Own Shares
There are no limitations on the right to own our common shares.
Disclosure of Shareholder Ownership
There are no provisions in the memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
Differences in Corporate Law
The BVI Business Companies Act, or the BVI Act, and the laws of the British Virgin Islands, or the BVI, affecting BVI business companies like us and our shareholders differ from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the laws of the BVI applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
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Mergers and Similar Arrangements
Under the laws of the BVI, two or more companies may merge or consolidate in accordance with Section 170 of the BVI Act. A merger means the merging of two or more constituent companies into one of the constituent companies and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation, which must be authorized by a resolution of shareholders.
While a director may vote on the plan of merger or consolidation even if he has a financial interest in the plan, the interested director must disclose the interest to all other directors of the company promptly upon becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the company.
A transaction entered into by our company in respect of which a director is interested (including a merger or consolidation) is voidable by us unless the director's interest was (a) disclosed to the board prior to the transaction or (b) the transaction is (i) between the director and the company and (ii) the transaction is in the ordinary course of the company's business and on usual terms and conditions.
Notwithstanding the above, a transaction entered into by the company is not voidable if the material facts of the interest are known to the shareholders and they approve or ratify it or the company received fair value for the transaction.
Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right to vote if the plan of merger or consolidation contains any provision which, if proposed as an amendment to the M&A, would entitle them to vote as a class or series on the proposed amendment. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting to approve the plan of merger or consolidation.
The shareholders of the constituent companies are not required to receive shares of the surviving or consolidated company but may receive debt obligations or other securities of the surviving or consolidated company, other assets, or a combination thereof. Further, some or all of the shares of a class or series may be converted into a kind of asset while the other shares of the same class or series may receive a different kind of asset. As such, not all the shares of a class or series must receive the same kind of consideration.
After the plan of merger or consolidation has been approved by the directors and authorized by a resolution of the shareholders, articles of merger or consolidation are executed by each company and filed with the Registrar of Corporate Affairs in the BVI.
A shareholder may dissent from a mandatory redemption of his shares, an arrangement (if permitted by the court), a merger (unless the shareholder was a shareholder of the surviving company prior to the merger and continues to hold the same or similar shares after the merger) or a consolidation. A shareholder properly exercising his dissent rights is entitled to a cash payment equal to the fair value of his shares.
A shareholder dissenting from a merger or consolidation must object in writing to the merger or consolidation before the vote by the shareholders on the merger or consolidation, unless notice of the meeting was not given to the shareholder. If the merger or consolidation is approved by the shareholders, the company must give notice of this fact to each shareholder within 20 days who gave written objection. These shareholders then have 20 days to give to the company their written election in the form specified by the BVI Act to dissent from the merger or consolidation, provided that in the case of a merger, the 20 days starts when the plan of merger is delivered to the shareholder.
Upon giving notice of his election to dissent, a shareholder ceases to have any shareholder rights except the right to be paid the fair value of his shares. As such, the merger or consolidation may proceed in the ordinary course notwithstanding his dissent.
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Within seven days of the later of the delivery of the notice of election to dissent and the effective date of the merger or consolidation, the company must make a written offer to each dissenting shareholder to purchase his shares at a specified price per share that the company determines to be the fair value of the shares. The company and the shareholder then have 30 days to agree upon the price. If the company and a shareholder fail to agree on the price within the 30 days, then the company and the shareholder shall, within 20 days immediately following the expiration of the 30-day period, each designate an appraiser and these two appraisers shall designate a third appraiser. These three appraisers shall fix the fair value of the shares as of the close of business on the day prior to the shareholders' approval of the transaction without taking into account any change in value as a result of the transaction.
Shareholders' Suits
There are both statutory and common law remedies available to our shareholders as a matter of BVI law. These are summarized below:
Prejudiced Members
A shareholder who considers that the affairs of the company have been, are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory or unfairly prejudicial to him in that capacity, can apply to the court under Section 184I of the BVI Act, among other things, for an order that his shares be acquired, that he be provided compensation, that the Court regulate the future conduct of the company, or that any decision of the company which contravenes the BVI Act or our memorandum and articles of association be set aside.
Derivative Actions
Section 184C of the BVI Act provides that a shareholder of a company may, with the leave of the Court, bring an action in the name of the company to redress any wrong done to it.
Just and Equitable Winding Up
In addition to the statutory remedies outlined above, shareholders can also petition for the winding up of a company on the grounds that it is just and equitable for the court to so order. Save in exceptional circumstances, this remedy is only available where the company has been operated as a quasi partnership and trust and confidence between the partners has broken down.
Indemnification of Directors and Executive Officers and Limitation of Liability
Under our M&A, we indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings for any person who:
These indemnities only apply if the person acted honestly and in good faith with a view to our best interests and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Anti-takeover Provisions in Our Memorandum and Articles of Association
Some provisions of our M&A may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable. Yet, under BVI law, our directors may only exercise the rights and powers granted to them under our M&A, as they believe in good faith to be in the best interests of our company.
Directors' Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
Under BVI law, our directors owe the company certain statutory and fiduciary duties including, among others, a duty to act honestly, in good faith, for a proper purpose and with a view to what the directors believe to be in the best interests of the company. Our directors are also required, when exercising powers or performing duties as a director, to exercise the care, diligence and skill that a reasonable director would exercise in comparable circumstances, taking into account without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken. In the exercise of their powers, our directors must ensure neither they nor the company acts in a manner which contravenes the BVI Act or our M&A. A shareholder has the right to seek damages for breaches of duties owed to us by our directors.
Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. BVI law provides that shareholders may approve corporate matters by way of a written resolution without a meeting signed by or on behalf of shareholders sufficient to constitute the requisite majority of shareholders who would have been entitled to vote on such matter at a general meeting; provided that if the consent is less than unanimous, notice must be given to all non-consenting shareholders.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing
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documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. Our memorandum and articles of association allow our shareholders holding not less than 10% of the votes of the outstanding voting shares to requisition a shareholders' meeting. We are not obliged by law to call shareholders' annual general meetings, but our memorandum and articles of association do permit the directors to call such a meeting and we intend to hold annual meetings of shareholders following the completion of this offering. The location of any shareholders' meeting can be determined by the board of directors and can be held anywhere in the world.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder's voting power with respect to electing such director. As permitted under BVI law, our memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, directors can be removed from office, with cause, by a resolution of shareholders passed at a meeting called for the purpose of removing the director or for purposes including the removal of the director.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15% or more of the target's outstanding voting shares within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target's board of directors. BVI law has no comparable statute.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated
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by the board. Under the BVI Act and our memorandum and articles of association, we may appoint a voluntary liquidator by a resolution of the shareholders or by resolution of directors.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by BVI, our memorandum and articles of association may be amended by a resolution of shareholders and by a resolution of directors. Any amendment is effective from the date it is registered at the Registry of Corporate Affairs in the BVI.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is American Stock Transfer & Trust Company, LLC. The transfer agent's address is 6201 15 th Avenue, Brooklyn, NY 11219.
Stock Exchange Listing
We have been approved to list our common shares on the New York Stock Exchange under the trading symbol "BHVN."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, no public market existed for our common shares. Future sales of our common shares in the public market after this offering, or the perception that these sales could occur, could adversely affect prevailing market prices for our common shares and could impair our future ability to raise equity capital.
Based on the number of shares outstanding as of February 28, 2017, upon completion of this offering and assuming no exercise of the underwriters' option to purchase additional shares, 32,663,916 common shares will be outstanding, assuming no outstanding options or warrants are exercised. For a description of the impact of changes in the offering price, see "Prospectus SummaryThe Offering." All of the common shares sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares sold to our "affiliates," as that term is defined under Rule 144 under the Securities Act. The remaining common shares held by existing shareholders are "restricted securities," as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if registered or if their resale qualifies for exemption from registration described below under Rule 144 promulgated under the Securities Act.
As a result of contractual restrictions described below and the provisions of Rules 144 and 701, the shares sold in this offering and the restricted securities will be available for sale in the public market as follows:
Certain of our existing principal shareholders, directors and their affiliates have indicated an interest in purchasing an aggregate of up to $70.0 million in common shares in this offering at the initial public offering price per share. Any such shares purchased by these entities could not be resold in the public market immediately following this offering as a result of restrictions under securities laws and lock-up agreements, but would be able to be sold following the expiration of these restrictions, in each case as described below. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering.
Any common shares sold to our directors or executive officers pursuant to the directed share program will be subject to the 180-day lock-up restrictions described in the "Underwriting" section of this prospectus.
Rule 144
In general, persons who have beneficially owned restricted common shares for at least six months, and any affiliate of the company who owns either restricted or unrestricted common shares, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144 under the Securities Act.
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Non-Affiliates
Any person who is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale may sell an unlimited number of restricted securities under Rule 144 if:
Any person who is not deemed to have been an affiliate of ours at the time of, or at any time during the three months preceding, a sale and has held the restricted securities for at least one year, including the holding period of any prior owner other than one of our affiliates, will be entitled to sell an unlimited number of restricted securities without regard to the length of time we have been subject to Exchange Act periodic reporting or whether we are current in our Exchange Act reporting.
Affiliates
Persons seeking to sell restricted securities who are our affiliates at the time of, or any time during the three months preceding, a sale, would be subject to the restrictions described above. They are also subject to additional restrictions, by which such person would be required to comply with the manner of sale and notice provisions of Rule 144 and would be entitled to sell within any three-month period only that number of securities that does not exceed the greater of either of the following:
Additionally, persons who are our affiliates at the time of, or any time during the three months preceding, a sale may sell unrestricted securities under the requirements of Rule 144 described above, without regard to the six month holding period of Rule 144, which does not apply to sales of unrestricted securities.
Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and in the section of this prospectus titled "Underwriting" and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
Form S-8 Registration Statements
As soon as practicable after the completion of this offering, we intend to file with the SEC one or more registration statements on Form S-8 under the Securities Act to register the common shares that are issuable pursuant to the 2014 Plan and the 2017 plan. These registration statements will become effective
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immediately upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to vesting restrictions, any applicable lock-up agreements described below and Rule 144 limitations applicable to affiliates.
Lock-Up Agreements
We and the holders of all of our common shares outstanding on the date of this prospectus, including each of our executive officers and directors, have entered into lock-up agreements with the underwriters or otherwise agreed, subject to certain exceptions, that we and they will not, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise dispose of or hedge any of our common shares, any options or warrants to purchase common shares, or any securities convertible into, or exchangeable for or that represent the right to receive common shares, without the prior written consent of the representatives of the underwriters for a period of 180 days from the date of this prospectus.
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MATERIAL UNITED STATES FEDERAL INCOME CONSIDERATIONS FOR U.S. HOLDERS
The following is a summary of material U.S. federal income tax considerations relating to the acquisition, ownership and disposition of our common shares by a U.S. holder (as defined below). This summary addresses only the U.S. federal income tax considerations for U.S. holders that are initial purchasers of our common shares pursuant to this offering and that will hold such common shares as capital assets for U.S. federal income tax purposes. This summary does not address all U.S. federal income tax matters that may be relevant to a particular U.S. holder. This summary does not address tax considerations applicable to a holder of our common shares that may be subject to special tax rules including, without limitation, the following:
Further, this summary does not address the U.S. federal estate, gift, or alternative minimum tax considerations, or any U.S. state, local, or non-U.S. tax considerations of the acquisition, ownership and disposition of our common shares.
This description is based on the Code; existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder; and administrative and judicial interpretations thereof, in each case as in effect and available on the date hereof. All the foregoing is subject to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations described below. There can be no assurances that the U.S. Internal Revenue Service, or the IRS, will not take a contrary or different position concerning the tax consequences of the acquisition, ownership and disposition of our common shares or that such a position would not be sustained. Holders are urged to consult their own tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of acquiring, owning, and disposing of our common shares in their particular circumstances.
For the purposes of this summary, a "U.S. holder" is a beneficial owner of our common shares that is (or is treated as), for U.S. federal income tax purposes:
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decisions of such trust or (b) that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person
If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common shares, the U.S. federal income tax consequences relating to an investment in the common shares will depend in part upon the status of the partner and the activities of the partnership. Such a partner or partnership is urged to consult its tax advisor regarding the U.S. federal income tax considerations of acquiring, owning and disposing of our common shares in its particular circumstances.
As indicated below, this discussion is subject to U.S. federal income tax rules applicable to a "passive foreign investment company," or a PFIC.
Persons considering an investment in our common shares are urged to consult their own tax advisors as to the particular tax consequences applicable to them relating to the acquisition, ownership and disposition of our common shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Tax Residence
Generally, for U.S. federal tax purposes, a corporation is considered a "domestic corporation" if it is incorporated or organized in the United States, and a "foreign corporation" if it is incorporated or organized in a non-U.S. jurisdiction. Because we are a British Virgin Islands incorporated entity, we would be classified as a foreign corporation under these general rules. Section 7874 of the Code, or Section 7874, however, contains rules that can result in a foreign corporation being treated as a domestic corporation for U.S. federal tax purposes. Under Section 7874, a foreign corporation will nevertheless be treated as a domestic corporation for U.S. federal tax purposes if (1) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a domestic corporation (including the indirect acquisition of assets by acquisition of all the outstanding shares of a domestic corporation), (2) the shareholders of the acquired domestic corporation hold at least 80% (by either vote or value) of the shares of the acquiring foreign corporation after the acquisition by reason of holding shares in the acquired domestic corporation (including the receipt of the foreign corporation's shares in exchange for the domestic corporation's shares) (the "ownership test"), and (3) the foreign corporation's "expanded affiliated group" does not have substantial business activities in the foreign corporation's country of organization or incorporation relative to the expanded affiliated group's worldwide activities. For purposes of Section 7874, "expanded affiliated group" means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the shares by vote and value.
On December 31, 2016, we entered into an agreement with the stockholders of Biohaven Pharmaceuticals, Inc., a Delaware corporation, or BPI, to purchase all of the outstanding capital stock of BPI for an aggregate purchase price of $0.6 million, payable by the issuance of promissory notes to each BPI stockholder (see "Certain Relationships and Related Party TransactionsTransactions with Biohaven Pharmaceuticals, Inc."). Although we and BPI had certain shareholders in common before December 31, 2016, based on the rules for determining share ownership under Section 7874, we believe the stockholders of BPI owned less than 80% of our shares. Accordingly, we do not believe that this transaction meets the ownership test under Section 7874 and therefore do not believe that we should be treated as a domestic corporation for U.S. federal tax purposes. However, the tax law in this area could be changed, including changed on a retroactive basis, and the application of Section 7874 to our acquisition of BPI could substantially increase our effective tax rate. The remainder of this discussion assumes that we are properly classified as a foreign corporation for U.S. federal tax purposes.
Distributions
Although we do not currently plan to pay dividends, and subject to the discussion under "Passive Foreign Investment Company Considerations," below, a U.S. Holder generally will be required to treat the
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gross amount of any distribution actually or constructively received with respect to our common shares as a dividend to the extent of the U.S. holder's pro rata share of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. Distributions in excess of earnings and profits generally will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holder's adjusted tax basis in the common shares. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as either long-term or short-term capital gain depending upon whether the U.S. holder has held the common shares for more than one year as of the time such distribution is received. However, since we may not calculate our earnings and profits under U.S. federal income tax principles, a U.S. holder should assume that any distribution with respect to our common shares will constitute ordinary dividend income.
Non-corporate U.S. holders may qualify for the preferential rates of taxation with respect to dividends on our common shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) applicable to qualified dividend income (as discussed below) if we are a "qualified foreign corporation" and certain other requirements (discussed below) are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation with respect to any dividend it pays on shares of stock that are readily tradable on an established securities market in the United States. We expect that our common shares will be listed and readily tradable on the New York Stock Exchange, which is an established securities market in the United States. However, there can be no assurance that our common shares will be considered readily tradable on an established securities market in the United States in later years. If they are, and subject to the discussion under "Passive Foreign Investment Company Considerations," below, such dividends paid by us will generally be "qualified dividend income" in the hands of individual U.S. holders, provided that a holding period requirement (more than 60 days of ownership, without protection from the risk of loss, during the 121-day period beginning 60 days before the ex-dividend date) and certain other requirements are met. Any dividend income that a U.S. holder realizes generally will be treated as foreign source income for foreign tax credit limitation purposes and generally will constitute passive category income. Dividends paid on our common shares will not be eligible for the dividends received deduction allowed to corporate U.S. holders.
Sale, Exchange or Other Taxable Disposition of our Common Shares
A U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of our common shares in an amount equal to the difference between the U.S. dollar value of the amount realized from such sale or exchange (i.e., the amount of cash plus the fair market value of any property received) and the U.S. holder's tax basis for those common shares. Subject to the discussion under "Passive Foreign Investment Company Considerations," below, this gain or loss will generally be a capital gain or loss. The initial tax basis in the common shares generally will be equal to the cost of such common shares. Capital gain from the sale, exchange or other taxable disposition of our common shares by a non-corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if the non-corporate U.S. holder's holding period determined at the time of such sale, exchange or other taxable disposition for such common shares exceeds one year (i.e., such gain is long-term taxable gain and will be taxable at ordinary income rates if not long-term capital gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes. U.S. holders are encouraged to consult their own tax advisors regarding the availability of the U.S. foreign tax credit in their particular circumstances.
Medicare Tax
Certain U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds are subject to a 3.8% tax on all or a portion of their "net investment income," which may
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include all or a portion of their dividend income and net gains from the disposition of our common shares. Each U.S. holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our common shares.
Passive Foreign Investment Company Considerations
We do not believe we were a PFIC for our taxable year ended December 31, 2016 and based on the current and anticipated value of our assets and the composition of our income, assets and operations, we do not expect to be a PFIC for the current taxable year or the foreseeable future. However, the application of the PFIC rules is subject to uncertainty in several respects, and therefore we cannot provide any assurance regarding our PFIC status for any past, current or future taxable years. A non-U.S. corporation will be classified as a PFIC for any taxable year in which, after applying certain look-through rules, either (i) at least 75% of its gross income is passive income; or (ii) at least 50% of the average quarterly value of its total gross assets (which, after this offering may be determined in part by reference to the quarterly market value of our common shares, which may be volatile) is attributable to assets that produce passive income or are held for the production of passive income. Moreover, for purposes of determining if a non-U.S. corporation is a PFIC, if the non-U.S. corporation owns, directly or indirectly, at least 25%, by value, of the shares of another corporation, it will be treated as if it holds directly its proportionate share of the assets and receives directly its proportionate share of the income of such other corporation.
The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies which in some circumstances are unclear and subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our shares from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which, in our current and future taxable years, we may not be able to control, for example, with respect to income attributed to us from entities owned 25% or more by us. The composition of our income and assets is also affected by how, and how quickly, we spend the cash we raise in any offering, including this offering.
If we are classified as a PFIC for any taxable year during which a U.S. holder owns our common shares, the U.S. holder, absent certain elections (including the Purging Election and the Mark-to-Market Election described below), generally will be subject to special, adverse tax rules (regardless of whether we continue to be clssified as a PFIC) with respect to (a) any "excess distribution" (generally, any distributions received by the U.S. holder on its common shares in a taxable year that are greater than 125% of the average annual distributions received by the U.S. holder in the three preceding taxable years or, if shorter, the U.S. holder's holding period for its common shares) and (b) any gain realized from a sale or other disposition (including a pledge) of its common shares. Under these special tax rules (i) the excess distribution or gain will be allocated ratably over a U.S. holder's holding period for the common shares, (ii) the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income, and (iii) the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. If we are classified as a PFIC in any year with respect to which a U.S. holder owns our common shares, absent the "purging" election described below, we will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which the U.S. holder owns our common shares, regardless of whether we continue to meet the tests described above.
Certain elections may be available to a U.S. holder that would result in alternative treatments. If we are a PFIC at any time when a U.S. holder holds our common shares, we will generally continue to be treated as a PFIC with respect to the U.S. holder for all succeeding years during which the U.S. holder holds our common shares even if we cease to qualify as a PFIC under the income and asset tests described above. However, if we cease to meet these tests, a U.S. holder can avoid the continuing impact of the PFIC
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rules by making a special election (a "Purging Election") to recognize gain in the manner described above as if our common shares had been sold on the last day of the last taxable year during which we were a PFIC. In addition, for a U.S. holder making such an election, a new holding period would be deemed to begin for our common shares for purposes of the PFIC rules. After the Purging Election, the common shares with respect to which the Purging Election was made would not be treated as shares in a PFIC unless we were subsequently to qualify as a PFIC. U.S. holders should consult their tax advisers regarding the potential availability of a Purging Election that would allow them to eliminate PFIC status under certain circumstances.
In certain circumstances, a U.S. holder of shares in a PFIC may alleviate some of the adverse tax consequences described above by making a "qualified electing fund" election to include in income its pro rata share of the corporation's income on a current basis. However, a U.S. holder may make a qualified electing fund election with respect to our common shares only if we agree to furnish such U.S. holder annually with a PFIC annual information statement as specified in the applicable U.S. Treasury Regulations. We currently do not intend to prepare or provide the information that would enable U.S. holders to make a QEF election if we are treated as a PFIC for any taxable year, and prospective investors should assume that a QEF election will not be available.
Alternatively, a U.S. holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election ("Mark-to-Market Election") with respect to such stock to elect out of the tax treatment discussed above. A Mark-to-Market Election generally is effective for the taxable year in which it is made and all subsequent years and cannot be revoked without the consent of the IRS. An electing U.S. holder generally would take into account as ordinary income, for each year that we are a PFIC, the excess of the fair market value of our common shares held at the end of the taxable year over the U.S. holder's adjusted tax basis in such common shares at that time. The U.S. holder would also take into account, as an ordinary loss for each year that we are a PFIC, the excess of the U.S. holder's adjusted tax basis in such common shares at the end of the taxable year over the fair market value of the shares at that time, but only to the extent of the aggregate of the amounts previously included in income as a result of the Mark-to-Market Election. The U.S. holder's tax basis in our common shares would be adjusted to reflect any income or loss resulting from the Mark-to-Market Election. Any gain from a sale, exchange or other disposition of the common shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss to the extent of any net mark-to-market gains previously included in income and thereafter as capital loss. If, after having been a PFIC for one or more taxable years, we cease to be classified as a PFIC, the U.S. holder would not be required to take into account any latent gain or loss in the manner described above and any realized gain or loss would be classified as a capital gain or loss. A Mark-to-Market Election will not apply to our common shares for any taxable year during which we are not a PFIC, but it will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any subsidiary that we own. A Mark-to-Market Election is available to a U.S. holder only if the common shares are considered "marketable stock." Generally, stock will be considered marketable stock if it is "regularly traded" on a "qualified exchange" within the meaning of applicable U.S. Treasury Regulations. A class of stock is regularly traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. We expect that our common shares will be marketable stock as long as they remain listed on the New York Stock Exchange and are regularly traded. There can be no assurance that our common shares will continue to be so traded. U.S. holders should consult their tax advisers regarding the availability and advisability of making a Mark-to-Market Election in their particular circumstances.
Moreover, if we are treated as a PFIC with respect to any taxable year, to the extent any of our subsidiaries are also PFICs, a U.S. holder may be deemed to own shares in such lower-tier PFICs, and an election for mark-to-market treatment would likely not be available with respect to any such subsidiaries. U.S. holders are urged to consult their own tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
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If we are a PFIC with respect to a U.S. holder of our common shares, such U.S. holder will generally be required to file an annual information return on IRS Form 8621 with respect to our common shares and the shares of any of subsidiaries that also qualify as a PFIC. U.S. holders should consult their own tax advisers concerning annual filing requirements.
NO ASSURANCE CAN BE GIVEN REGARDING OUR PFIC STATUS FOR ANY PAST, CURRENT OR FUTURE TAXABLE YEARS. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE OPERATION OF THE PFIC RULES AND RELATED REPORTING REQUIREMENTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE ADVISABILITY OF MAKING ANY ELECTION THAT MAY BE AVAILABLE.
Backup Withholding and Information Reporting
U.S. holders generally will be subject to information reporting requirements with respect to dividends on our common shares and on the proceeds from the sale, exchange or disposition of our common shares that are paid within the United States or through U.S.-related financial intermediaries, unless the U.S. holder is an "exempt recipient." In addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder provides a taxpayer identification number and a duly executed IRS Form W-9 or otherwise establishes an exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will be allowed as a credit against a U.S. holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Foreign Asset Reporting
Certain U.S. holders (and to the extent provided in IRS guidance, certain non-U.S. holders) who hold interests in "specified foreign financial assets" (as defined in Section 6038D of the Code) are generally required to file an IRS Form 8938 as part of their U.S. federal income tax returns with information relating to such assets for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable IRS guidance). "Specified foreign financial assets" generally include, among other assets, financial accounts maintained by foreign financial institutions, and our common shares, unless the shares are held through an account maintained by a financial institution. Substantial penalties may apply to any failure to timely file a complete and correct IRS Form 8938. Additionally, in the event an applicable U.S. holder (and to the extent provided in IRS guidance, a non-U.S. holder) that is required to file IRS Form 8938 either fails to file or fails to report a relevant asset, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. Prospective investors are encouraged to consult with their own tax advisors regarding the possible reporting obligations under these and other disclosure requirements in light of their individual circumstances.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR COMMON SHARES IN LIGHT OF THE INVESTOR'S OWN CIRCUMSTANCES.
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Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC and Piper Jaffray & Co. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:
Name
|
Number of
Shares |
|||
---|---|---|---|---|
Morgan Stanley & Co. LLC |
||||
Piper Jaffray & Co. |
||||
Barclays Capital Inc. |
||||
William Blair & Company, L.L.C. |
||||
Needham & Company, LLC |
||||
| | | | |
Total |
8,333,333 | |||
| | | | |
| | | | |
| | | | |
The underwriters and the representatives are collectively referred to as the "underwriters" and the "representatives," respectively. The underwriters are offering the common shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the common shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the common shares offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the common shares directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. After the initial offering of the common shares, the offering price and other selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 1,250,000 additional common shares at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the common shares offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional common shares as the number listed next to the underwriter's name in the preceding table bears to the total number of common shares listed next to the names of all underwriters in the preceding table.
Certain of our existing principal shareholders, directors and their affiliated entities have indicated an interest in purchasing up to an aggregate of $70.0 million in common shares in this offering at the initial public offering price per share. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering. The underwriters will receive the same underwriting discount on any shares purchased by these entities as they will on any other shares sold to the public in this offering.
The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise
217
and full exercise of the underwriters' over-allotment option to purchase up to an additional common shares.
|
|
Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Per Share | No Exercise | Full Exercise | |||||||
Public offering price |
$ | $ | $ | |||||||
Underwriting discounts and commissions |
$ | $ | $ | |||||||
Proceeds, before expenses |
$ | $ | $ |
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $3.6 million. We have agreed to reimburse the underwriters up to $30,000 for expenses relating to clearance of this offering with the Financial Industry Regulatory Authority.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of common shares offered by them.
We have been approved to list our common shares on the New York Stock Exchange under the trading symbol "BHVN."
At our request, the underwriters have reserved for sale at the initial public offering price per share up to 416,667 common shares, or 5% of the common shares offered by this prospectus, to certain individuals through a directed share program, including employees, directors and other persons associated with us. If purchased by these persons, these shares will not be subject to a lock-up restriction, except in the case of shares purchased by any director or officer, which will be subject to the lock-up restrictions described below. The number of common shares available for sale to the general public will be reduced by the number of reserved shares sold to these individuals. Any reserved shares not purchased by these individuals will be offered by the underwriters to the general public on the same basis as the other common shares offered under this prospectus. The directed share program will be arranged through Morgan Stanley & Co. LLC.
We and all of our directors and officers and the holders of substantially all of our outstanding stock and stock options have agreed that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus, or the restricted period:
whether any such transaction described above is to be settled by delivery of common common shares or such other securities, in cash or otherwise, or publicly disclose the intention to do any of the foregoing. In addition, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, (i) our directors and officers and such holders will not, during the restricted period, make any demand for, or exercise any right, or publicly disclose its intention to make any demand or exercise any right, with respect to the registration of any common shares or any security convertible into or exercisable or exchangeable for common shares and (ii) we will not file any registration statement with the Securities and Exchange Commission relating to the offering of any common shares or any securities convertible into or exercisable or exchangeable for common shares. In addition, our directors and officers and such holders agreed and consented to the entry of stop transfer instructions with our transfer agent and registrar against the transfer of each such person's common shares except in compliance with the below restrictions.
218
The restrictions described in the immediately preceding paragraph to do not apply to:
219
restricted stock or restricted stock units are outstanding as of the date of the lock-up agreement or as of the date of this prospectus, provided that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of common shares is required or is voluntarily made during the restricted period;
The representatives, in their sole discretion, may release the common shares and other securities subject to the lock-up agreements described above at any time.
In order to facilitate this offering of the common shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common shares. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering,
220
the underwriters may bid for, and purchase, common shares in the open market to stabilize the price of the common shares. These activities may raise or maintain the market price of the common shares above independent market levels or prevent or retard a decline in the market price of the common shares. The underwriters are not required to engage in these activities and may end any of these activities at any time.
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of common shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
William Blair & Company, L.L.C., or William Blair, served as one of our placement agents in connection with our Series A preferred share financing in October 2016. As a component of its compensation for serving as placement agent, William Blair received 26,235 Series A preferred shares at the closing of the first tranche of such financing, which occurred in October 2016, and received an additional 26,235 Series A preferred shares at the closing of the second tranche of such financing, which occurred in February 2017. FINRA deems the Series A preferred shares William Blair received in the second tranche underwriting compensation. The Series A preferred shares William Blair received in the first tranche are excluded from underwriting compensation pursuant to FINRA Rule 5110(d)(5)(C). Pursuant to FINRA Rule 5110(g)(1), none of the shares received by William Blair in the first tranche or the second tranche may be sold during this offering, or sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of these shares by any person for a period of 180 days immediately following the date of the effectiveness or commencement of sales of this offering, subject to certain exceptions set forth in FINRA Rule 5110(g)(2).
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Pricing of the Offering
Prior to this offering, there has been no public market for our common shares. The initial public offering price was determined by negotiations among us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
221
Selling Restrictions
Canada
The common shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations . Any resale of the common shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Furthermore, as residents of Canada will own more than 10% the outstanding common shares after giving effect to this initial public offering, a Canadian purchaser will not be able to rely on the exemption from the prospectus requirements available in respect of certain resales outside of Canada found in section 2.14 of National Instrument 45-102Resale of Securities.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts ( NI 33-105 ), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each, a Relevant Member State, an offer to the public of any of our common shares may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any of our common shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
For the purposes of this provision, the expression an "offer to the public" in relation to any of our common shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any of our common shares to be offered so as to enable an investor to decide to purchase any of our common shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
222
United Kingdom
Each underwriter has represented and agreed that:
223
The validity of the common shares and certain other matters of British Virgin Islands law will be passed upon for us by Maples and Calder, our special BVI counsel. Certain other legal matters will be passed upon for us by Cooley LLP, Reston, Virginia, and for the underwriters by Ropes & Gray LLP, Boston, Massachusetts.
The financial statements as of December 31, 2015 and 2016 and for each of the two years in the period ended December 31, 2016 included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company's ability to continue as a going concern as described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the common shares being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to our company and the common shares offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
You can read our SEC filings, including the registration statement, over the internet at the SEC's website at www.sec.gov . You may also read and copy any document we file with the SEC at its public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We also maintain a website at www.biohavenpharma.com , at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus.
224
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Biohaven Pharmaceutical Holding Company Ltd.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, of convertible preferred shares and shareholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Biohaven Pharmaceutical Holding Company Ltd. and its subsidiaries as of December 31, 2015 and 2016, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred recurring losses from operations since inception, has an accumulated deficit, and will require additional financing to fund future operations. These circumstances raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
Hartford,
Connecticut
April 3, 2017
F-2
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
|
December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Pro Forma
December 31, 2016 |
|||||||||
|
2015 | 2016 | ||||||||
|
|
|
(unaudited)
|
|||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash |
$ | 1,460 | $ | 23,565 | $ | 23,565 | ||||
Restricted cash |
| 67 | 67 | |||||||
Prepaid expenses and other current assets |
427 | 403 | 403 | |||||||
| | | | | | | | | | |
Total current assets |
1,887 | 24,035 | 24,035 | |||||||
Property and equipment, net |
5 | 26 | 26 | |||||||
Deferred offering costs |
| 134 | 134 | |||||||
Equity method investment (Note 5) |
| 2,753 | 2,753 | |||||||
Restricted cash |
| 60 | 60 | |||||||
Deferred tax assets |
| 9 | 9 | |||||||
| | | | | | | | | | |
Total assets |
$ | 1,892 | $ | 27,017 | $ | 27,017 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities, Convertible Preferred Shares and Shareholders' Equity (Deficit) |
||||||||||
Current liabilities: |
||||||||||
Notes payable, net of discount |
$ | | $ | 4,216 | $ | 4,216 | ||||
Accounts payable |
68 | 746 | 746 | |||||||
Accrued expenses |
261 | 2,980 | 2,980 | |||||||
| | | | | | | | | | |
Total current liabilities |
329 | 7,942 | 7,942 | |||||||
Warrant liability |
| 780 | 780 | |||||||
Derivative liability |
447 | 512 | 512 | |||||||
Contingent equity liability |
| 18,938 | | |||||||
Notes payable to related parties |
| 595 | 595 | |||||||
Other long-term liabilities |
29 | 13 | 13 | |||||||
| | | | | | | | | | |
Total liabilities |
805 | 28,780 | 9,842 | |||||||
| | | | | | | | | | |
Commitments and contingencies (Note 16) |
||||||||||
Series A convertible preferred shares, no par value; no and 11,242,172 shares authorized as of December 31, 2015 and 2016, respectively; no and 4,948,369 shares issued and outstanding as of December 31, 2015 and 2016, respectively; aggregate liquidation preference of $45,976 as of December 31, 2016; no shares issued or outstanding, pro forma as of December 31, 2016 (unaudited) |
| 43,270 | | |||||||
Shareholders' equity (deficit): |
||||||||||
Common shares, no par value; 17,500,000 and 38,000,000 shares authorized as of December 31, 2015 and 2016, respectively; 11,569,000 and 13,088,500 shares issued and outstanding as of December 31, 2015 and 2016, respectively; 19,920,392 shares issued and outstanding, pro forma as of December 31, 2016 (unaudited) |
8,665 | 19,944 | 82,152 | |||||||
Additional paid-in capital |
4,258 | 10,479 | 10,479 | |||||||
Accumulated deficit |
(11,779 | ) | (75,456 | ) | (75,456 | ) | ||||
| | | | | | | | | | |
Total Biohaven Pharmaceutical Holding Company Ltd. shareholders' equity (deficit) |
1,144 | (45,033 | ) | 17,175 | ||||||
Non-controlling interests |
(57 | ) | | | ||||||
| | | | | | | | | | |
Total shareholders' equity (deficit) |
1,087 | (45,033 | ) | 17,175 | ||||||
| | | | | | | | | | |
Total liabilities, convertible preferred shares and shareholders' equity (deficit) |
$ | 1,892 | $ | 27,017 | $ | 27,017 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Operating expenses: |
|||||||
Research and development |
$ | 7,559 | $ | 55,529 | |||
General and administrative |
2,137 | 5,109 | |||||
| | | | | | | |
Total operating expenses |
9,696 | 60,638 | |||||
| | | | | | | |
Loss from operations |
(9,696 | ) | (60,638 | ) | |||
| | | | | | | |
Other income (expense): |
|||||||
Interest expense |
| (385 | ) | ||||
Change in fair value of warrant liability |
| 154 | |||||
Change in fair value of derivative liability |
(370 | ) | (65 | ) | |||
Change in fair value of contingent equity liability |
| (2,263 | ) | ||||
Loss from equity method investment |
| (247 | ) | ||||
| | | | | | | |
Total other income (expense), net |
(370 | ) | (2,806 | ) | |||
| | | | | | | |
Loss before provision for income taxes |
(10,066 | ) | (63,444 | ) | |||
Provision for income taxes |
| 90 | |||||
| | | | | | | |
Net loss and comprehensive loss |
(10,066 | ) | (63,534 | ) | |||
Less: Net income (loss) attributable to non-controlling interests |
(4 | ) | 143 | ||||
| | | | | | | |
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. |
$ | (10,062 | ) | $ | (63,677 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.basic and diluted |
$ | (0.91 | ) | $ | (5.05 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted average common shares outstandingbasic and diluted |
11,009,277 | 12,608,366 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Pro forma net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.basic and diluted (unaudited) |
$ | (4.48 | ) | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Pro forma weighted average common shares outstandingbasic and diluted (unaudited) |
14,215,323 | ||||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY (DEFICIT)
(Amounts in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Series A
Convertible Preferred Shares |
|
|
|
|
|
Total Biohaven
Pharmaceutical Holding Company Ltd. Shareholders' Equity (Deficit) |
|
|
||||||||||||||||||||||||
|
Common Shares |
|
Note
Receivable from Shareholder |
|
|
Total
Shareholders' Equity (Deficit) |
|||||||||||||||||||||||||||
|
Additional
Paid-in Capital |
Accumulated
Deficit |
Non-
Controlling Interests |
||||||||||||||||||||||||||||||
|
Shares | Amount |
|
Shares | Amount | ||||||||||||||||||||||||||||
Balances as of December 31, 2014 |
| $ | | 10,652,000 | $ | 3,587 | $ | 190 | $ | (500 | ) | $ | (1,717 | ) | $ | 1,560 | $ | (53 | ) | $ | 1,507 | ||||||||||||
Issuance of common shares, net of offering costs of $37 |
| | 867,000 | 4,816 | | | | 4,816 | | 4,816 | |||||||||||||||||||||||
Issuance of common shares in connection with license agreement (Note 13) |
| | 50,000 | 262 | | | | 262 | | 262 | |||||||||||||||||||||||
Issuance of common share warrant in connection with license agreement (Note 13) |
| | | | 1,231 | | | 1,231 | | 1,231 | |||||||||||||||||||||||
Collection of note receivable from shareholder |
| | | | | 500 | | 500 | | 500 | |||||||||||||||||||||||
Share-based compensation expense |
| | | | 2,837 | | | 2,837 | | 2,837 | |||||||||||||||||||||||
Net loss |
| | | | | | (10,062 | ) | (10,062 | ) | (4 | ) | (10,066 | ) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2015 |
| | 11,569,000 | 8,665 | 4,258 | | (11,779 | ) | 1,144 | (57 | ) | 1,087 | |||||||||||||||||||||
Issuance of common shares, net of offering costs of $120 |
| | 1,519,500 | 11,279 | | | | 11,279 | | 11,279 | |||||||||||||||||||||||
Issuance of common share warrant in connection with license agreement (Note 13) |
| | | | 2,127 | | | 2,127 | | 2,127 | |||||||||||||||||||||||
Issuance of Series A convertible preferred shares, net of cash offering costs of $1,730 |
4,305,209 | 38,270 | | | | | | | | | |||||||||||||||||||||||
Issuance of Series A convertible preferred shares as payment of related offering costs |
105,010 | | | | | | | | | | |||||||||||||||||||||||
Issuance of Series A convertible preferred shares in settlement of contingent equity liability (Note 13) |
538,150 | 5,000 | | | | | | | | | |||||||||||||||||||||||
Acquisition of BPI (Note 18) |
| | | | (509 | ) | | | (509 | ) | (86 | ) | (595 | ) | |||||||||||||||||||
Share-based compensation expense |
| | | | 4,603 | | | 4,603 | | 4,603 | |||||||||||||||||||||||
Net loss |
| | | | | | (63,677 | ) | (63,677 | ) | 143 | (63,534 | ) | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances as of December 31, 2016 |
4,948,369 | $ | 43,270 | 13,088,500 | $ | 19,944 | $ | 10,479 | $ | | $ | (75,456 | ) | $ | (45,033 | ) | $ | | $ | (45,033 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except share and per share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
1. Nature of the Business and Basis of Presentation
Biohaven Pharmaceutical Holding Company Ltd. (the "Company") was incorporated in Tortola, British Virgin Islands in September 2013. The Company is a clinical-stage biopharmaceutical company with a portfolio of innovative, late-stage product candidates targeting neurologic diseases, including rare disorders. The Company's product candidates are small molecules based on two distinct mechanistic platformscalcitonin gene-related peptide ("CGRP") receptor antagonists and glutamate modulatorswhich the Company believes have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large markets and orphan indications. The most advanced product candidate from the Company's CGRP receptor antagonist platform is rimegepant, which the Company is developing for the acute treatment of migraine and for which it intends to initiate two Phase 3 clinical trials in the second half of 2017. The most advanced product candidate from the Company's glutamate modulation platform is trigriluzole, which the Company is developing for the treatment of ataxias with an initial focus on spinocerebellar ataxia ("SCA"). The Company has received orphan drug designation from the U.S. Food and Drug Administration ("FDA") for trigriluzole in SCA, and the Company began a Phase 2/3 clinical trial in SCA in December 2016. The Company's second most advanced product candidate from its glutamate modulation platform is BHV-0223, which the Company is developing for the treatment of amyotrophic lateral sclerosis ("ALS"), a neurodegenerative disease that affects nerve cells in the brain and spinal cord. The Company has received orphan drug designation from the FDA for BHV-0223 in ALS.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company's product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
The Company has historically outsourced all of the research and clinical development for its programs under a master services agreement (the "MSA") with Biohaven Pharmaceuticals, Inc. ("BPI"). BPI was incorporated in the state of Delaware in July 2013. The three founders of BPI, each of whom beneficially owned one-third of the equity of BPI prior to the Company's acquisition of BPI on December 31, 2016 (see Note 18), are shareholders of the Company and also serve as the Company's Chairman of the board of directors, Chief Executive Officer, and Chief Medical Officer, respectively (see Note 17). BPI is a contract research organization ("CRO") whose only customer is the Company. Since its incorporation, substantially all of the operations of BPI have been performed in service to the Company under the terms of the MSA, and substantially all of the funding for the operations of BPI was provided by the Company. The Company has determined that (i) it has the authority to direct the activities of BPI that most significantly impact the economics of the entity and (ii) the equity at risk in BPI is insufficient to finance its operations. As a result, the Company is deemed to have had a variable interest in BPI, and BPI is deemed to be a variable interest entity ("VIE") of which the Company is the primary beneficiary. Accordingly, since the date of the Company's incorporation in September 2013, the Company has consolidated the results of BPI. Upon original consolidation, the Company applied purchase accounting by recording the fair values of BPI's assets acquired and liabilities assumed, which were determined to be zero because BPI had not yet
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1. Nature of the Business and Basis of Presentation (Continued)
commenced any operations. For periods prior to December 31, 2016, 100% of the equity in BPI was reflected as non-controlling interest within shareholders' deficit on the consolidated balance sheet. On December 31, 2016, the Company acquired 100% of the issued and outstanding shares of BPI (see Note 18), and as a result, for periods subsequent to the acquisition, the Company no longer reports any non-controlling interest related to BPI.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its subsidiaries as well as BPI, a variable interest entity, after elimination of all significant intercompany accounts and transactions.
In October 2016, the Company effected a 500-for-one stock split of its issued and outstanding common shares. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split.
Going Concern
In accordance with Accounting Standards Update ("ASU") 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
Through December 31, 2016, the Company has funded its operations primarily with proceeds from sales of preferred and common shares and borrowings under a credit agreement. The Company has incurred recurring losses since its inception, including net losses of $10,066 and $63,534 for the years ended December 31, 2015 and 2016, respectively. In addition, as of December 31, 2016, the Company had an accumulated deficit of $75,456. The Company expects to continue to generate operating losses for the foreseeable future. As of April 3, 2017, the issuance date of these consolidated financial statements, the Company expects that its cash of $23,565 as of December 31, 2016, together with the $38,635 of net cash proceeds received from the second closing of the Company's sale of Series A convertible preferred shares ("Series A preferred shares") in February 2017 (see Note 20), will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments through July 31, 2017. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.
The Company is seeking to complete an initial public offering of its common shares. In the event the Company does not complete an initial public offering, the Company expects to seek additional funding through private equity financings, debt financings, or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company's shareholders.
If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be
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1. Nature of the Business and Basis of Presentation (Continued)
unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Based on its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and need to raise additional capital to finance its future operations, the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses and the valuation of common shares, stock options, warrants, derivative instruments and contingent equity instruments. In addition, management's assessment of the Company's ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Unaudited Pro Forma Information
The accompanying unaudited pro forma consolidated balance sheet as of December 31, 2016 has been prepared to give effect, upon the closing of a qualified initial public offering, to the conversion of all outstanding convertible preferred shares into 4,948,369 common shares and the issuance of an aggregate of 1,883,523 common shares to AstraZeneca AB ("AstraZeneca") and Bristol Myers-Squibb Company ("BMS") pursuant to the Company's license agreements with AstraZeneca and BMS (see Note 13) as if the proposed initial public offering had occurred on December 31, 2016.
In the accompanying consolidated statements of operations and comprehensive loss, the unaudited pro forma basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. for the year ended December 31, 2016 have been prepared to give effect, upon the closing of a qualified initial public offering, to the conversion of all outstanding convertible preferred shares into 4,948,369 common shares and the issuance of an aggregate of 1,883,523 common shares to AstraZeneca and BMS pursuant to the Company's license agreements with AstraZeneca and BMS (see Note 13) as if the proposed initial public offering had occurred on the latest of January 1, 2016,
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2. Summary of Significant Accounting Policies (Continued)
the issuance date of the convertible preferred shares or the date the Company entered into each respective license agreement.
Restricted Cash
As of December 31, 2016, current restricted cash consisted of $67 of cash received from investors as an advance payment for their participation in the second closing of the Company's sale of Series A preferred shares and non-current restricted cash consisted of a $60 certificate of deposit held as a security deposit in connection with the Company's corporate credit card.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in shareholders' equity (deficit) as a reduction of proceeds generated as a result of the offering. Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. The Company did not record any deferred offering costs as of December 31, 2015. The Company recorded deferred offering costs of $134 as of December 31, 2016.
Equity Method Investments
Investments in non-public companies in which the Company owns less than a 50% equity interest and where it exercises significant influence over the operating and financial policies of the investee are accounted for using the equity method of accounting. The Company's proportionate share of the net income or loss of the equity method investment is included in other income (expense), net in the consolidated statement of operations and comprehensive loss and results in a corresponding adjustment to the carrying value of the investment on the consolidated balance sheet. Dividends received reduce the carrying value of the investment. The Company periodically reviews the carrying value of its investment to determine if there has been an other-than-temporary decline in carrying value. A variety of factors are considered when determining if a decline in carrying value is other than temporary, including, among other factors, the financial condition and business prospects of the investee as well as the Company's intent with regard to the investment.
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2. Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful lives of the respective assets. As of December 31, 2015 and 2016, the Company's property and equipment consisted of computer equipment, which has an estimated useful life of three years. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are charged to expense as incurred.
Impairment of Long-Lived Assets
Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long-lived assets.
Fair Value Measurements
Certain assets of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The Company's warrant liability, derivative liability and contingent equity liability are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values
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2. Summary of Significant Accounting Policies (Continued)
of other current assets, accounts payable, accrued expenses and notes payable under a credit agreement approximate their fair values due to the short-term nature of these assets and liabilities.
Segment Information
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company's singular current focus is on a pipeline of product candidates that represent two distinct mechanistic platformsCGRP receptor antagonists, and glutamate modulators. All of the Company's tangible assets are held in the United States.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, share-based compensation and benefits, facilities costs, depreciation, third-party license fees, and external costs of outside vendors engaged to conduct clinical development activities and clinical trials as well as to manufacture clinical trial materials. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.
Research Contract Costs and Accruals
The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. These agreements are cancelable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company's estimates. The Company's historical accrual estimates have not been materially different from the actual costs.
Patent Costs
All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.
Share-Based Compensation
The Company measures stock options granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. Generally, the Company issues stock options with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company has not issued any stock options with performance-based vesting conditions.
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2. Summary of Significant Accounting Policies (Continued)
For share-based awards granted to consultants and non-employees, compensation expense is recognized over the period during which services are rendered by such consultants and non-employees until completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of the Company's common shares and updated assumption inputs in the Black-Scholes option-pricing model.
The Company classifies share-based compensation expense in its consolidated statement of operations and comprehensive loss in the same manner in which the award recipient's payroll costs are classified or in which the award recipient's service payments are classified.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information for its shares. Therefore, it estimates its expected share price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The expected term of the Company's stock options has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Warrant Liability
In connection with entering into a credit agreement (see Note 8), the Company agreed to issue warrants to purchase common shares to the guarantor and co-guarantor of its obligations under the agreement (see Note 8). The Company classifies the warrants as a liability on its consolidated balance sheet because each warrant represents a freestanding financial instrument that is not indexed to the Company's own shares. The warrant liability was initially recorded at fair value upon entering into the credit agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.
Derivative Liability
The Company's license agreement with Yale University ("Yale") (see Note 13) provides for a change-of-control payment to Yale upon the occurrence of a change-of-control event, as defined in the agreement, including an initial public offering. The Company classifies the change-of-control payment obligation as a liability on its consolidated balance sheet because it represents a contingent obligation to pay a variable amount of cash that may be based, in part, on the value of the Company's own shares. The derivative liability was initially recorded at fair value upon entering into the license agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the derivative liability are recognized as a component of other income (expense), net in the consolidated statement of
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2. Summary of Significant Accounting Policies (Continued)
operations and comprehensive loss. Changes in the fair value of the derivative liability will continue to be recognized until a change-of-control event occurs.
Contingent Equity Liability
The Company's license agreements with AstraZeneca and BMS (see Note 13) require the Company to issue shares of capital stock upon the occurrence of specified financing or change-of-control events or development milestones, as defined in the agreements. In each agreement, the class and number of shares to be issued upon a triggering event were not known upon entering into the license agreements; however, the dollar amount of the shares to be issued upon a triggering event is fixed. The Company classifies these contingent obligations to issue shares as a liability on its consolidated balance sheet because each represents an obligation to issue a variable number of shares for a fixed dollar amount. Each contingent equity liability was initially recorded at fair value upon entering into each respective agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair values of the contingent equity liabilities are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the contingent equity liabilities will continue to be recognized until the occurrence of a respective triggering event.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in shareholders' equity (deficit) that result from transactions and economic events other than those with shareholders. There was no difference between net loss and comprehensive loss for each of the periods presented in the accompanying consolidated financial statements.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company's tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a
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2. Summary of Significant Accounting Policies (Continued)
greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.
Net Loss per Share Attributable to Common Shareholders of Biohaven Pharmaceutical Holding Company Ltd.
The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Net income (loss) per share attributable to common shareholders is calculated based on net income (loss) attributable to Biohaven Pharmaceutical Holding Company Ltd. and excludes net income (loss) attributable to non-controlling interests.
Basic net income (loss) per share attributable to common shareholders is computed by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common shareholders is computed by dividing the diluted net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding options, warrants to purchase common shares, convertible preferred shares and contingently issuable equity are considered potential dilutive common shares.
The Company's convertible preferred shares contractually entitle the holders of such shares to participate in dividends but contractually do not require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). The new standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Certain of these changes are required to be applied retrospectively, while other changes are required to be applied prospectively. The new standard will be effective for the Company on January 1, 2017 with early adoption permitted. The Company has elected to early adopt ASU 2016-09 and has reflected the adoption in the consolidated financial statements of the Company. The adoption of ASU 2016-09 had no impact on the Company's financial position, results of operations or cash flows.
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2. Summary of Significant Accounting Policies (Continued)
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"). ASU 2015-17 requires deferred tax liabilities and assets to be classified as non-current in the consolidated balance sheet. ASU 2015-17 is required to be adopted for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. The amendment may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company elected to early adopt this guidance retrospectively to all periods presented, and its adoption had no impact on the Company's financial position, results of operations or cash flows.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"), which requires that debt issuance costs related to a debt liability be presented in the balance sheet as a direct reduction in the carrying amount of that debt liability. The amendments in ASU 2015-03 are effective for the annual periods ending after December 15, 2015. The Company adopted the standard retrospectively to all periods presented on the required effective date of January 1, 2016, and its adoption had no impact on the Company's financial position, results of operations or cash flows.
In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16"). The guidance requires an entity to determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of the relevant facts and circumstances (commonly referred to as the whole-instrument approach). The Company adopted the standard retrospectively to all periods presented on the required effective date of January 1, 2016, and its adoption had no impact on the Company's financial position, results of operations or cash flows.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40) ("ASU 2014-15"). The amendments in this update explicitly require a company's management to assess an entity's ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The new standard is effective in the first annual period ending after December 15, 2016. The Company adopted ASU 2014-15 as of the required effective date of December 31, 2016. This guidance relates to footnote disclosure only (see Note 1), and its adoption had no impact on the Company's financial position, results of operations or cash flows.
Recently Issued Accounting Pronouncements
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory ("ASU 2016-16"), which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2016-16 will have on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2016-15 will have on its consolidated financial statements.
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2. Summary of Significant Accounting Policies (Continued)
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 (Accounting Standards Codification ("ASC") Topic 842) supersedes the previous leases standard, ASC 840, Leases . The standard is effective for public entities for annual periods beginning after December 15, 2018 and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which supersedes existing revenue recognition guidance under GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The standard defines a five-step process to achieve this principle, and will require companies to use more judgment and make more estimates than under the current guidance. The Company expects that these judgments and estimates will include identifying performance obligations in the customer contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which delays the effective date of ASU 2014-09 such that the standard is effective for public entities for annual periods beginning after December 15, 2017 and for interim periods within those fiscal years. Early adoption of the standard is permitted for annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations ("ASU 2016-08"), which further clarifies the implementation guidance on principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments in this update reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The amendments in this update also provide implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ("ASU 2016-12"), which clarifies the objective of the collectability criterion, presentation of taxes collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in ASU 2014-09 is retrospectively applied. ASU 2016-08, ASU 2016-10 and ASU 2016-12 have the same effective dates and transition requirements as ASU 2014-09. The
F-17
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
Company is currently evaluating the impact that the adoption that these standards will have on its consolidated financial statements, if and when it generates revenue.
3. Fair Value of Financial Assets and Liabilities
The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:
|
Fair Value Measurements as of
December 31, 2015 Using: |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
Liabilities: |
|||||||||||||
Derivative liability |
$ | | $ | | $ | 447 | $ | 447 | |||||
| | | | | | | | | | | | | |
|
$ | | $ | | $ | 447 | $ | 447 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
Fair Value Measurements as of
December 31, 2016 Using: |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
Liabilities: |
|||||||||||||
Warrant liability |
$ | | $ | | $ | 780 | $ | 780 | |||||
Derivative liability |
| | 512 | 512 | |||||||||
Contingent equity liability |
| | 18,938 | 18,938 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | | $ | 20,230 | $ | 20,230 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
During the years ended December 31, 2015 and 2016, there were no transfers between Level 1, Level 2 and Level 3.
Valuation of Warrant Liability
The warrant liability in the table above is composed of the fair value of warrants to purchase common shares that the Company agreed to issue to the guarantor and co-guarantor of its obligations under a credit agreement (see Note 8). The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company utilized a Monte Carlo simulation, which is a statistical method used to generate a defined number of share price paths to develop a reasonable estimate of the range of the future expected share prices, to value the warrant liability. The Monte Carlo simulation incorporated assumptions and estimates to value the warrant liability. Estimates and assumptions impacting the fair value measurement included the estimated probability of adjusting the exercise price of the warrants, the number of shares for which the warrants will be exercisable, the fair value per share of the underlying common shares issuable upon exercise of the warrants, the remaining contractual term of the warrants, the risk-free interest rate, the expected dividend yield, and the expected volatility of the price of the underlying common shares. The Company estimated the fair value per share of its common shares by taking into consideration the most recent arm's-length sale of its common shares or third-party valuation of its common shares as well as additional factors that the Company deemed relevant. The Company historically has been a private
F-18
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
3. Fair Value of Financial Assets and Liabilities (Continued)
company and lacks company-specific historical and implied volatility information of its shares. Therefore, it estimated its expected share volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company estimated a 0% expected dividend yield based on the fact that the Company has never paid or declared dividends and does not intend to do so in the foreseeable future.
Valuation of Derivative Liability
The fair value of the derivative liability recognized in connection with the Company's license agreement with Yale (see Note 13) was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the derivative liability was determined using the probability-weighted expected return method ("PWERM"), which considered as inputs the type and probability of occurrence of a change-of-control event, the amount of the payment, the expected timing of a change-of-control event and a risk-adjusted discount rate.
Valuation of Contingent Equity Liability
BMS. The fair value of the contingent equity liability recognized in connection with the Company's license agreement with BMS (see Note 13) was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent equity liability was determined using the PWERM, which considered as inputs the probability of occurrence of events that would trigger the issuance of shares, the expected timing of such events, the value of the contingently issuable equity and a risk-adjusted discount rate. As of July 8, 2016, the assumed probability of occurrence of the event that was most probable of triggering the issuance of shares was 70%, the expected timing of such an event was estimated to be less than one year, the value of the contingently issuable equity was $18,750 and the discount rate was assessed to be 0%. As of December 31, 2016, the assumed probability of occurrence of the event that was most probable of triggering the issuance of shares was 75%, the expected timing of such an event was estimated to be less than one year, the value of the contingently issuable equity was $18,750 and the discount rate was assessed to be 0%. Based on these inputs, the Company determined that the fair value of the contingent equity liability was $13,125 as of July 8, 2016, the date the Company entered into the license agreement with BMS, and $14,063 as of December 31, 2016.
AstraZeneca. The fair value of the contingent equity liability recognized in connection with the Company's license agreement with AstraZeneca (see Note 13) was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent equity liability was determined using the PWERM, which considered as inputs the probability of occurrence of events that would trigger the issuance of shares, the expected timing of such events, the value of the contingently issuable equity and a risk-adjusted discount rate. The contingently issuable equity is issuable in two tranches, each for a fixed dollar amount of $5,000, for a total amount of $10,000. Using the PWERM, the Company assessed the fair value of each tranche of the contingent equity liability separately.
F-19
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
3. Fair Value of Financial Assets and Liabilities (Continued)
The shares related to the first tranche become issuable if the Company completes an equity financing transaction with aggregate proceeds of at least $30,000 prior to December 31, 2016. As of October 5, 2016, the date the Company entered into the license agreement with AstraZeneca, the Company determined that the fair value of the first tranche contingent equity liability was $4,500. In determining this fair value, the assumed probability of completing a qualifying equity financing transaction prior to December 31, 2016 was 90%, the expected timing of such event was estimated to be three months, the value of the contingently issuable equity was $5,000 and the discount rate was assessed to be 0%. In October 2016, upon completion of the Series A First Closing (see Note 10), the first tranche of contingently issuable equity became issuable to AstraZeneca. As a result, the Company issued to AstraZeneca 538,150 Series A preferred shares with an aggregate fair value of $5,000, or $9.2911 per share, in satisfaction of the obligation to issue the first tranche of equity under the agreement. Immediately prior to the completion of the Series A First Closing, the Company remeasured the contingent equity liability to fair value, resulting in recognition of other expense of $500 in the consolidated statement of operations and comprehensive loss in the year ended December 31, 2016. Upon the issuance of the 538,150 Series A preferred shares to AstraZeneca in October 2016, the Company reclassified the carrying value of the first tranche contingent equity liability, equal to the then-current fair value of $5,000, to the carrying value of Series A preferred shares.
The shares related to the second tranche become issuable upon the earlier of (i) the initiation of a Phase 2b or equivalent clinical trial of a product candidate based on the licensed patent rights and (ii) any liquidity event, including an initial public offering, any change of control or any assignment of the Company's rights or obligations under the license agreement. As of October 5, 2016, the date the Company entered into the license agreement with AstraZeneca, the Company determined that the fair value of the second tranche contingent equity liability was $4,050. In determining this fair value, the assumed probability of occurrence of the event that was most probable of triggering the issuance of shares was 60%, the expected timing of such an event was estimated to be less than one year, the value of the contingently issuable equity was $7,500 and the discount rate was assessed to be 0%. As of December 31, 2016, the Company determined that the fair value of the second tranche contingent equity liability was $4,875. In determining this fair value, the assumed probability of occurrence of the event that was most probable of triggering the issuance of shares was 65%, the expected timing of such an event was estimated to be less than one year, the value of the contingently issuable equity was $7,500 and the discount rate was assessed to be 0%.
F-20
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
3. Fair Value of Financial Assets and Liabilities (Continued)
The following table provides a roll forward of the aggregate fair values of the Company's warrant liability, derivative liability and contingent equity liability, for which fair value is determined by Level 3 inputs:
|
Warrant
Liability |
Derivative
Liability |
Contingent
Equity Liability |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance at December 31, 2014 |
$ | | $ | 77 | $ | | ||||
Change in fair value |
| 370 | | |||||||
| | | | | | | | | | |
Balance at December 31, 2015 |
| 447 | | |||||||
Initial fair value of warrant liability |
934 | | | |||||||
Initial fair value of contingent equity liability |
| | 21,675 | |||||||
Issuance of Series A preferred shares in settlement of first tranche of contingent equity liability to AstraZeneca |
| | (5,000 | ) | ||||||
Change in fair value |
(154 | ) | 65 | 2,263 | ||||||
| | | | | | | | | | |
Balance at December 31, 2016 |
$ | 780 | $ | 512 | $ | 18,938 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Prepaid clinical trial costs |
$ | 387 | $ | 388 | |||
Other |
40 | 15 | |||||
| | | | | | | |
|
$ | 427 | $ | 403 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
5. Equity Method Investment
On August 29, 2016, the Company executed a stock purchase agreement with Kleo Pharmaceuticals, Inc. ("Kleo") to purchase 3,000,000 shares of common stock in an initial closing, with a commitment to purchase an aggregate of 5,500,000 additional shares of common stock, in each case at a share price of $1.00 per share (the "Kleo SPA"). Kleo is a development-stage biopharmaceutical company focused on advancing the field of immunotherapy by developing small molecules that emulate biologics. Under the terms of the Kleo SPA, the Company committed to purchase 3,000,000 shares upon the initial closing on August 31, 2016, and the remaining 5,500,000 shares are to be purchased in four equal tranches of 1,375,000 shares beginning six months from the initial closing and then every three months thereafter.
In connection with the Kleo SPA, the Company agreed to purchase an additional 500,000 shares of Kleo common stock from an officer and stockholder of Kleo. In March 2017, the Company completed the purchase of these shares. The consideration paid for these shares consisted of a cash payment of $250 and the Company's issuance of 32,500 common shares (see Note 20).
The Company has a variable interest in Kleo through its equity investment. Kleo is a variable interest entity due to the equity investment at risk being insufficient to finance its activities. An assessment of
F-21
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
5. Equity Method Investment (Continued)
whether or not the Company has the power to direct activities that most significantly impact Kleo's economic performance and to identify the party that obtains the majority of the benefits of the investment was performed as of the investment date and as of December 31, 2016, and will be performed as of each subsequent reporting date. The Company concluded that the activities that most significantly impact Kleo's economic performance are the ability to direct the research activities, the ability to select vendors to perform the research, the ability to maintain research staff and the ability to raise additional funds. Based on the outcome of this assessment, the Company concluded that consolidation of Kleo is not appropriate, and has therefore accounted for the investment under the equity method.
The Company's purchase of 3,000,000 shares of Kleo's common stock represented a 21.7% interest and an 18.6% interest in the outstanding shares of Kleo as of August 29, 2016 and December 31, 2016, respectively. In connection with the investment, the Company also received the right to designate two of the five members of Kleo's board of directors. The Company accounts for its investment in Kleo under the equity method of accounting. The Company recorded its initial investment in Kleo based on the $3,000 cost of the investment. The difference between the cost of the Company's investment in Kleo and its proportionate share of the net assets of Kleo was allocated to goodwill and indefinite-lived intangible assets. The Company will record future adjustments to the carrying value of its investment at each reporting date equal to its proportionate share of Kleo's net income or loss for the corresponding period. The Company recorded other expense of $247 for the year ended December 31, 2016, and a corresponding reduction in the carrying value of its investment in Kleo at December 31, 2016, for its proportionate share of Kleo's net loss for the period in which the investment was held.
The carrying value of the Company's investment in Kleo was $2,753 as of December 31, 2016 and is reported as equity method investment on the consolidated balance sheet. The carrying value of the investment represents the Company's maximum loss exposure as of December 31, 2016.
Summarized financial information for Kleo was as follows:
|
December 31, 2016 | |||
---|---|---|---|---|
Current assets |
$ | 4,269 | ||
Total assets |
$ | 4,317 | ||
Current liabilities |
$ | 413 | ||
Total liabilities |
$ | 656 |
|
Year Ended
December 31, 2016 |
|||
---|---|---|---|---|
Revenue |
$ | | ||
Loss from operations |
$ | (2,815 | ) | |
Net loss |
$ | (2,835 | ) |
F-22
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
6. Property and Equipment, Net
Property and equipment, net consisted of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Computer equipment |
$ | 8 | $ | 34 | |||
Less: Accumulated depreciation |
(3 | ) | (8 | ) | |||
| | | | | | | |
|
$ | 5 | $ | 26 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Depreciation expense was $2 and $5 for the years ended December 31, 2015 and 2016, respectively.
7. Accrued Expenses
Accrued expenses consisted of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Accrued clinical trial costs |
$ | 104 | $ | 2,204 | |||
Accrued professional fees |
82 | 516 | |||||
Accrued employee compensation and benefits |
9 | 27 | |||||
Accrued income taxes |
| 99 | |||||
Other |
66 | 134 | |||||
| | | | | | | |
|
$ | 261 | $ | 2,980 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
8. Notes Payable
Credit Agreement
On August 30, 2016, the Company entered into a one-year credit agreement (the "Credit Agreement") with Wells Fargo Bank, National Association ("Wells Fargo") providing for a term loan in the principal amount of $5,000 (the "Loan") and borrowed the full $5,000 available under the agreement. Borrowings under the Credit Agreement bear interest at a rate equal to monthly LIBOR plus 1.50% per annum, and the agreement requires monthly, interest-only payments beginning on September 30, 2016 through August 30, 2017 (the "Maturity Date"), when all amounts of unpaid principal and interest become due. The monthly LIBOR rate is reset each month ("LIBOR Period"). As of December 31, 2016, the interest rate applicable to the Loan was 2.27% per annum. In the event of a default, the interest rate applicable is equal to the monthly LIBOR rate then in effect, increased by 4.0% per annum. The Company's obligations under the Credit Agreement are guaranteed by an outside director and shareholder of the Company (the "Guarantor"). A second outside director and shareholder of the Company entered into a guaranty agreement with the Guarantor under which the second director agreed to reimburse the Guarantor for one-half of any guaranty obligations that the Guarantor pays to Wells Fargo.
The Credit Agreement also provides that the Company may voluntarily prepay the Loan at any time; however, if the Company elects to prepay the Loan or the Loan otherwise is accelerated and becomes payable prior to the Maturity Date, the Company will pay a prepayment premium, which will be the
F-23
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
8. Notes Payable (Continued)
additional interest that would have accrued if the Loan remained outstanding through the end of the current monthly LIBOR Period. The Credit Agreement contains affirmative and negative covenants, but does not contain any financial covenants.
The Loan is guaranteed by the Guarantor pursuant to a continuing guaranty agreement entered into between the Guarantor and Wells Fargo. The Guarantor entered into a separate guaranty agreement with another outside director and shareholder of the Company (the "Co-Guarantor"), pursuant to which the Co-Guarantor agreed to reimburse the Guarantor for one half of any guaranty obligations paid by the Guarantor to Wells Fargo.
There were no principal payments due or paid under the Credit Agreement during the year ended December 31, 2016.
In connection with entering into the Credit Agreement on August 30, 2016, the Company agreed to issue warrants to purchase $1,000 of common shares to each of the Guarantor and Co-Guarantor. The number of common shares issuable upon exercise of each warrant is determined by dividing $1,000 by the price per share paid by investors in the Series A First Closing (see Note 10). On January 26, 2017, the Company issued the warrants to the Guarantor and Co-Guarantor (see Note 9).
The Company determined that the obligation to issue the warrants represented a liability that was considered outstanding for accounting purposes on August 30, 2016, the date of the Credit Agreement (see Note 9). The fair value of the warrant liability upon issuance represented a premium paid for the guaranty of the Loan, and, accordingly, the Company recorded the issuance-date fair value of the warrant liability of $934 as a debt discount and as a warrant liability in the Company's consolidated balance sheet. In addition, the Company paid an arrangement fee of $150 to the lender and incurred legal costs of $47, both of which were recorded as a debt discount. The debt discount is reflected as a reduction of the carrying value of the notes payable on the Company's consolidated balance sheet and is being amortized to interest expense over the term of the note using the effective interest method.
The Company recognized interest expense of $385 during the year ended December 31, 2016, including $347 related to the accretion of the debt discount. As of December 31, 2016, the unamortized debt discount was $784.
Notes Payable to Related Parties
On December 31, 2016, the Company entered into stock purchase agreements with each of the stockholders of BPI, acquiring 100% of the issued and outstanding shares of BPI for aggregate purchase consideration of $595. The Company funded the acquisition through the issuance of promissory notes to each of the former stockholders of BPI. The former beneficial stockholders of BPI are shareholders of the Company and also serve as the Company's Chairman of the board of directors, Chief Executive Officer, and Chief Medical Officer, respectively. The notes are payable in five annual payments, the first four of which are interest only, with the final payment to include the principal balance outstanding plus any accrued and unpaid interest. The notes bear interest at a rate of 4.5% per annum and mature on December 31, 2021. The notes become immediately due and payable upon specified events, including immediately prior to the consummation of an initial public offering of the Company's common shares or upon the occurrence of a change of control of the Company. There are no affirmative, negative or financial covenants associated with the notes.
F-24
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
8. Notes Payable (Continued)
As of December 31, 2016, the aggregate minimum future principal payments of the Company's debt are summarized as follows:
Year Ending December 31,
|
|
|||
---|---|---|---|---|
2017 |
$ | 5,000 | ||
2018 |
| |||
2019 |
| |||
2020 |
| |||
2021 |
595 | |||
| | | | |
|
$ | 5,595 | ||
| | | | |
| | | | |
| | | | |
9. Warrants
ALS Biopharma Warrants
On August 10, 2015, as partial consideration issued in connection with a license agreement with ALS Biopharma LLC ("ALS Biopharma") (see Note 13), the Company issued to ALS Biopharma a warrant to purchase 275,000 common shares at an exercise price of $5.60 per share. The warrant was immediately exercisable upon issuance and expires 10 years from the issuance date. The warrant was classified as equity and recorded at its fair value on the date of issuance, which was estimated to be $1,231 using the Black-Scholes option-pricing model with the following assumptions: 89.9% volatility; 2.20% risk-free interest rate; 10-year expected term; and no dividend yield. The issuance-date fair value of the warrant was recorded as research and development expense in the consolidated statement of operations and comprehensive loss, and as additional paid-in capital in the consolidated balance sheet.
On August 10, 2015, in connection with the same license agreement, the Company issued to ALS Biopharma a warrant to purchase 325,000 common shares at an exercise price of $5.60 per share. The warrant became exercisable upon the Company's filing of an investigational new drug application ("IND") for a patented product under the license agreement, and expires 10 years from the issuance date. On May 31, 2016, the Company filed an IND for a patented product under the license agreement. The warrant was classified as equity and recorded at its fair value on May 31, 2016, which was estimated to be $2,127 using the Black-Scholes option-pricing model with the following assumptions: 85.7% volatility; 1.84% risk-free interest rate; 10-year expected term; and no dividend yield. The issuance-date fair value of the warrant was recorded as research and development expense in the consolidated statement of operations and comprehensive loss, and as additional paid-in capital in the consolidated balance sheet.
Guarantor and Co-Guarantor Warrants
The Company agreed to issue warrants to purchase $1,000 of common shares to each of the Guarantor and Co-Guarantor of the Credit Agreement (see Note 8), who are members of the Company's board of directors (see Note 17). The number of common shares issuable upon exercise of each warrant is determined by dividing $1,000 by the price per share paid by investors in the Series A First Closing (see Note 10). As of December 31, 2016, the warrants had not yet been issued.
F-25
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
9. Warrants (Continued)
The Company determined that the obligation to issue the warrants represented a liability that was considered outstanding for accounting purposes on August 30, 2016, the date the Company entered into the Credit Agreement. The Company classifies the warrants as a liability on its consolidated balance sheet because each warrant represents a freestanding financial instrument that is not indexed to the Company's own shares. The warrant liability was initially recorded at fair value upon entering into the Credit Agreement and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of other income (expense), net in the Company's consolidated statement of operations and comprehensive loss. Changes in the fair value of the warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.
The fair value of the warrant liability was determined to be $934 on the date of issuance. The Company remeasured the liability as of December 31, 2016 and determined that the fair value of the warrant liability was $780, resulting in a gain of $154 recorded within other income (expense), net in the consolidated statements of operations for the year ended December 31, 2016.
On January 26, 2017, the Company issued the warrants to the Guarantor and Co-Guarantor, pursuant to which each director received a warrant to purchase 107,500 common shares at an exercise price of $9.2911 per share. The warrants were immediately exercisable and expire upon the earlier to occur of (i) the fifth anniversary of the issuance date of the warrants and (ii) the second anniversary of the Company's initial public offering. Upon issuance, the Company continued to classify these warrants as a liability on the consolidated balance sheet because the warrants contain anti-dilution price protection provisions through January 26, 2018. As a result, changes in the fair value of the warrant liability will continue to be recognized as a component of other income (expense), net until the earliest of (i) the exercise of the warrants, (ii) the expiration of the warrants or (iii) January 26, 2018.
10. Convertible Preferred Shares
As of December 31, 2016, the Company's memorandum and articles of association, as amended and restated, authorized the Company to issue 11,242,172 Series A preferred shares. The holders of Series A preferred shares have liquidation rights in the event of a deemed liquidation that, in certain situations, is not solely within the control of the Company. Therefore, the Series A preferred shares are classified outside of shareholders' equity (deficit).
In October 2016, the Company issued and sold an aggregate of 4,305,209 Series A preferred shares, at an issuance price of $9.2911 per share, for proceeds of $37,295, net of offering costs of $2,705 (the "Series A First Closing"). The $2,705 of offering costs consisted of $1,730 payable in cash and 105,010 shares of the Company's Series A preferred shares valued at $975, or $9.2911 per share. The preferred share purchase agreement provides for the issuance of additional Series A preferred shares in a second and final tranche (the "Series A Second Closing"). The Series A Second Closing was contingent upon the results of the Company's oral contraceptive drug-drug interaction study for rimegepant. One of the investors was designated to review the results of the study and within 21 days notify the Company if it elected to proceed with the Series A Second Closing. The Company determined that the future tranche obligation did not meet the definition of a freestanding financial instrument because, while separately exercisable, it was not legally detachable. Further, the Company determined that the embedded future
F-26
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
10. Convertible Preferred Shares (Continued)
tranche obligation did not meet the definition of a derivative, which would require bifurcation for accounting purposes, as it does not provide for net settlement.
In February 2017, the Company completed the Series A Second Closing through the issuance and sale of an aggregate of 4,305,182 Series A preferred shares at an issuance price of $9.2911 per share for net cash proceeds of $38,635 (see Note 20). The offering costs for the second tranche consisted of $1,365 payable in cash and 105,009 shares of the Company's Series A preferred shares.
In October 2016, the Company issued to AstraZeneca 538,150 Series A preferred shares with an aggregate fair value of $5,000, or $9.2911 per share, in satisfaction of the obligation to issue the first tranche of contingently issuable equity under the Company's license agreement with AstraZeneca (see Note 13).
The holders of the Series A preferred shares have the following rights and preferences:
Voting
The holders of Series A preferred shares are entitled to vote, together with the holders of common shares, on all matters submitted to shareholders for a vote. The holders of Series A preferred shares are entitled to the number of votes equal to the number of common shares into which their Series A preferred shares could convert.
Conversion
Each Series A preferred share is convertible into common shares at the option of the shareholder at any time after the date of issuance. In addition, each Series A preferred share will be automatically converted into common shares, at the applicable conversion ratio then in effect, upon the earlier of (i) a firm commitment public offering with proceeds to the Company of at least $50,000, before deducting underwriting discounts and commissions or (ii) the date specified by the vote or written consent of the holders of a majority of the then outstanding Series A preferred shares.
The conversion ratio of Series A preferred shares is determined by dividing the Original Issue Price by the Conversion Price. The Original Issue Price of the Series A preferred shares is $9.2911 per share. The Conversion Price of the Series A preferred shares is $9.2911 per share, subject to appropriate adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization and other adjustments as set forth in the Company's memorandum and articles of association, as amended and restated. On the date of issuance, each Series A preferred share is convertible into one common share. In the event that any Series A preferred stock investor does not participate in the second and final tranche of the Series A preferred financing, that investor's shares will be convertible into common shares at a ratio of one common share for every 1,000 Series A preferred shares. In addition, if the Company decides not to move forward with a Phase 3 clinical trial on its product candidate, rimegepant, or if the Company fails to initiate a Phase 3 clinical trial prior to October 1, 2017, the Conversion Price of the Series A preferred shares will be reduced to $7.0613 per share.
F-27
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
10. Convertible Preferred Shares (Continued)
Dividends
The holders of Series A preferred shares are entitled to receive dividends in preference to any dividend on common shares at the rate of 8.0% per year of the Original Issue Price. Dividends shall accrue daily and compound annually, whether or not declared, shall be payable when, as and if declared by the board or directors of the Company and shall be noncumulative. The Company may not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of Series A preferred shares then outstanding first receive, or simultaneously receive, dividends on each outstanding Series A preferred share.
Accruing dividends, whether or not declared, shall be payable upon any liquidation event. Declared but unpaid dividends are payable upon the conversion of the Series A preferred shares into common shares.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or a Deemed Liquidation Event (as described below), the holders of Series A preferred shares then outstanding will receive, in preference to holders of common shares, an amount equal to the greater of (i) the Original Issue Price per share, plus all dividends declared but unpaid on such shares or (ii) the amount such holders would have received had all of their Series A preferred shares been converted into common shares immediately prior to such liquidation event. If upon any such liquidation event, the assets of the Company available for distribution are insufficient to permit payment in full to the holders of Series A preferred shares, the proceeds will be ratably distributed among the holders of Series A preferred shares in proportion to the respective amounts that they would have received if they were paid in full.
After payments have been made in full to the holders of Series A preferred shares, the remaining assets of the Company available for distribution shall be distributed among the holders of common shares ratably in proportion to the number of shares held by each such holder.
Unless a majority of the holders of the then outstanding Series A preferred shares elect otherwise, a Deemed Liquidation Event shall include a merger or consolidation (other than one in which shareholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.
Redemption
The Company's memorandum and articles of association, as amended and restated, does not provide redemption rights to the holders of Series A preferred shares.
11. Common Shares
As of December 31, 2015 and 2016, the Company's memorandum and articles of association, as amended and restated, authorized the Company to issue 17,500,000 shares and 38,000,000 shares, respectively, of no par value common shares.
F-28
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
11. Common Shares (Continued)
Each common share entitles the holder to one vote on all matters submitted to a vote of the Company's shareholders. Common shareholders are entitled to receive dividends, as may be declared by the board of directors, if any. Through December 31, 2016, no dividends have been declared.
In September 2013, the Company issued 250,000 common shares to Yale in connection with a license agreement (see Note 13). Also in September 2013, the Company issued 3,350,000 common shares to Company founders and inventors and 1,300,000 common shares to the Chairman of the Company's board of directors and co-founder of BPI.
In January 2014, the Company issued 5,752,000 common shares at an issuance price of $0.61 per share for proceeds of $3,435, net of issuance costs of $65. Pursuant to the terms of the securities purchase agreement, the purchase price for the common shares was payable in four installments, with $1,750 due at closing, $750 due on August 1, 2014, $500 due on December 3, 2014 and $500 due on February 4, 2015. As of December 31, 2014, the Company reported a note receivable from shareholder for the final installment of $500 on its consolidated balance sheet. The investor paid the final installment of $500 in 2015.
In July 2015, the Company issued 867,000 common shares at an issuance price of $5.60 per share for proceeds of $4,816, net of issuance costs of $37.
In August 2015, the Company issued 50,000 common shares valued at $262 in partial settlement of consideration due under a license agreement.
In February 2016, the Company issued 429,000 common shares at an issuance price of $7.00 per share for proceeds of $2,980, net of issuance costs of $23.
In May 2016 and July 2016 the Company issued an aggregate of 1,090,500 common shares at an issuance price of $7.70 per share for proceeds of $8,299, net of issuance costs of $97.
In July 2016, concurrently with the issuance of the Company's common shares to Connecticut Innovations Incorporated ("CII"), the Company and CII entered into a put agreement (the "Put Agreement"). The Put Agreement grants CII the right to sell (the "Put Option") to the Company all or any part of CII's warrant rights (if any), shares (if any) or notes (if any). The Put Option becomes exercisable upon the Company's breach of the covenant to maintain a presence in Connecticut, as defined in the Put Agreement. Upon CII's exercise of the Put Option, the Company would be obligated to purchase CII's shares for a price that is the greater of (i) the current market price of such share and (ii) the original purchase price of such share. The right to put the shares will terminate at such time that the shares may be sold (i) pursuant to an effective registration statement under the Securities Act of 1933 (the "Securities Act"), (ii) pursuant to Rule 144 promulgated under the Securities Act, but in each case, only after the termination of any applicable "lock-up" restrictions and, in the case of (ii), only if the common shares are then listed for trading on a national securities exchange. The fair value of the Put Option was determined to be $0 upon execution of the agreement and as of December 31, 2016 because the ability to maintain a presence in Connecticut is within the Company's control.
F-29
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Share-Based Compensation
2014 Equity Incentive Plan
The Company's 2014 Equity Incentive Plan, as amended, (the "2014 Plan") provides for the Company to sell or issue common shares or restricted common shares, or to grant incentive stock options or nonqualified stock options for the purchase of common shares, to employees, members of the board of directors and consultants of the Company. The 2014 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the common share on the date of grant and the term of stock option may not be greater than ten years.
The total number of common shares that may be issued under the 2014 Plan was 4,000,000 shares as of December 31, 2015. In January 2017, the Company effected an increase, effective October 28, 2016, in the number of common shares reserved for issuance under the 2014 Plan from 4,000,000 to 4,899,230 shares. As of December 31, 2016, 1,034,805 shares remained available for future grant under the 2014 Plan.
Vesting periods are determined at the discretion of the board of directors. Stock options granted to employees and directors typically vest over three years. Stock options granted to non-employees typically vest over three years. The Company measures and records the value of these options over the period of time services are provided and, as such, unvested portions are subject to remeasurement at subsequent reporting periods.
During the years ended December 31, 2015 and 2016, the Company granted options to purchase 637,500 common shares and 417,875 common shares, respectively, to employees and directors. The Company recorded share-based compensation expense for options granted to employees and directors of $1,137 and $2,284 during the years ended December 31, 2015 and 2016, respectively.
During the years ended December 31, 2015 and 2016, the Company granted options to purchase 610,000 common shares and 199,050 common shares, respectively, to non-employees. The Company recorded share-based compensation expense for options granted to non-employees of $1,700 and $2,319 during the years ended December 31, 2015 and 2016, respectively.
Stock Option Valuation
The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors were as follows, presented on a weighted average basis:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Risk-free interest rate |
1.62 | % | 2.19 | % | |||
Expected term (in years) |
5.75 | 5.75 | |||||
Expected volatility |
58.51 | % | 70.58 | % | |||
Expected dividend yield |
0 | % | 0 | % | |||
Exercise price |
$ | 5.60 | $ | 9.29 | |||
Fair value of common share |
$ | 5.23 | $ | 6.73 |
F-30
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Share-Based Compensation (Continued)
The assumptions that the Company used to determine the grant-date fair value of stock options granted to non-employees were as follows, presented on a weighted average basis:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Risk-free interest rate |
2.09 | % | 2.54 | % | |||
Expected term (in years) |
10.0 | 10.0 | |||||
Expected volatility |
61.61 | % | 67.16 | % | |||
Expected dividend yield |
0 | % | 0 | % | |||
Exercise price |
$ | 5.60 | $ | 9.29 | |||
Fair value of common share |
$ | 5.23 | $ | 6.73 |
Stock Options
Stock option activity under the 2014 Plan is summarized as follows:
|
Number of
Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contractual Term |
Aggregate
Intrinsic Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
(in years)
|
|
|||||||||
Outstanding as of December 31, 2015 |
3,247,500 | $ | 2.53 | 9.68 | $ | 9,983 | |||||||
Granted |
616,925 | $ | 9.29 | ||||||||||
Exercised |
| | |||||||||||
Forfeited |
| | |||||||||||
| | | | | | | | | | | | | |
Outstanding as of December 31, 2016 |
3,864,425 | $ | 3.61 | 9.21 | $ | 15,991 | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Options exercisable as of December 31, 2016 |
2,277,981 | $ | 2.56 | 8.30 | $ | 11,416 | |||||||
Options unvested as of December 31, 2016 |
1,586,444 | $ | 5.10 | 8.87 | $ | 4,575 |
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common shares for those stock options that had exercise prices lower than the fair value of the Company's common shares. There have been no exercises as of December 31, 2016.
The weighted average grant-date fair value per share of stock options granted during the years ended December 31, 2015 and 2016 was $3.22 and $4.09, respectively.
The total fair value of options vested during the years ended December 31, 2015 and 2016 was $2,345 and $3,381, respectively.
F-31
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
12. Share-Based Compensation (Continued)
Share-Based Compensation
Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Research and development expense |
$ | 1,527 | $ | 2,382 | |||
General and administrative expense |
1,310 | 2,221 | |||||
| | | | | | | |
|
$ | 2,837 | $ | 4,603 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
As of December 31, 2016, total unrecognized compensation cost related to the unvested share-based awards was $5,258, which is expected to be recognized over a weighted average period of 1.53 years.
13. License Agreements
Yale Agreement
In September 2013, the Company entered into an exclusive license agreement with Yale (the "Yale Agreement") to obtain a license to certain patent rights for the commercial development, manufacture, distribution, use and sale of products and processes resulting from the development of those patent rights, related to the use of riluzole in treating various neurological conditions, such as general anxiety disorder, post-traumatic stress disorder and depression. As part of the consideration for this license, the Company issued Yale 250,000 common shares and granted Yale the right to purchase up to 10% of the securities issued in specified future equity offerings by the Company. In the event that Yale's fully diluted ownership position following the closing of the Company's first two financings with institutional investors resulting in an investment of at least $3,500 fell below 1% of the Company's fully diluted common shares outstanding, the Company would be required to issue to Yale an additional number of shares of common shares such that Yale's ownership position is restored to no less than 1%. The obligation to contingently issue equity to Yale was determined to be a liability, which was accounted for at fair value and remeasured at each reporting date. The fair value of the obligation at inception of the Yale Agreement was $0 based on the Company's assessment that the probability of issuing additional shares that would reduce Yale's ownership percentage below 1% was remote. The fair value of the liability remained at $0 through the completion of the Company's common share issuances in January 2014 and July 2015, at which time the contingent obligation terminated, as Yale's ownership position remained above 1%.
The Yale Agreement provides for a change-of-control payment to Yale upon the occurrence of a change-of-control event, as defined in the agreement, including an initial public offering. Upon the occurrence of a change-of-control event, the Company is obligated to pay to Yale the lesser of (i) 5% of the dollar value of all initial and future potential consideration paid or payable by the acquirer and (ii) $1,500. If the change-of-control event is as an initial public offering, the amount the Company will be obligated to pay to Yale will be reduced by the value of Yale's equity investment in the Company on the first day that Yale is free to sell its equity interest. The Company classifies the change-of-control payment obligation as a liability on its consolidated balance sheet because it represents a contingent obligation to pay a variable amount of cash that may be based, in part, on the value of the Company's own shares. The issuance-date
F-32
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
fair value of the derivative liability of $14 was recognized as research and development expense in the consolidated statement of operations and comprehensive loss upon entering into the agreement with Yale. The derivative liability is remeasured to fair value at each reporting date. Changes in the fair value of the derivative liability are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the derivative liability will continue to be recognized until a change-of-control event occurs.
For the years ended December 31, 2015 and 2016, the Company recorded other expense of $370 and $65, respectively, for the change in the fair value of the derivative liability. The fair value of the derivative liability was $447 and $512 as of December 31, 2015 and 2016, respectively.
In addition, the Company agreed to pay Yale up to $2,000 upon the achievement of specified regulatory milestones and annual royalty payments of a low single-digit percentage based on net sales of products from the licensed patents, subject to a minimum amount of up to $1,000 per year. If the Company grants any sublicense rights under the Yale Agreement, it must pay Yale a low single-digit percentage of sublicense income that it receives.
The Yale Agreement also requires the Company to meet certain due diligence requirements based upon specified milestones. The Company can elect to extend the deadline for its compliance with the due diligence requirements by a maximum of one year upon the payment to Yale of up to $150. The Company is also required to reimburse Yale for any fees that Yale incurs related to the filing, prosecution, defending and maintenance of patent rights licensed under the Yale Agreement. The Company also agreed to reimburse Yale for its past costs related to the licensed patents, which were estimated to be $18 in the aggregate. In the event that the Company fails to make any payments, commits a material breach, fails to maintain adequate insurance or challenges the patent rights of Yale, Yale can terminate the Yale Agreement. The Company can terminate the Yale Agreement (i) upon 90 days' notice to Yale, (ii) if Yale commits a material breach of the Yale Agreement or (iii) as to a specific country if there are no valid patent rights in such country. The Yale Agreement expires on a country-by-country basis upon the later of the date on which the last patent rights expire in such country or ten years from the date of the first sale of a product incorporating the licensed patents.
The Company recorded research and development expenses of $84 and $4 for the years ended December 31, 2015 and 2016 for reimbursement of patent fees in connection with the Yale Agreement.
MGH Agreement
In September 2014, the Company entered into a license agreement (the "MGH Agreement") with The General Hospital Corporation d/b/a Massachusetts General Hospital ("MGH"), pursuant to which MGH granted the Company a license to certain patent rights for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights, related to treating depression with a combination of ketamine and scopolamine. Under the MGH Agreement, the Company paid MGH an upfront license fee of $20. The Company is also obligated to pay MGH annual license maintenance fees of between $30 and $50, beginning in 2017, future milestone payments of up to $750 upon the achievement of specified clinical and regulatory milestones and up to $2,500 upon the achievement of specified commercial milestones. The Company has also agreed to pay MGH royalties of a low single-digit percentage based on net sales of products licensed under the
F-33
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
agreement. If the Company receives revenue from sublicensing any of its rights under the agreement, the Company is also obligated to pay a portion of that revenue to MGH.
The MGH Agreement also requires the Company to meet certain due diligence requirements based upon specified milestones. The Company can elect to extend the deadline for its compliance with the due diligence requirements by a maximum of one year by making payments to MGH of up to $300 in the aggregate. The Company is required to reimburse MGH for any fees that MGH incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the agreement. The Company also agreed to reimburse MGH for its past costs related to the licensed patents, which were estimated to be $13 in the aggregate. The MGH Agreement expires upon expiration of the patent rights under the MGH Agreement, unless earlier terminated by either party.
The Company did not recognize any research and development expense associated with the MGH Agreement during the years ended December 31, 2015 and 2016.
ALS Biopharma Agreement
In August 2015, the Company entered into an agreement (the "ALS Biopharma Agreement") with ALS Biopharma and Fox Chase Chemical Diversity Center Inc. ("FCCDC"), pursuant to which ALS Biopharma and FCCDC assigned the Company their worldwide patent rights to a family of over 300 prodrugs of glutamate modulating agents, including trigriluzole, as well as other innovative technologies. Under the ALS Biopharma Agreement, the Company is obligated to use commercially reasonable efforts to commercialize and develop markets for the patent products. The Company paid ALS Biopharma $1,000 upon entering into the agreement as well as additional payments of $500 and $1,000 during the years ended December 31, 2015 and 2016, respectively, which amounts represented funding for research to be performed by ALS Biopharma in connection with a mutually agreed upon research plan. The Company is also obligated to pay $3,000 upon the achievement of specified regulatory milestones with respect to the first licensed product and $1,000 upon the achievement of specified regulatory milestones with respect to subsequently developed products, as well as royalty payments of a low single-digit percentage based on net sales of products licensed under the agreement, payable on a quarterly basis.
In connection with the ALS Biopharma Agreement, the Company also issued to ALS Biopharma (i) 50,000 common shares; (ii) an immediately exercisable warrant to purchase 275,000 common shares at an exercise price of $5.60 per share; and (iii) a warrant to purchase 325,000 common shares at an exercise price of $5.60 per share, which warrant will become exercisable upon the Company's achievement of a specified regulatory milestone (see Note 9). The ALS Biopharma Agreement terminates on a country-by-country basis as the last patent rights expire in each such country. If the Company abandons its development, research, licensing or sale of all products covered by one or more claims of any patent or patent application assigned under the ALS Biopharma Agreement, or if the Company ceases operations, it has agreed to reassign the applicable patent rights back to ALS Biopharma.
F-34
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
The Company recorded research and development expenses of $2,836 and $3,127 for the years ended December 31, 2015 and 2016, respectively, as a result of the ALS Biopharma Agreement, which amounts consist of the fair value of the shares and warrants upon their issuance to ALS Biopharma, as well as the upfront payments made at the time of signing the ALS Biopharma Agreement.
Rutgers Agreement
In June 2016, the Company entered into an exclusive license agreement (the "Rutgers Agreement") with Rutgers, The State University of New Jersey ("Rutgers"), licensing several patents and patent applications related to the use of riluzole to treat various cancers. Under the Rutgers Agreement, the Company is required to pay Rutgers annual license maintenance fees in the aggregate of $75 for the first five years following execution of the agreement, then $25 per year thereafter until the first commercial sale of a licensed product, at which point the Company will pay Rutgers minimum annual royalties totaling in the low six-digits. The Company is also obligated to pay Rutgers up to $825 in the aggregate upon the achievement of specified clinical and regulatory milestones. The Company also agreed to pay Rutgers royalties of a low single-digit percentage of net sales of licensed products sold by the Company, its affiliates or its sublicensees, subject to a minimum amount of up to $100 per year. If the Company grants any sublicense rights under the Rutgers Agreement, the Company must pay Rutgers a low double-digit percentage of sublicense income it receives.
Under the Rutgers Agreement, in the event that the Company experiences a change of control or sale of substantially all of its assets prior to the initiation of a Phase 3 clinical trial related to products licensed under the agreement, and such change of control or sale results in a full liquidation of the Company, the Company will be obligated to pay Rutgers a change-of-control fee equal to 0.3% of the total value of the transaction, but not less than $100. The Company determined that the change-of-control payment should be accounted for as a liability because it represents a contingent obligation to pay a variable amount of cash that may be based, in part, on the value of the Company's own shares. The fair value of the obligation upon execution of the Rutgers Agreement was $0 based on the Company's assessment that the probability of a change-in-control event occurring prior to the initiation of a Phase 3 clinical trial related to products licensed under the agreement was remote. The fair value of the liability remained at $0 through December 31, 2016.
The Rutgers Agreement also requires the Company to meet certain due diligence requirements based upon specified milestones. The Company can elect to extend the deadline for its compliance with the due diligence requirements by a maximum of one year upon payments to Rutgers of up to $500 in the aggregate. Under the Rutgers Agreement, the Company is required to reimburse Rutgers for any fees that Rutgers incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the agreement. The Company also agreed to reimburse Rutgers for its past costs related to the licensed patent, which were estimated to be $72. The Rutgers Agreement expires upon expiration of the patent rights under the agreement or ten years from the date of first commercial sale of a licensed product, whichever is later, unless terminated by either party.
The Company recorded research and development expense of $72 for the year ended December 31, 2016, which consisted of the reimbursed patent fees.
F-35
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
BMS Agreement
In July 2016, the Company entered into an exclusive, worldwide license agreement (the "BMS Agreement") with BMS for the development and commercialization rights to rimegepant and BHV-3500, as well as other CGRP-related intellectual property. In exchange for these rights, the Company agreed to pay BMS initial payments, milestone payments and royalties on net sales of licensed products under the agreement.
The Company made upfront payments to BMS totaling $9,000 during the year ended December 31, 2016 in connection with the BMS Agreement.
The Company is obligated to make milestone payments to BMS upon the achievement of specified development and commercialization milestones. The development milestone payments due under the agreement depend on the licensed product being developed. With respect to rimegepant, the Company is obligated to pay up to $127,500 in the aggregate upon the achievement of the development milestones. For any product other than rimegepant, the Company is obligated to pay up to $74,500 in the aggregate upon the achievement of the development milestones. In addition, the Company is obligated to pay up to $150,000 for each licensed product upon the achievement of commercial milestones. If the Company receives revenue from sublicensing any of its rights under the agreement, it is also obligated to pay a portion of that revenue to BMS. The Company is also obligated to make tiered royalty payments to BMS based on annual worldwide net sales, with percentages in the low to mid teens.
Under the BMS Agreement, the Company is obligated to use commercially reasonable efforts to develop licensed products and to commercialize at least one licensed product using the patent rights licensed from BMS and is solely responsible for all development, regulatory and commercial activities and costs. The Company is also required to reimburse BMS for any fees that BMS incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the BMS Agreement. Under the BMS Agreement, BMS transferred to the Company manufactured licensed products, including certain materials that will be used by the Company to conduct clinical trials.
The BMS Agreement will terminate on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to each licensed product in each country. BMS has the right to terminate the agreement upon the Company's insolvency or bankruptcy, the Company's uncured material breach of the agreement, including the failure to meet its development and commercialization obligations, or if the Company challenges any of BMS's patent rights. The Company has the right to terminate the BMS Agreement if BMS materially breaches the agreement or if, after the Company provides notice, it chooses not to move forward with development and commercialization in a specific country.
The BMS Agreement required the Company to complete a financing transaction with gross proceeds of at least $30,000, of which a minimum of $22,000 was to be from investment in equity prior to October 17, 2016, unless extended by mutual agreement of the Company and BMS. The BMS Agreement was amended, effective October 14, 2016, to extend the deadline for completing the financing transaction to October 31, 2016, on which date the Series A First Closing was completed (see Note 10).
Under the BMS Agreement, the Company also agreed to issue BMS common shares in the amount of $12,500, which shares are contingently issuable upon the earliest to occur of (i) the initiation of a Phase 3 trial for the first licensed compound to reach such milestone, (ii) the Company's initial public offering or
F-36
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
(iii) an event resulting in the change of control of the Company. Under the terms of the BMS Agreement, if the qualifying financing transaction involves the issuance of preferred shares, BMS is entitled to receive preferred shares instead of common shares, at its option. BMS also had the right to purchase up to 8%, on a fully diluted basis, of shares issued in a qualifying financing transaction (as defined in the BMS Agreement) on the same terms and rights as all other investors involved in the financing. The number of shares issuable to BMS under the agreement will be determined by dividing $12,500 by a price per share equal to the lower of (i) the price per share paid by investors in the Series A First Closing, or $9.2911 (see Note 10), or (ii) the price per share paid by investors in any subsequent financing event that occurs prior to the events specified above.
The obligation to contingently issue equity to BMS is classified as a liability on the consolidated balance sheet because it represents an obligation to issue a variable number of shares for a fixed dollar amount. Upon entering into the BMS Agreement, the issuance-date fair value of the contingent equity liability of $13,125 was recognized as research and development expense in the consolidated statement of operations and comprehensive loss. The Company remeasured the fair value of the contingent equity liability as of December 31, 2016 and recognized expense of $938 for the increase in the fair value of the liability to $14,063. Changes in the fair value of the contingent equity liability are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the contingent equity liability will continue to be recognized until the occurrence of a triggering event.
The Company recorded research and development expense of $22,125 related to the BMS Agreement for the year ended December 31, 2016, which consisted of $13,125 for the issuance-date fair value of the contingent equity liability and $9,000 for the upfront license payments made to BMS.
AstraZeneca Agreement
In October 2016, the Company entered into an exclusive license agreement (the "AstraZeneca Agreement") with AstraZeneca, pursuant to which AstraZeneca granted the Company a license to certain patent rights for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights, including BHV-5000 and BHV-5500. In exchange for these rights, the Company agreed to pay AstraZeneca an upfront payment, milestone payments and royalties on net sales of licensed products under the agreement. The Company made an upfront payment of $5,000 during the year ended December 31, 2016. The regulatory milestones due under the agreement depend on the indication of the licensed product being developed as well as the territory where regulatory approval is obtained. Development milestones due under the agreement with respect to Rett syndrome total up to $30,000, and, for any indication other than Rett syndrome, total up to $60,000. Commercial milestones are based on net sales of all products licensed under the agreement and total up to $120,000. The Company has also agreed to pay tiered royalties based on net sales of all products licensed under the agreement of mid single-digit to low double-digit percentages. If the Company receives revenue from sublicensing any of its rights under the AstraZeneca Agreement, the Company is also obligated to pay a portion of that revenue to AstraZeneca. The Company is also required to reimburse AstraZeneca for any fees that AstraZeneca incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the AstraZeneca Agreement.
F-37
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
The AstraZeneca Agreement expires upon the expiration of the patent rights under the agreement, unless earlier terminated by either party, or on a country-by-country basis ten years after the first commercial sale.
As part of the consideration under the AstraZeneca Agreement, the Company agreed to issue to AstraZeneca common shares in the amount of $10,000 if the Company completed a qualifying equity financing resulting in proceeds of at least $30,000 prior to December 29, 2016. Under the terms of the AstraZeneca Agreement, if the qualifying financing transaction involved the issuance of preferred shares, AstraZeneca would be entitled to receive preferred shares instead of common shares, at its option. The number of shares issued would be determined based on the price per share paid by investors in the qualifying financing transaction. Upon the occurrence of the qualifying financing transaction, 50% of the shares would be issuable upon the closing of the transaction (the "First Tranche") and the other 50% would become issuable upon the earlier of (i) the initiation of a Phase 2b or equivalent clinical trial of a product candidate based on the licensed patent rights or (ii) any liquidity event, including an initial public offering of the Company, any change of control of the Company or any assignment of the Company's rights and obligations under the AstraZeneca Agreement (the "Second Tranche"). The number of shares issuable to AstraZeneca in each of the First Tranche and the Second Tranche is determined by dividing $5,000 by the price per share paid by investors in the Company's Series A First Closing, or $9.2911 (see Note 10). In addition, AstraZeneca had the right to purchase up to 8%, on a fully diluted basis, of shares issued in such qualifying financing transaction, on the same terms and rights as all other investors involved in the financing.
The obligations to contingently issue equity to AstraZeneca are classified as liabilities on the consolidated balance sheet because they represent obligations to issue a variable number of shares for a fixed dollar amount. Upon entering into the AstraZeneca Agreement, the issuance-date fair values of the First Tranche and Second Tranche contingent equity liabilities of $4,500 and $4,050, respectively, were recognized as research and development expense in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the contingent equity liabilities are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the contingent equity liabilities will continue to be recognized until the occurrence of a respective triggering event.
In October 2016, upon completion of the Series A First Closing (see Note 10), the contingency associated with the First Tranche of contingently issuable equity related to the occurrence of a qualified financing was satisfied. As a result, the Company issued to AstraZeneca 538,150 Series A preferred shares with an aggregate fair value of $5,000, or $9.2911 per share. Immediately prior to the completion of the Series A First Closing, the Company remeasured the contingent equity liability associated with the First Tranche to fair value, resulting in recognition of other expense of $500. Upon issuance of the 538,150 Series A preferred shares to AstraZeneca, the Company reclassified the contingent equity liability associated with the First Tranche of $5,000 to the carrying value of Series A preferred shares.
As of December 31, 2016, the Company determined that the fair value of the contingent equity liability associated with the Second Tranche was $4,875, which resulted in the recognition of other expense of $825 during the year ended December 31, 2016.
F-38
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
13. License Agreements (Continued)
The Company recorded research and development expense of $13,550 related to the AstraZeneca Agreement for the year ended December 31, 2016, which consisted of $8,550 for the issuance-date fair value of the contingent equity liability and $5,000 for the upfront license fee paid to AstraZeneca.
Agreement with Catalent
In March 2015, the Company entered into a development and license agreement with Catalent U.K. Swindon Zydis Limited ("Catalent") pursuant to which the Company obtained license rights to the Zydis technology in BHV-0223. BHV-0223 was developed under this agreement, and Catalent has manufactured BHV-0223 for clinical testing. The Company made an upfront payment of $275 to Catalent upon entering into the agreement and is obligated to pay Catalent up to $1,575 upon the achievement of specified regulatory and commercial milestones. The Company is also obligated to make royalty payments of a low single-digit percentage based on net sales of products licensed under the agreement.
Under the agreement, the Company is responsible for conducting clinical trials and for preparing and filing regulatory submissions. The Company has the right to sublicense its rights under the Catalent agreement subject to Catalent's prior written consent. Catalent has the right to enforce the patents covering the Zydis Technology and to defend any allegation that a formulation using Zydis technology, such as BHV-0223, infringes a third party's patent.
The development and license agreement terminates on a country-by-country basis upon the later of (i) 10 years after the launch of the most recently launched product in such country and (ii) the expiration of the last valid claim covering each product in such country, unless earlier voluntarily terminated by the Company. The agreement automatically extends for one-year terms unless either party gives advance notice of intent to terminate. In addition, Catalent may terminate the agreement either in its entirety or terminate the exclusive nature of the agreement on a country-by-country basis if the Company fails to meet specified development timelines, which it may extend in certain circumstances.
The Company recorded research and development expense of $275 for the year ended December 31, 2015 under the agreement with Catalent, consisting of the upfront license fee. The Company did not record any research and development expense related to the agreement during the year ended December 31, 2016.
14. Income Taxes
As a company incorporated in the British Virgin Islands ("BVI"), the Company is principally subject to taxation in the BVI. Under the current laws of the BVI, tax on a company's income is assessed at a zero percent tax rate. As a result, the Company has not recorded any income tax benefits from its losses incurred in the BVI during each reporting period, and no net operating loss carryforwards will be available to the Company for those losses.
In addition, in each reporting period, the Company's tax provision includes the effects of consolidating the results of operations of BPI, either through December 30, 2016 as a variable interest entity or as of December 31, 2016 as the Company's wholly owned subsidiary. BPI is subject to taxation in the United States. Due to BPI's history of cumulative losses through September 30, 2016, the Company had recorded no tax benefits for the losses incurred by BPI through that date and had recorded a full valuation allowance against BPI's deferred tax assets, which consisted primarily of its U.S. net operating loss
F-39
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
14. Income Taxes (Continued)
carryforwards for all periods through September 30, 2016. BPI's U.S. net operating loss carryforwards are reflected as foreign net operating loss carryforwards in the following discussion.
During the three months ended December 31, 2016, the Company fully utilized BPI's remaining U.S. net operating loss carryforwards due to BPI's profitability in that period and the Company recorded a full release of the valuation allowance of $9 due to management's reassessment of the amount of deferred tax assets that it believes are more likely than not to be realized. As a result, the Company recorded an income tax provision for the first time during the three months ended December 31, 2016.
Income (loss) before provision for income taxes consisted of the following:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
BVI |
$ | (10,062 | ) | $ | (63,677 | ) | |
Foreign (U.S.) |
(4 | ) | 233 | ||||
| | | | | | | |
Loss before provision for income taxes |
$ | (10,066 | ) | $ | (63,444 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The provision for income taxes consisted of the following:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Current income tax provision: |
|||||||
BVI |
$ | | $ | | |||
Foreign (U.S. federal and state) |
| 99 | |||||
| | | | | | | |
Total current income tax provision |
| 99 | |||||
| | | | | | | |
Deferred income tax provision (benefit): |
|||||||
BVI |
| | |||||
Foreign (U.S. federal and state) |
| (9 | ) | ||||
| | | | | | | |
Total deferred income tax provision (benefit) |
| (9 | ) | ||||
| | | | | | | |
Total provision for income taxes |
$ | | $ | 90 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
A reconciliation of the BVI statutory income tax rate of 0% to the Company's effective income tax rate is as follows:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
BVI statutory income tax rate |
(0.0 | )% | (0.0 | )% | |||
Foreign tax rate differential |
(0.0 | ) | 0.1 | ||||
Change in valuation allowance |
0.0 | (0.0 | ) | ||||
| | | | | | | |
Effective income tax rate |
0.0 | % | 0.1 | % | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-40
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
14. Income Taxes (Continued)
Net deferred tax assets consisted of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Deferred tax assets: |
|||||||
Foreign net operating loss carryforwards |
$ | 13 | $ | | |||
Other |
3 | 9 | |||||
| | | | | | | |
Total deferred tax assets |
16 | 9 | |||||
Valuation allowance |
(16 | ) | | ||||
| | | | | | | |
Net deferred tax assets |
$ | | $ | 9 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
As of December 31, 2016, the Company had no remaining foreign net operating loss carryforwards.
Each reporting period, the Company evaluates the positive and negative evidence bearing on its ability to realize its deferred tax assets.
As of December 31, 2015 and September 30, 2016 (unaudited), BPI's deferred tax assets consisted primarily of its U.S. net operating loss carryforwards. A full valuation allowance had been recorded against BPI's deferred tax assets through September 30, 2016. During the three months ended December 31, 2016, the Company fully utilized BPI's remaining U.S. net operating loss carryforwards and recorded a valuation allowance release of $9 due to management's reassessment of the amount of deferred tax assets that it believes are more likely than not to be realized.
As of December 31, 2016, the Company released the deferred tax asset valuation allowance in full primarily as a result of BPI achieving three years of cumulative pre-tax income in the U.S. during the three months ended December 31, 2016. In addition, management had determined that sufficient positive evidence existed as of December 31, 2016 to conclude that it is more likely than not that BPI's deferred tax assets are realizable.
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2015 and 2016 were due primarily to the utilization of U.S. net operating loss carryforwards and were as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Valuation allowance as of beginning of year |
$ | 21 | $ | 16 | |||
Decreases recorded as benefit to income tax provision |
(5 | ) | (16 | ) | |||
Increases recorded to income tax provision |
| | |||||
| | | | | | | |
Valuation allowance as of end of year |
$ | 16 | $ | | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2015 or 2016. The Company's policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2015 and 2016, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company's statement of operations and comprehensive loss.
BPI files income tax returns in the U.S. and certain state jurisdictions. BPI's U.S. federal and state income tax returns are subject to tax examinations for the tax years ended December 31, 2013 and subsequent years. There are currently no income tax examinations pending.
F-41
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
15. Net Loss per Share and Unaudited Pro Forma Net Loss per Share
Net Loss per Share Attributable to Common Shareholders of Biohaven Pharmaceutical Holding Company Ltd.
Basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. was calculated as follows:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Numerator: |
|||||||
Net loss |
$ | (10,066 | ) | $ | (63,534 | ) | |
Less: Net income (loss) attributable to non-controlling interests |
(4 | ) | 143 | ||||
| | | | | | | |
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. |
$ | (10,062 | ) | $ | (63,677 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Denominator: |
|||||||
Weighted average common shares outstandingbasic and diluted |
11,009,277 | 12,608,366 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.basic and diluted |
$ | (0.91 | ) | $ | (5.05 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The Company's potential dilutive securities, which include stock options and warrants to purchase common shares, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2015 | 2016 | |||||
Options to purchase common shares |
3,247,500 | 3,864,425 | |||||
Warrants to purchase common shares |
275,000 | 600,000 | |||||
| | | | | | | |
|
3,522,500 | 4,464,425 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
In addition to the potentially dilutive securities noted above, as of December 31, 2016, the Company agreed to issue warrants to purchase common shares to each of the Guarantor and Co-Guarantor of the Credit Agreement (see Note 8). As of December 31, 2016, the warrants had not yet been issued. Accordingly, the Company has excluded these warrants from the table above and the calculation of diluted net loss per share for the year ended December 31, 2016.
The Company has also agreed under its agreements with AstraZeneca and BMS to issue common shares upon the achievement of specified milestones or upon the occurrence of specified events (see Note 13). Because the necessary conditions for issuance of the shares had not been met as of December 31, 2016, the Company excluded these shares from the table above and from the calculation of diluted net loss per share for the year ended December 31, 2016.
F-42
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
15. Net Loss per Share and Unaudited Pro Forma Net Loss per Share (Continued)
Unaudited Pro Forma Net Loss per Share Attributable to Common Shareholders of Biohaven Pharmaceutical Holding Company Ltd.
The unaudited pro forma basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. for the year ended December 31, 2016 have been prepared to give effect to adjustments arising upon the closing of a qualified initial public offering.
The unaudited pro forma basic and diluted weighted average common shares outstanding used in the calculation of unaudited pro forma basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. for the year ended December 31, 2016 have been prepared to give effect, upon a qualified initial public offering, to the automatic conversion of all outstanding convertible preferred shares into 4,948,369 common shares and the issuance of 1,883,523 common shares to AstraZeneca and BMS pursuant to the Company's license agreements with AstraZeneca and BMS (see Note 13) as if the proposed initial public offering had occurred on the latest of January 1, 2016, the issuance date of the convertible preferred shares or the date the Company entered into each respective license agreement.
Unaudited pro forma basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. was calculated as follows:
16. Commitments and Contingencies
Lease Agreement
In December 2016, the Company entered into an assignment agreement to assume an operating lease for its office space in New Haven, Connecticut. The lease agreement expires in October 2018, and the Company has the option to extend the term through October 2021. The agreement requires future minimum lease payments for the years ending December 31, 2017 and 2018 of $40 and $35, respectively, totaling $75.
F-43
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
16. Commitments and Contingencies (Continued)
License Agreements
The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 13).
Research Commitments
The Company has entered into agreements with several CROs to provide services in connection with its preclinical studies and clinical trials. As of December 31, 2015 and 2016, the Company had committed to minimum payments under these arrangements totaling $630 and $6,973, respectively.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2015 or 2016.
Legal Proceedings
The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.
17. Related Party Transactions
License Agreement with Yale
On September 30, 2013, the Company entered into the Yale Agreement with Yale (see Note 13). Yale is a related party because the Company's Chief Executive Officer is one of the inventors of the patents that the Company has licensed from Yale and, as such, is entitled to a specified share of the glutamate product-related royalty revenues that may be received by Yale under the Yale Agreement. As partial consideration for the license under the Yale Agreement, on September 30, 2013, the Company issued to Yale 250,000 common shares, representing 5.1% of the Company's then outstanding equity on a fully diluted basis. The fair value of the shares, totaling $152, was recognized as research and development expense at the time of issuance of the shares. During the years ended December 31, 2015 and 2016, the Company made payments to Yale under the Yale Agreement of $84 and $4, respectively. During the years ended December 31, 2015 and 2016, the Company recognized research and development expense under the Yale Agreement of $84 and $4, respectively. As of December 31, 2015 and 2016, the Company owed no amounts to Yale.
Guarantor and Co-Guarantor Warrants
The Guarantor and Co-Guarantor of the Credit Agreement with Wells Fargo are each shareholders and members of the board of directors of the Company. The Company agreed to issue warrants to
F-44
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
17. Related Party Transactions (Continued)
purchase $1,000 of common shares to each of the Guarantor and Co-Guarantor in exchange for their respective guaranties (see Notes 8 and 9). The warrants were issued on January 26, 2017, pursuant to which each director received a warrant to purchase 107,500 common shares at an exercise price of $9.2911 per share.
Kleo Pharmaceuticals, Inc.
On August 29, 2016, the Company executed a stock purchase agreement with Kleo to purchase 3,000,000 shares of Kleo common stock at a purchase price of $1.00 per share in an initial closing, which was completed on August 31, 2016, and committed to purchase an aggregate 5,500,000 additional shares of Kleo common stock at a purchase price of $1.00 per share (see Note 5). Kleo is a related party because the Company has determined that it exercises significant influence over the operating and financial policies of Kleo. In connection with its investment in Kleo, the Company received the right to designate two members of Kleo's board of directors, who are the Chairman of the Company's board of directors and another outside director of the Company. Also, the Chief Executive Officer and controlling stockholder of Kleo is a shareholder of the Company. In addition to the purchases under the stock purchase agreement described above, on August 29, 2016, the Company entered into an agreement with the Chief Executive Officer of Kleo to purchase 500,000 shares of Kleo common stock from him, which purchase was completed in March 2017 (see Note 20). As of December 31, 2016, the Company owned 18.6% of Kleo's outstanding capital stock. The Company has also entered into a clinical development master services agreement with Kleo to assist Kleo with clinical development. As of December 31, 2016, the Company had not performed any services or received any payments under this agreement.
Biohaven Pharmaceuticals, Inc.
BPI is a related party because its three founders, each of whom beneficially owned one-third of the equity of BPI prior to the Company's acquisition of BPI on December 31, 2016 (see Note 18), are shareholders of the Company and also serve as the Company's Chairman of the board of directors, Chief Executive Officer, and Chief Medical Officer, respectively. Since the Company's incorporation in September 2013, the Company is deemed to have had a variable interest in BPI, and BPI is deemed to have been a VIE, of which the Company is the primary beneficiary. Accordingly, the Company has consolidated the results of BPI since September 2013. All transactions between the Company and BPI have been eliminated in consolidation. On December 31, 2016, the Company acquired 100% of the capital stock of BPI for aggregate purchase consideration of $595 in the form of promissory notes to each of the former stockholders of BPI.
18. Acquisition of Biohaven Pharmaceuticals, Inc.
On December 31, 2016, the Company entered into stock purchase agreements with each of the stockholders of BPI, acquiring 100% of the issued and outstanding shares of BPI for aggregate purchase consideration of $595. Prior to the acquisition, the Company was deemed to have had a variable interest in BPI, and BPI was deemed to be a VIE of which the Company was the primary beneficiary. As a result, the Company has consolidated the results of BPI since the Company's incorporation in September 2013, and, prior to the acquisition of BPI, recognized a non-controlling interest in its consolidated balance sheet representing 100% of the capital stock of BPI not owned by the Company. The three founders of BPI, each of whom beneficially owned one-third of the equity of BPI, also serve as the Company's Chairman of the board of directors, Chief Executive Officer, and Chief Medical Officer, respectively (see Note 17).
F-45
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands, except share and per share amounts)
18. Acquisition of Biohaven Pharmaceuticals, Inc. (Continued)
The Company funded the acquisition through the issuance of promissory notes to each of the former stockholders of BPI. The notes are payable in five annual payments, the first four of which are interest only, with the final payment to include the principal balance outstanding plus any accrued and unpaid interest. The notes bear interest at a rate of 4.5% per annum and mature on December 31, 2021. The notes become immediately due and payable upon specified events, including immediately prior to the consummation of the initial public offering of the Company's common shares or upon the occurrence of a change of control of the Company. There are no affirmative, negative or financial covenants associated with the notes.
Because the Company consolidated BPI as a VIE prior to the acquisition, the acquisition of all of the capital stock of BPI did not result in a change of control for accounting purposes and was accounted for as an equity transaction. Accordingly, as of the acquisition date, the $86 carrying value of the non-controlling interest on December 31, 2016 was derecognized and the difference between the carrying value of the non-controlling interest of $86 and the purchase price of $595 was recorded as a $509 reduction to additional paid-in capital.
19. 401(k) Savings Plan
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Company's board of directors. The Company made no contributions to the plan during the year ended December 31, 2015. During the year ended December 31, 2016, the Company made contributions totaling $25 to the plan.
20. Subsequent Events
For its consolidated financial statements as of December 31, 2016 and for the year then ended, the Company evaluated subsequent events through April 3, 2017, the date on which those financial statements were issued.
Sale of Series A Preferred Shares
In February 2017, the Company closed the second and final tranche of its Series A preferred financing through the issuance and sale of an aggregate of 4,305,182 Series A preferred shares, at an issuance price of $9.2911 per share, for net cash proceeds of $38,635. The offering costs for the second tranche consisted of $1,365 payable in cash and 105,009 shares of the Company's Series A preferred shares.
Purchases of Kleo Common Stock
On March 30, 2017, the Company purchased 1,375,000 shares of Kleo common stock for cash consideration of $1,375 pursuant to its commitment under the Kleo SPA (see Note 5).
On March 30, 2017, the Company purchased 500,000 shares of Kleo common stock from the Chief Executive Officer of Kleo pursuant to an agreement dated August 29, 2016. The consideration paid for these shares consisted of a cash payment of $250 and the Company's issuance of 32,500 common shares.
21. Subsequent Events (Unaudited)
Increase in Authorized Common Shares
On April 21, 2017, the Company effected an increase in the number of authorized common shares from 38,000,000 shares to 50,000,000 shares.
F-46
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with this offering. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the initial listing fee of the New York Stock Exchange.
|
Amount to
be Paid |
|||
---|---|---|---|---|
SEC registration fee |
$ | 17,771 | ||
FINRA filing fee |
23,500 | |||
New York Stock Exchange initial listing fee |
150,000 | |||
Printing and engraving expenses |
315,000 | |||
Legal fees and expenses |
1,560,000 | |||
Accountants' fees and expenses |
1,490,000 | |||
Transfer agent and registrar fees and expenses |
25,000 | |||
Miscellaneous fees and expenses |
48,729 | |||
| | | | |
Total |
$ | 3,630,000 | ||
| | | | |
| | | | |
| | | | |
Item 14. Indemnification of Directors and Officers.
British Virgin Islands law does not limit the extent to which a company's articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Amended Memorandum and Articles of Association will provide for the indemnification of our directors against all losses or liabilities incurred or sustained by him or her as a director of our company in defending any proceedings, whether civil, criminal, administrative or investigative in which the director acted honestly and in good faith with a view to the best interest of the company and had no reasonable cause to believe that their conduct was unlawful.
Further, prior to the completion of this offering, we expect to enter into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained under British Virgin Islands law. These indemnification agreements will require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements will also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit, or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
The limitation of liability and indemnification provisions that are expected to be included in our memorandum and articles of association and in indemnification agreements that we enter into with our directors and executive officers may discourage shareholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other shareholders. Further, a shareholder's investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
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We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of us and our officers and directors for certain liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, and otherwise.
Item 15. Recent Sales of Unregistered Securities.
Issuances of Capital Stock
The following list sets forth information regarding all unregistered securities sold by us since January 1, 2014 through the date of the prospectus that forms a part of this registration statement.
The offers, sales and issuances of the securities described in the paragraphs above were exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act. Each of the purchasers represented to us that they acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed
II-2
to the securities issued in these transactions. The purchasers also represented to us that they were accredited investors as defined in Rule 501 promulgated under the Securities Act.
Stock Option Grants
From January 1, 2014 through the date of the prospectus that is a part of this registration statement, we have granted options under our 2014 Equity Incentive Plan to purchase an aggregate of 4,898,858 common shares to employees, consultants and directors, having exercise prices ranging from $0.61 to $10.82 per share. We have not issued any common shares upon the exercise of stock options.
The offers, sales and issuances of the securities described in the foregoing paragraph were exempt from registration under Rule 701 promulgated under the Securities Act in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were our employees, directors or consultants and received the securities under our 2014 Equity Incentive Plan. Appropriate legends were affixed to the securities issued in these transactions.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The exhibits to the registration statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.
(b) Financial Statement Schedules.
No financial statement schedules have been submitted because they are not required or are not applicable or because the information required is included in the consolidated financial statements or the notes thereto.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New Haven, State of Connecticut, on the 24th day of April, 2017.
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD. | ||||
|
|
By: |
|
/s/ VLAD CORIC Vlad Coric Chief Executive Officer |
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
||||
---|---|---|---|---|---|---|
|
|
|
|
|
|
|
/s/ VLAD CORIC, M.D.
Vlad Coric, M.D. |
Chief Executive Officer and Director (Principal Executive Officer) | April 24, 2017 | ||||
* James Engelhart |
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
|
April 24, 2017 |
||
* Declan Doogan, M.D. |
|
Chairman of the Board of Directors |
|
April 24, 2017 |
||
* Gregory H. Bailey, M.D. |
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Director |
|
April 24, 2017 |
||
* John W. Childs |
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Director |
|
April 24, 2017 |
||
* Albert Cha, M.D., Ph.D. |
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Director |
|
April 24, 2017 |
||
* Eric Aguiar, M.D. |
|
Director |
|
April 24, 2017 |
||
*By: |
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/s/ VLAD CORIC Vlad Coric, Attorney-in-fact |
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|
|
|
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Exhibit
Number |
Description of Document | ||
---|---|---|---|
1.1 | Form of Underwriting Agreement. | ||
|
3.1 |
* |
Memorandum and Articles of Association, as currently in effect. |
|
3.2 |
|
Amendment to Memorandum and Articles of Association dated April 21, 2017. |
|
3.3 |
|
Amended and Restated Memorandum and Articles of Association, to be in effect upon the closing of this offering. |
|
4.1 |
* |
Investor Rights Agreement, dated as of October 31, 2016, by and among the Registrant and certain of its shareholders. |
|
4.2 |
* |
Term Note, dated August 30, 2016, issued to Wells Fargo Bank, National Association. |
|
4.3 |
* |
Warrant, dated January 26, 2017, issued to John Childs. |
|
4.4 |
* |
Warrant, dated January 26, 2017, issued to Gregory Bailey. |
|
4.5 |
* |
Warrants, dated August 15, 2015, issued to ALS Biopharma, LLC. |
|
5.1 |
|
Opinion of Maples and Calder, British Virgin Islands counsel as to legality. |
|
10.1 |
#* |
License Agreement, by and between the registrant and Bristol-Myers Squibb Company, dated as of July 8, 2016. |
|
10.2 |
# |
ALS Biopharma Agreement, by and among the registrant, ALS Biopharma, LLC and Fox Chase Chemical Diversity Center Inc., dated as of August 10, 2015, as amended to date. |
|
10.3 |
#* |
License Agreement, by and between the registrant and AstraZeneca AB, dated as of October 5, 2016. |
|
10.4 |
# |
Agreement, by and between the registrant and Yale University, dated as of September 30, 2013, as amended to date. |
|
10.5 |
# |
Zydis® Development and License Agreement, by and between the registrant and Catalent U.K. Swindon Zydis Limited, dated as of March 9, 2015. |
|
10.6 |
# |
Exclusive Patent License Agreement, by and between the registrant and The General Hospital Corporation d/b/a Massachusetts General Hospital, dated as of September 13, 2014. |
|
10.7 |
# |
Exclusive License Agreement, by and between the registrant and Rutgers, the State University of New Jersey, dated as of June 15, 2016. |
|
10.8 |
* |
Credit Agreement, by and between the registrant and Wells Fargo Bank, National Association, dated as of August 30, 2016. |
|
10.9 |
+* |
2014 Equity Incentive Plan. |
|
10.10 |
+* |
Form of Share Option Agreement under 2014 Equity Incentive Plan. |
|
10.11 |
+ |
Form of 2017 Equity Incentive Plan. |
|
10.12 |
+ |
Form of Share Option Grant Notice and Share Option Agreement under 2017 Equity Incentive Plan. |
|
10.13 |
+ |
Form of Restricted Share Unit Grant Notice and Restricted Share Unit Award Agreement under 2017 Equity Incentive Plan. |
|
10.14 |
+ |
Form of 2017 Employee Share Purchase Plan. |
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II-6
Exhibit 1.1
Shares
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
COMMON SHARES, WITHOUT PAR VALUE
UNDERWRITING AGREEMENT
, 2017
, 2017
Morgan Stanley & Co. LLC
Piper Jaffray & Co.
As Representatives of the
several Underwriters listed
on Schedule I hereto
c/o
Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
c/o
Piper Jaffray & Co.
345 Park Avenue, 12
th
Floor
New York, NY 10154
Ladies and Gentlemen:
Biohaven Pharmaceutical Holding Company Ltd., a British Virgin Islands ( BVI ) business company (the Company ), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the Underwriters ), for whom you are acting as representatives (the Representatives ), of its common shares, without par value (the Common Shares ) (such shares to be issued and sold by the Company being hereinafter called the Firm Shares ), in accordance with this Underwriting Agreement (the Agreement ). The Company also proposes to issue and sell to the several Underwriters not more than an additional of its Common Shares (the Additional Shares ), if and to the extent that you, as the Representatives, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such Common Shares granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the Shares .
The Company has filed with the Securities and Exchange Commission (the Commission ) a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the Securities Act ), is hereinafter referred to as the Registration Statement . The prospectus in the form first used to confirm sales of Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the Prospectus . If the Company has filed an abbreviated registration statement to register additional Common Shares pursuant to Rule 462(b) under the Securities Act (a Rule 462 Registration Statement ), then any reference herein to the term Registration Statement shall be deemed to include such Rule 462 Registration Statement.
For purposes of this Agreement, free writing prospectus has the meaning set forth in Rule 405 under the Securities Act, Time of Sale Prospectus means the preliminary prospectus together with the documents and pricing information set forth in Schedule II hereto, and broadly available road show means a bona fide electronic road show as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person. As used herein, the terms Registration Statement, preliminary prospectus, Time of Sale Prospectus and Prospectus shall include the documents, if any, incorporated by reference therein as of the date hereof.
Morgan Stanley & Co. LLC ( Morgan Stanley ) has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Companys directors, officers, employees and business associates and other parties related to the Company (collectively, Participants ), as set forth in the Prospectus under the heading Underwriters (the Directed Share Program ). The Shares to be sold by Morgan Stanley and its affiliates pursuant to the Directed Share Program, at the direction of the Company, are referred to hereinafter as the Directed Shares . Any Directed Shares not orally confirmed for purchase by any Participant by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus.
1. Representations and Warranties . The Company represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain, as of the date of such amendment or supplement, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply, as of the date of such amendment or supplement, in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 4), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iv) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) as of its date
and the Closing Date, the Prospectus does not contain and, as amended or supplemented, if applicable, as of the date of such amendment or supplement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus, any broadly available road show or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(c) The Company is not an ineligible issuer in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or, if filed after the effective date of this Agreement, will comply, when filed, in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule II hereto, and electronic road shows, if any, each furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior consent, prepare, use or refer to, any free writing prospectus.
(d) The Company has been duly incorporated, is validly existing as a business company in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own or lease its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(e) Each subsidiary has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary has been duly and validly authorized and issued,
are fully paid and non-assessable (to the extent such concepts are applicable under such laws) and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims.
(f) This Agreement has been duly authorized, executed and delivered by the Company.
(g) As of the Closing Date, the authorized shares of the Company will conform as to legal matters to the description thereof contained in each of the Time of Sale Prospectus and the Prospectus.
(h) The Common Shares outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable.
(i) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights or any restrictions on transfer or voting. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights for or relating to the registration of any Common Shares or other securities of the Company (collectively Registration Rights ), that have not been waived, and any person to whom the Company has granted Registration Rights has agreed not to exercise such rights until after expiration of the Restricted Period (as defined below). The Company has an authorized and outstanding capitalization as set forth in the Registration Statement, in the Time of Sale Prospectus and in the Prospectus under the caption Capitalization. The Shares conform in all material respects to the description thereof contained in the Time of Sale Prospectus and the Prospectus.
(j) Neither the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, nor the issuance and sale of the Shares, will contravene, conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, (i) any provision of applicable law, (ii) the memorandum of association or articles of association of the Company, (iii) any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or its subsidiaries, except in the cases of clauses (i) and (iii) above, where such contravention, conflict, breach, violation or default would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power and ability of the Company to perform its obligations under this Agreement; and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under
this Agreement, except such as have already been obtained or made or as may be required by the securities or Blue Sky laws of the various states or the rules and regulations of the Financial Industry Regulatory Authority, Inc. ( FINRA ) in connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any development that, individually or in the aggregate, would reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, prospects or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus.
(l) There are no legal or governmental proceedings pending or, to the Companys knowledge, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject (i) other than proceedings accurately described in all material respects in the Time of Sale Prospectus and proceedings that, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by the Time of Sale Prospectus or (ii) that are required to be described in the Registration Statement or the Prospectus and are not so described in all material respects; and there are no statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described in all material respects or filed as required.
(m) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.
(n) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus will not be, required to register as an investment company as such term is defined in the Investment Company Act of 1940, as amended.
(o) No stamp, documentary, issuance, registration, transfer, withholding, capital gains, income or other taxes or duties are payable by or on behalf of the Underwriters, the Company or any of its subsidiaries in the British Virgin Islands or to any taxing authority thereof or therein in connection with (i) the execution, delivery or consummation of this Agreement, (ii) the creation, allotment and issuance of the Shares, (iii) the sale and delivery of the Shares to the Underwriters or purchasers procured by the Underwriters, or (iv) the resale and delivery of the shares by the Underwriters in the manner contemplated herein.
(p) The Company was not a passive foreign investment company ( PFIC ) for U.S. federal income tax purposes for its most recent taxable year and it does not expect to be a PFIC for its current taxable year or in the foreseeable future.
(q) It is not necessary under the laws of the British Virgin Islands (i) to enable the Underwriters to enforce their rights under this Agreement, to enable any holder of Shares to enforce their respective rights thereunder, provided that they are not otherwise engaged in business in the British Virgin Islands, or (ii) solely by reason of the execution, delivery or consummation of this Agreement, for any of the Underwriters or any holder of Shares of the Company to be qualified or entitled to carry out business in the British Virgin Islands.
(r) This Agreement is in proper form under the laws of the British Virgin Islands for the enforcement thereof against the Company, and to ensure the legality, validity, enforceability or admissibility into evidence in the British Virgin Islands of this Agreement.
(s) The courts of the British Virgin Islands would recognize as a valid judgment any final monetary judgment obtained against the Company in the courts of the State of New York.
(t) Neither the Company nor any of its subsidiaries nor any of its or their properties or assets has any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) under the laws of the British Virgin Islands. The irrevocable and unconditional waiver and agreement of the Company contained in Section 15(a) not to plead or claim any such immunity in any legal action, suit or proceeding based on this Agreement is valid and binding under the laws of the British Virgin Islands.
(u) The choice of law of the State of New York as the governing law of this Agreement is a valid choice of law under the laws of the British Virgin Islands and will be honored by the courts of the British Virgin Islands. The Company has the power to submit, and pursuant to Section 15(a) has, to the extent permitted by law, legally, validly, effectively and irrevocably submitted, to the jurisdiction of the Specified Courts (as defined in Section 15(a)), and has the power to designate, appoint and empower, and pursuant to Section 15(b), has legally, validly and effectively designated, appointed and empowered, an agent for service of process in any suit or proceeding based on or arising under this Agreement in any of the Specified Courts.
(v) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ( Environmental Laws ), (ii) have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(w) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(x) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement, except as have been validly waived or complied with in connection with the issuance and sale of the Shares contemplated hereby and as have been described in the Time of Sale Prospectus and the Prospectus.
(y) (i) None of the Company or any of its subsidiaries or affiliates, or any director or officer thereof, or, to the Companys knowledge, any employee, agent or representative of the Company or any of its subsidiaries or affiliates, has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) ( Government Official ) in order to influence official action, or to any person in violation of any applicable anti-corruption laws; (ii) the Company and its subsidiaries and their respective affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintained and will continue to maintain policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (iii) neither the Company nor its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws.
(z) The operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Company and its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Anti-Money Laundering Laws ), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(aa) (i) None of the Company, any of its subsidiaries or any director, officer or employee thereof, or, to the Companys knowledge, any agent, affiliate or representative of the Company or any of its subsidiaries, is an individual or entity ( Person ) that is, or is owned or controlled by one or more Persons that are:
(A) the subject of any sanctions administered or enforced by the U.S. Department of the Treasurys Office of Foreign Assets Control ( OFAC ) , the United Nations Security Council, the European Union, Her Majestys Treasury, or other relevant sanctions authority (collectively, Sanctions ), or
(B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea, Sudan and Syria).
(ii) The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:
(A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
(B) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(iii) The Company and its subsidiaries have not knowingly engaged in, are not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or
territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
(bb) Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding capital stock (except for acquisitions of shares by the Company pursuant to agreements that permit the Company to repurchase such shares upon the applicable partys termination of service to the Company as described in the Time of Sale Prospectus and the Prospectus), nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, except in each case as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, respectively.
(cc) Neither the Company nor its subsidiaries owns any real property. The Company and its subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Time of Sale Prospectus or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Time of Sale Prospectus.
(dd) The Company and its subsidiaries own or have existing licenses under all patents, patent applications, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names and other intellectual property used in or necessary for the conduct of the business of the Company and its subsidiaries, in the manner described in the Registration Statement, the Time of Sale Prospectus and the Prospectus (collectively, the Intellectual Property ), and such licenses are enforceable against the Company and, to the Companys knowledge, enforceable against the counterparties to the license agreements under which such licenses were granted to the Company, except as certain rights under any licenses may be limited by bankruptcy and other similar laws affecting the rights of creditors generally and general principles of equity; to the knowledge of the Company, the patents, trademarks, and copyrights, if any, included within the Intellectual Property are valid, enforceable, and subsisting; other than as disclosed
in the Registration Statement, the Time of Sale Prospectus and the Prospectus: (i) neither the Company nor any of its subsidiaries is obligated to pay a material royalty, grant a license to, or provide other material consideration to any third party in connection with the Intellectual Property, (ii) neither the Company nor any of its subsidiaries has received any written notice of any claim of infringement, misappropriation of or conflict with asserted rights of others with respect to any of the Companys or its subsidiaries product candidates, processes or Intellectual Property, (iii) to the knowledge of the Company, with the exception of the review of pending applications in the United States Patent and Trademark Office (USPTO) or corresponding foreign patent offices, no action, suit, claim or other proceeding is pending or, to the knowledge of the Company, is threatened, challenging the Companys or any of its subsidiaries rights in or to any Intellectual Property, or challenging the validity, enforceability or scope of any Intellectual Property, (iv) to the knowledge of the Company, none of the development, manufacture, sale or use of any of the discoveries, inventions, product candidates or processes of the Company in the manner presently contemplated by the Company and referred to in the Registration Statement, the Time of Sale Prospectus or the Prospectus do or will infringe, or violate any right or issued patent claim of any third party in any material respect, (v) to the knowledge of the Company, no third party has any ownership right in or to any Intellectual Property that is owned by the Company, other than any co-owner of any patent constituting Intellectual Property who is listed on the records of the U.S. Patent and Trademark Office and any co-owner of any patent application constituting Intellectual Property who is named in such patent application, (vi) except as would not, individually or in the aggregate, have a material adverse effect on the Company and its subsidiaries taken as a whole, the Intellectual Property owned by the Company and its subsidiaries is free and clear of all liens or encumbrances, (vii) to the knowledge of the Company, none of the Intellectual Property employed by the Company or its subsidiaries in the conduct of the business in the manner described in the Registration Statement, the Time of Sale Prospectus and the Prospectus has been obtained or is being used by the Company or its subsidiaries in material violation of any contractual obligation binding on the Company or, to the knowledge of the Company, upon any of its officers, consultants, directors or employees, and (viii) the Company has taken reasonable measures to protect its confidential information and trade secrets and to maintain and safeguard the Intellectual Property.
(ee) All material patents and patent applications owned by or licensed to the Company or any of its subsidiaries, to the knowledge of the Company, have been duly and properly filed, prosecuted and maintained in all material respects.
(ff) The Company and each of its subsidiaries has operated and currently is in compliance in all material respects with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business. The Company and each of its subsidiaries: (i) is and at all times has been in material compliance with all statutes, rules or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product under development, manufactured or distributed by the Company ( Applicable Laws ); (ii) has not received any FDA Form 483, notice of adverse finding, warning letter, untitled letter or other written correspondence or notice from the U.S. Food and Drug Administration (the FDA ) or any other federal, state, local or foreign governmental or regulatory authority alleging or asserting material noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any Applicable Laws to conduct the Companys business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus ( Authorizations ); (iii) possesses all material Authorizations and such Authorizations are valid and in full force and effect and the Company is not in material violation of any such Authorizations; (iv) has not received notice of any pending or completed claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from the FDA or any other federal, state, local or foreign governmental or regulatory authority or third party alleging that any product operation or activity is in material violation of any Applicable Laws or Authorizations and the Company has no knowledge that the FDA or any other federal, state, local or foreign governmental or regulatory authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) has not received notice that the FDA or any other federal, state, local or foreign governmental or regulatory authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any material Authorizations and has no knowledge that the FDA or any other federal, state, local or foreign governmental or regulatory authority is considering such action; and (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were materially complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (vii) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, dear doctor letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Companys knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
(gg) The studies, tests and preclinical and clinical trials conducted by the Company that are described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, and, to the Companys knowledge, those studies, tests and preclinical and clinical trials conducted on behalf of the Company, were and, if still pending, are being conducted in all material respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and all Applicable Laws and Authorizations, including, without limitation, the Federal Food, Drug and Cosmetic Act and the
rules and regulations promulgated thereunder; the descriptions of the results of such studies, tests and trials contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus are accurate and complete and fairly present the data derived from such studies, tests and trials in all material respects; the Company is not aware of any studies, tests or trials, the results of which the Company believes are materially inconsistent with the study, test or trial results described or referred to in the Registration Statement, the Time of Sale Prospectus and the Prospectus when viewed in the context in which such results are described and the clinical state of development; and the Company has not received any notices or written correspondence from the FDA or any other federal, state, local or foreign governmental or regulatory authority requiring the termination, suspension or material modification of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company.
(hh) Neither the Company nor, to the knowledge of the Company, any of its officers, directors or managing employees (as defined in 42 U.S.C. § 1320a-5(b)) is or has been excluded, suspended or debarred from participation in any state or federal health care program, or made subject to any pending or, to the Companys knowledge, threatened or contemplated action which could reasonably be expected to result in such exclusion, suspension or debarment.
(ii) To the knowledge of the Company, the manufacturing facilities and operations of its suppliers of investigational drug products are operated in compliance in all material respects with all Applicable Laws.
(jj) None of the Companys or any of its subsidiaries product candidates have received marketing approval from the FDA or any other federal, state, local or foreign governmental or regulatory authority.
(kk) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in the Time of Sale Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that would be reasonably likely to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(ll) Except (A) as described in the Time of Sale Prospectus or (B) as would not, individually or in the aggregate, have (or reasonably be expected to have) a material adverse effect, each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) that the Company or any member of its Controlled Group (defined as any organization which is under common control with the Company within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the Code)) sponsors or maintains has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code.
(mm) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Time of Sale Prospectus.
(nn) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where failure to obtain such certificates, authorizations and permits would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Time of Sale Prospectus.
(oo) PricewaterhouseCoopers LLP, which has audited certain financial statements of the Company and its subsidiaries, is an independent public accountant as required by the Securities Act and the rules and regulations of the Commission thereunder and the rules and regulations of the Public Company Accounting Oversight Board (United States).
(pp) The financial statements of the Company and its consolidated subsidiaries included in the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related notes, present fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and, in the case of the statements of operations, stockholders equity and cash flows of the Company and its consolidated subsidiaries, for the periods specified; the financial statements of the Company and its consolidated subsidiaries included in the Registration Statement comply in all material respects with the applicable requirements of the Securities Act and have been prepared in conformity with U.S. generally accepted accounting principles ( GAAP ) applied on a consistent basis throughout the periods involved except (i) the unaudited, interim financial statements, which are subject to normal year-end adjustments and do not contain certain footnotes as permitted by the applicable rules of the Commission and (ii) as otherwise disclosed therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus or the Prospectus under the Securities Act and the rules and regulations of the Commission thereunder; to the extent included in the
Registration Statement, the Time of Sale Prospectus and the Prospectus, the pro forma financial information and the related notes thereto included therein have been prepared in accordance with the applicable requirements of the Securities Act and comply in all material respects with Regulation G of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and Item 10 of Regulation S-K of the Securities Act, to the extent applicable, and the assumptions used in the preparation of such pro forma financial information are reasonable and are set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus in all material respects; all other information regarding the financial condition or results of operations of the Company or its subsidiaries included in the Registration Statement, the Time of Sale Prospectus and the Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly in all material respects the information shown thereby.
(qq) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with managements general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with managements general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any difference. Except as described in the Time of Sale Prospectus, since the end of the Companys most recent audited fiscal year, there has been (i) no material weakness in the Companys internal control over financial reporting (whether or not remediated) and (ii) no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
(rr) Except as disclosed in the Time of Sale Prospectus and the Prospectus, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act and applicable regulations thereunder; such disclosure controls and procedures have been designed to ensure that material information relating to the Company is made known to the Companys principal executive officer and principal financial officer by others within the Company.
(ss) Except as described in the Time of Sale Prospectus, the Company has not sold, issued or distributed any Common Shares during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.
(tt) The Registration Statement, the Prospectus, the Time of Sale Prospectus and any preliminary prospectus comply, and any amendments or supplements thereto will comply, in all material respects, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus, the Time of Sale Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program.
(uu) No consent, approval, authorization or order of, or qualification with, any governmental body or agency, other than those obtained, is required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered.
(vv) The Company has not offered, or caused Morgan Stanley or any Morgan Stanley Entity as defined in Section 9 to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customers or suppliers level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.
(ww) The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole) and have paid all taxes required to be paid thereon (except for cases in which the failure to pay would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, or except as currently being contested in good faith and for which reserves required by GAAP have been created in the financial statements of the Company), and no unpaid tax deficiency has been determined adversely to the Company or its subsidiaries which has had (nor does the Company or its subsidiaries have any notice or knowledge of any unpaid tax deficiency which could reasonably be expected to be determined adversely to the Company or its subsidiaries and which could reasonably be expected to have) a material adverse effect on the Company or its subsidiaries, taken as a whole.
(xx) The Shares have been approved for listing and admitted and authorized for trading, subject to official notice of issuance and evidence of satisfactory distribution, on the New York Stock Exchange (the Exchange ) upon official notice of issuance; on the date the Registration Statement became effective, the Companys registration statement on Form 8-A or other applicable form under the Exchange Act became effective.
(yy) Other than as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, the Company, directly or indirectly, owns no capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust or other entity. As used in this
Agreement with respect to the Company, subsidiaries shall mean the direct and indirect subsidiaries of the Company, provided that Kleo Pharmaceuticals, Inc. shall not be a direct or indirect subsidiary for purposes of this Agreement.
(zz) From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an emerging growth company, as defined in Section 2(a) of the Securities Act (an Emerging Growth Company ). Testing-the-Waters Communication means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
(aaa) The Company (i) has not alone engaged in any Testing-the-Waters Communication and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule III hereto. Written Testing-the-Waters Communication means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
(bbb) As of the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers, none of (A) the Time of Sale Prospectus, (B) any free writing prospectus, when considered together with the Time of Sale Prospectus, and (C) any individual Written Testing-the-Waters Communication, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(ccc) Except as described in the Registration Statement, in the Time of Sale Prospectus and in the Prospectus, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company or any subsidiary of the Company any shares of the capital stock of the Company or any subsidiary of the Company. The description of the Companys stock option, stock bonus and other stock plans or arrangements (the Company Stock Plans ), and the options (the Options ) or other rights granted thereunder, set forth in the Time of Sale Prospectus and the Prospectus accurately and fairly presents in all material respects the information required to be shown with respect to such plans, arrangements, options and rights. Each grant of an Option (A) was duly authorized no later than the date on which the grant of such Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the
necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto and (B) was made in accordance with the terms of the applicable Company Stock Plan, and all applicable laws and regulatory rules or requirements, including all applicable federal securities laws.
(ddd) Other than as contemplated by this Agreement, the Company has not incurred any liability for any finders or brokers fee or agents commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
(eee) Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, neither the Company nor any of its subsidiaries has granted rights to develop, manufacture, produce, assemble, distribute, license, market or sell its products to any other person and is not bound by any agreement that materially affects the exclusive right of the Company or such subsidiary to develop, manufacture, produce, assemble, distribute, license, market or sell its products.
(fff) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiarys capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiarys property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Time of Sale Prospectus and the Prospectus.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $ a share (the Purchase Price ).
On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to Additional Shares at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Additional Shares shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm Shares but not payable on such Additional Shares. You may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares nor later than ten business days after the date of
such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. On each day, if any, that Additional Shares are to be purchased (an Option Closing Date ), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
3. Terms of Public Offering . The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at $ a share (the Public Offering Price ) and to certain dealers selected by you at a price that represents a concession not in excess of $ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $ a share, to any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on , 2017, or at such other time on the same or such other date, not later than , 2017, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the Closing Date .
Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 2 or at such other time on the same or on such other date, in any event not later than , 2017, as shall be designated in writing by you.
The Firm Shares and Additional Shares shall be registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to you on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters, if any, duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters Obligations . The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the
condition that the Registration Statement shall have become effective not later than , (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the securities of the Company or any of its subsidiaries by any nationally recognized statistical rating organization, as such term is defined in Section 3(a)(62) of the Exchange Act; and
(ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business, prospects or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus.
(b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Cooley LLP, outside counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
(d) The Underwriters shall have received on the Closing Date an opinion of Locke Lord LLP, special counsel to the company with respect to certain intellectual property matters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
(e) The Underwriters shall have received on the Closing Date an opinion of Maples and Calder, British Virgin Islands counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
(f) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Ropes & Gray LLP, counsel for the Underwriters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
With respect to Sections 5(c), 5(e) and 5(f), above, Cooley LLP, Maples and Calder and Ropes & Gray LLP may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale Prospectus and the Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.
The opinions of Cooley LLP, Locke Lord LLP and Maples and Calder described in Sections 5(c), 5(d) and 5(e) above shall be rendered to the Underwriters at the request of the Company and shall so state therein.
(g) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from PricewaterhouseCoopers LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants comfort letters to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the Closing Date shall use a cut-off date not earlier than the date hereof.
(h) The lock-up agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of Common Shares or certain other securities, delivered to you on or before the date hereof (the Lock-up Agreements ), shall be in full force and effect on the Closing Date.
(i) The Underwriters shall have received, on each of the date hereof and the Closing Date, a certificate of the chief financial officer of the Company, containing statements and information related to certain financial information included in the Registration Statement, the Time of Sale Prospectus and the Prospectus in the form and substance reasonably satisfactory to you.
(j) The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the applicable Option Closing Date of the following:
(i) a certificate, dated the Option Closing Date and signed by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 5(b) hereof remains true and correct as of such Option Closing Date;
(ii) an opinion and negative assurance letter of Cooley LLP, outside counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(c) hereof;
(iii) an opinion of Locke Lord LLP, special counsel to the company with respect to certain intellectual property matters, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(d) hereof;
(iv) an opinion and negative assurance letter of Ropes & Gray LLP, counsel for the Underwriters, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(f) hereof;
(v) an opinion of Maples and Calder, British Virgin Islands counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(e) hereof;
(vi) a letter dated the Option Closing Date, in form and substance satisfactory to the Underwriters, from PricewaterhouseCoopers LLP, independent public accountants, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(g) hereof; provided that the letter delivered on the Option Closing Date shall use a cut-off date not earlier than three business days prior to such Option Closing Date;
(vii) a certificate, dated the Option Closing Date and signed by the chief financial officer of the Company, containing statements and information related to certain financial information included in the Registration Statement, the Time of Sale Prospectus and the Prospectus in the form and substance reasonably satisfactory to you; and
(viii) such other documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares.
6. Covenants of the Company . The Company covenants with each Underwriter as follows:
(a) To furnish to you, without charge, six conformed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the second business day succeeding the date of this Agreement and during the period mentioned in Section 6(e) or 6(f) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) To furnish to you a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which you reasonably object.
(d) Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.
(e) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that
the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
(f) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.
(g) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request; provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction.
(h) To make generally available to the Companys security holders and to you as soon as practicable an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.
(i) To comply with all applicable securities and other laws, rules and regulations in each jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.
(j) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Companys counsel and the Companys accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes, if any, payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all reasonable expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(g) hereof, including filing fees and the reasonable and documented fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable and documented fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by FINRA (provided, that, the amount payable by the Company with respect to fees and disbursements of counsel for the Underwriters pursuant to subsections (iii) and (iv) shall not exceed $30,000), (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Shares and all costs and expenses incident to listing the Shares on the Exchange, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any road show undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and 50% of the cost of any aircraft chartered in connection with the road show (with the Underwriters agreeing to pay for the other 50%, as well as any other travel and lodging expenses of the Underwriters in connection with the road show), (ix) the document production charges and expenses associated with printing this Agreement , (x) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program and (xi) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 8 entitled Indemnity and Contribution , Section 9 entitled Directed Share Program Indemnification and the last paragraph of Section 11 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make.
(k) To promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Shares within the meaning of the Securities Act and (ii) completion of the Restricted Period (as defined in this Section 6).
(l) If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, to promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(m) To pay, and to indemnify and hold the Underwriters harmless against, any stamp, issue, registration, documentary, sales, transfer income, capital gains or other similar taxes or duties imposed under the laws of the British Virgin Islands or any political sub-division or taxing authority thereof or therein that is payable in connection with (i) the execution, delivery, consummation or enforcement of this Agreement, (ii) the creation, allotment and issuance of the Shares, (iii) the sale and delivery of the Shares to the Underwriters or purchasers procured by the Underwriters, or (iv) the resale and delivery of the Shares by the Underwriters in the manner contemplated herein.
(n) After the date of this Agreement, to promptly advise the Representatives (i) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any Preliminary Prospectus, the Time of Sale Prospectus or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement becomes effective, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order preventing or suspending its use or the use of any Preliminary Prospectus, the Time of Sale Prospectus, the Prospectus or any issuer free writing prospectus, or (v) of any proceedings to remove, suspend or terminate from listing or quotation the Common Shares from any securities exchange upon which it is listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its best efforts to obtain the prompt lifting of such order.
(o) To apply the net proceeds from the sale of the Shares to be sold by it hereunder for the purposes set forth in the Time of Sale Prospectus and in the Prospectus.
(p) To not take, directly or indirectly, any action designed to or which would reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.
The Company also covenants with each Underwriter that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus (the Restricted Period ), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Shares or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares.
The restrictions contained in the preceding paragraph shall not apply to (a) the Shares to be sold hereunder, (b) the issuance by the Company of Common Shares upon the exercise of an option or warrant or the conversion of a security described in the Time of Sale Prospectus and Prospectus and outstanding on the date hereof, (c) the grant of options, restricted share units or any other type of equity award described in the Time of Sale Prospectus and Prospectus, or the issuance of Common Shares by the Company (whether upon the exercise of stock options or otherwise), to employees, officers, directors, advisors or consultants of the Company pursuant to employee benefit plans in effect on the date hereof and described in the Time of Sale Prospectus and the Prospectus, provided that, prior to the issuance of any such Common Shares or other securities where the Common Shares or other securities vest within the Restricted Period, the Company shall cause each recipient of such grant or issuance to execute and deliver to the Representatives a lock-up letter described in Section 5(h), (d) the filing by the Company of a registration statement with the Commission on Form S-8 in respect of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares issued under or the grant of any award pursuant to an employee benefit plan in effect on the date hereof and described in the Time of Sale Prospectus and Prospectus, (e) the establishment or amendment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Common Shares, provided that (i) such plan does not provide for the transfer of Common Shares during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by the Company regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Shares may be made under such plan during the Restricted Period, (f) the sale or issuance
of or entry into an agreement to sell or issue Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares in connection with one or more mergers; acquisitions of securities, businesses, property or other assets, products or technologies; joint ventures; commercial relationships or other strategic corporate transactions or alliances; provided that each recipient of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares pursuant to this clause (f) shall execute a lock-up letter described in Section 5(h) hereof with respect to the remaining portion of the Restricted Period, and provided further that the aggregate amounts of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares (on an as-converted, as-exercised or as-exchanged basis) that the Company may sell or issue or agree to sell or issue pursuant to this clause (f) shall not exceed 5% of the total number of Common Shares of the Company issued and outstanding immediately following the completion of the transactions contemplated by this A greement, or (g) the issuance of Common Shares to AstraZeneca AB, a company incorporated in Sweden (AstraZeneca), pursuant to that certain license agreement, dated as of October 5, 2016, between AstraZeneca and the Company, and to Bristol-Myers Squibb Company, a Delaware corporation (BMS), pursuant to that certain license agreement, dated as of July 8, 2016, between BMS and the Company, provided that each recipient of Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares pursuant to this clause (g) shall execute a lock-up letter described in Section 5(h) hereof with respect to the remaining portion of the Restricted Period.
If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 5(h) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.
7. Covenants of the Underwriters . Each Underwriter severally covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing
prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show as defined in Rule 433(h) under the Securities Act (a road show ), or the Prospectus or any amendment or supplement thereto, or any Written Testing-the-Waters Communication caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, road show or the Prospectus or any amendment or supplement thereto.
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the indemnified party ) shall promptly notify the person against whom such indemnity may be sought (the indemnifying party ) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonably incurred fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Representatives, in the case of parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement admitting fault, culpability or a failure to act, by or on behalf of any indemnified party.
(d) To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters respective obligations to
contribute pursuant to this Section 8 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 8(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
9. Directed Share Program Indemnification. (a) The Company agrees to indemnify and hold harmless Morgan Stanley, each person, if any, who controls Morgan Stanley within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of Morgan Stanley within the meaning of Rule 405 of the Securities Act ( Morgan Stanley Entities ) from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share
Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section 9(a), the Morgan Stanley Entity seeking indemnity, shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity and any others the Company may designate in such proceeding and shall pay the reasonably incurred fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such separate firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section 9(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company in lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to the
amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by clause 9(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 9(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with any statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (before deducting expenses) and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public Offering Price of the Directed Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplied by the Company or by the Morgan Stanley Entities and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 9(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total price at which the Directed Shares distributed to the public were offered to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(e) The indemnity and contribution provisions contained in this Section 9 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Morgan Stanley Entity or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the Directed Shares.
10. Termination . The Underwriters may terminate this Agreement by notice given by you to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Market, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States or the British Virgin Islands shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State or the British Virgin Islands authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in your judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.
11. Effectiveness; Defaulting Underwriters . This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 11 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other
documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the reasonable and documented fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.
12. Entire Agreement . (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire agreement between the Company and the Underwriters with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the Shares.
(b) The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arms length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement and prior written agreements (to the extent not superseded by this Agreement), if any, (iii) the Underwriters may have interests that differ from those of the Company and (iv) the Underwriters are not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares.
13. Counterparts . This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
14. Applicable Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
15. Submission to Jurisdiction; Appointment of Agents for Service . (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in The City of New York (the Specified Courts ) over any suit, action or proceeding arising out of or relating to this Agreement, the Prospectus, the Registration Statement or the offering of the Shares (each, a Related Proceeding ). The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Related Proceeding brought in such a court and any claim that any such Related Proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company has or hereafter may acquire any immunity (on the grounds of sovereignty or otherwise) from the jurisdiction of any court or from any legal process with respect to itself or its property, the Company irrevocably waives, to the fullest extent permitted by law, such immunity in respect of any such suit, action or proceeding.
(b) The Company hereby irrevocably appoints Biohaven Pharmaceuticals, Inc., with offices at 234 Church Street, New Haven, CT 06510, as its agent for service of process in any Related Proceeding and agrees that service of process in any such Related Proceeding may be made upon it at the office of such agent. The Company waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto. The Company represents and warrants that such agent has agreed to act as the Companys agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.
16. Taxes. If any sum payable by the Company under this Agreement is subject to tax in the hands of an Underwriter or taken into account as a receipt in computing the taxable income of that Underwriter (excluding net income taxes on underwriting commissions payable hereunder), the sum payable to the Underwriter under this Agreement shall be increased to such sum as will ensure that the Underwriter shall be left with the sum it would have had in the absence of such tax.
17. Headings . The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
18. Notices . All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to you in care of Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department or Piper Jaffray & Co., 345 Park Avenue, 12 th Floor, New York, NY 10154, Attention: Equity Capital Markets, with a copy to the Legal Department at 800 Nicollet Mall, Minneapolis, MN 55402; and if to the Company shall be delivered, mailed or sent to 234 Church Street, New Haven, CT 06510.
[Signature Page Follows Immediately]
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Biohaven Pharmaceutical Holding Company Ltd. |
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Accepted as of the date hereof |
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Morgan Stanley & Co. LLC |
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Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. |
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SCHEDULE I
Underwriter |
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Number of Firm Shares To
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Morgan Stanley & Co. LLC |
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Piper Jaffray & Co. |
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Barclays Capital Inc. |
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William Blair & Company |
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Needham & Company, LLC |
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EXHIBIT B
FORM OF WAIVER OF LOCK-UP
, 20
[Name and Address of
Officer or Director
Requesting Waiver]
Dear Mr./Ms. [Name]:
This letter is being delivered to you in connection with the offering by Biohaven Pharmaceutical Holding Company Ltd., a British Virgin Islands corporation (the Company ) of Common Shares, without par value (the Common Shares ), of the Company and the lock-up letter dated , 20 (the Lock-up Letter ), executed by you in connection with such offering, and your request for a [waiver] [release] dated , 20 , with respect to Common Shares (the Shares ).
Each of Morgan Stanley & Co. LLC and Piper Jaffray & Co. hereby agrees to [waive] [release] the transfer restrictions set forth in the Lock-up Letter, but only with respect to the Shares, effective , 20 ; provided, however, that such [waiver] [release] is conditioned on the Company announcing the impending [waiver] [release] by press release through a major news service at least two business days before effectiveness of such [waiver] [release]. This letter will serve as notice to the Company of the impending [waiver] [release].
Except as expressly [waived] [released] hereby, the Lock-up Letter shall remain in full force and effect.
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Morgan Stanley & Co. LLC |
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Piper Jaffray & Co. |
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Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto |
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cc: Company
FORM OF PRESS RELEASE
[Name of Company]
[Date]
[Name of Issuer] (the Company ) announced today that Morgan Stanley & Co. LLC and Piper Jaffray & Co., the co-bookrunners in the Companys recent public sale of of its Common Shares is [waiving][releasing] a lock-up restriction with respect to Common Shares held by [certain officers or directors] [an officer or director] of the Company. The [waiver][release] will take effect on , 20 , and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
Exhibit 3.2
COMPANY NO. 1792178 Biohaven Pharmaceutical Holding Company Ltd. (the "Company") NOTICE OF CHANGE OF THE MAXIMUM NUMBER OFSHARESTHECOMPANY IS AUTHORISED TO ISSUE pursuant to section 40 of the BVI Business Companies Act (as amended) INCREASE IN THE AUTHORISED SHARES OF THE COMPANY IT WAS RESOLVED: Amendment of the Memorandum and Articles of Association and Change in Number of Authorised Shares 2 (a) It is noted that the Company propose$ to change the ma)( mum number of sharee that the Company is ;u..Jttlorised to Issue from 49,242,172 shares of no par value each to 61,242,172 shares of no par value each (the cha nge of Authorised Shares"). (b) It is noted that, 11"1 connection with the Change of Authorised Shares. the Company proposes to amend the memorandum of association of lhe Company (the "Current Memorandum") currently registered by the Registrar of Corporate Affairs in the British Virgin Islands (the "Registrar') by deleting clause 6 of the Cun-eflt Memorandum in its ll'ntirety and inserting a 1'\eW clause 6 as totiOW$ (tt"le "Propoaed Amendments"): " 6 Maximum Number of Authorised Shares The Cllmpany Is authorised to issue a totaf of 61,242,172 Shares divirieri Into two classes as mJJows: 50,000,000 common Shares nf no p Jr veluP. a h: (the "Common Shares"): and 11,242,172 serits A oonWJrlibla prafamKf Shar9s tJf no ptar value ear:n (the ,.Sarias A Preferred ShBTNj (sur.h Set'ies A PI"E:ferred Shares to be fs!fued fn such series as the Directors may datermintfrom tim6 to time), 6.1 (a) (b) each Shhaving the rights and being subject to thtrestrictions set out in this Memorandum and the ArticJas. For tha purposes of Section Q of the AGt, any rights, privileges, restrictions and conditions attaching to any of the Sharas as provid6d for in rhe Articles ara daamed to b6 sat out and stated in full in this M8morandum.
6.2 Subject at all times to the provisions of clauses 10 and 11 of this Memorandum, the Directors or Members may from time to time by Resolution of Directors or Resolution of Members increase or decrease the maximum number of Shares the Company is authorised to issue, by amendment to this Memorandum in accordance with the provisions below. It is noted that the Proposed Amendments will be effective from the date of registration by the Registrar. (c) Dated this 21st day of April, 2017 For and on behalf of Maples Corporate Services (BVI) Limited Registered agent of the Company
Exhibit 5.1
Our ref: DTP/685602-000001/19146406v1
Biohaven Pharmaceutical Holding Company Ltd. |
Kingston Chambers |
P.O. Box 173 |
Road Town, Tortola |
British Virgin Islands |
24 April 2017
Dear Sirs
Biohaven Pharmaceutical Holding Company Ltd. (the Company)
We have acted as counsel as to British Virgin Islands law to the Company and have been asked to provide this legal opinion in connection with the Companys registration statement on Form S-1, including all amendments or supplements thereto, filed with the United States Securities and Exchange Commission (the Commission ) under the United States Securities Act of 1933 (the SEC Act ), as amended, (Registration No. 333-217214) (the Registration Statement ) in respect of the proposed initial offering (the IPO ) of up to 9,583,333 common shares in the Company with no par value (the Shares ). Such public offering is being underwritten pursuant to an underwriting agreement (the Underwriting Agreement ) to be entered into between (1) the Company, (2) Morgan Stanley & Co. LLC and (3) Piper Jaffray & Co.
1 Documents Reviewed
We have reviewed originals, copies, drafts or conformed copies of the following documents:
1.1 The public records of the Company on file and available for public inspection at the Registry of Corporate Affairs in the British Virgin Islands (the Registry of Corporate Affairs ) on 21 April 2017, including the Companys Certificate of Incorporation and its Memorandum and Articles of Association (the Memorandum and Articles ).
1.2 The records of proceedings on file with and available for inspection on 21 April 2017 at the British Virgin Islands High Court Registry (the High Court Registry ).
1.3 The written resolutions of the board of directors of the Company dated 6 April 2017 (the Resolutions ).
1.4 A Certificate of Incumbency dated 21 April 2017, issued by Maples Corporate Services (BVI) Limited, the Companys registered agent (the Registered Agents Certificate ).
1.5 The Registration Statement.
1.6 The amended and restated shareholders agreement dated 31 October 2016 made between, the Company and those persons named in schedule A thereto (the Shareholders Agreement ).
1.7 The waiver or registration rights and notice and conversion and termination agreement dated 17 March 2017 made between the Company and the Majority Holders (as such term is defined in the Shareholders Agreement) (the Waiver ).
2 Assumptions
The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter. These opinions only relate to the laws of the British Virgin Islands which are in force on the date of this opinion letter. In giving the following opinions we have relied (without further verification) upon the completeness and accuracy, as at the date of this opinion letter, of the Registered Agents Certificate. We have also relied upon the following assumptions, which we have not independently verified:
2.1 Copies of documents, conformed copies or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals.
2.2 All signatures, initials and seals are genuine.
2.3 The Memorandum and Articles remain in full force and effect and are unamended.
2.4 The Resolutions were signed by all the directors in the manner prescribed in the Memorandum and Articles of the Company, including as to the disclosure of any directors interests in the Registration Statement, and have not been amended, varied or revoked in any respect.
2.5 The members of the Company (the Members ) have not restricted or limited the powers of the directors of the Company in any way.
2.6 No invitation has been or will be made by or on behalf of the Company to the public in the British Virgin Islands to subscribe for any of the Shares.
2.7 The Company will receive money or moneys worth in consideration for the issue of the Shares, and none of the Shares were or will be issued for less than par value.
2.8 The Waiver is legal, valid, binding and enforceable against all relevant parties in accordance with its terms under the laws of the State of Delaware and the effect of the Waiver, as a matter of Delaware law, is to waive the rights set forth at Clause 3.3 of the Shareholders Agreement.
2.9 There is nothing under any law (other than the laws of the British Virgin Islands) which would or might affect the opinions set out below.
Save as aforesaid we have not been instructed to undertake and have not undertaken any further enquiry or due diligence in relation to the transaction the subject of this opinion.
3 Opinions
Based upon, and subject to, the foregoing assumptions and the qualifications set out below, and having regard to such legal considerations as we deem relevant, we are of the opinion that:
3.1 The issue of the Shares by the Company as contemplated by the Registration Statement has been authorised, and when issued and paid for in the manner described in the Registration Statement and in accordance with the Resolutions, such Shares will be legally issued, fully paid and non-assessable. As a matter of British Virgin Islands law, a share is only issued when it has been entered in the register of members of the Company.
4 Qualifications
The opinions expressed above are subject to the following qualifications:
4.1 Under section 42 of the Act, the entry of the name of a person in the register of members of a company as a holder of a share in a company is prima facie evidence that legal title in the share vests in that person. A third party interest in the shares in question would not appear. An entry in the register of members may yield to a court order for rectification (for example, in the event of inaccuracy or omission).
4.2 Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this opinion.
4.3 In this opinion, the phrase non-assessable means, with respect to the Shares in the Company, that a shareholder shall not, solely by virtue of its status as a shareholder, be liable for additional assessments or calls on the Shares by the Company or its creditors (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstance in which a court may be prepared to pierce or lift the corporate veil).
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the heading Legal Matters in the prospectus included in the Registration Statement. In providing our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the SEC Act or the rules and regulations of the Commission thereunder.
This opinion is addressed to you and may be relied upon by you, your counsel and purchasers of Shares pursuant to the Registration Statement. This opinion is limited to the matters detailed herein and is not to be read as an opinion with respect to any other matter.
Yours faithfully
/s/ Maples and Calder
Maples and Calder
Exhibit 10.2
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
ALS BIOPHARMA AGREEMENT
THIS AGREEMENT (the Agreement) by and among ALS Biopharma, LLC, a Delaware limited liability company having a place of business at 3805 Old Easton Road, Doylestown, PA 18902 (ALS), Fox Chase Chemical Diversity Center Inc., a Delaware corporation having a place of business at 3805 Old Easton Road, Doylestown, PA 18902 (FCCDC) and Biohaven Pharmaceutical Holding Company, Ltd., a British Virgin Island company with a business office located at 234 Church Street, Suite 301, New Haven, Connecticut 06520 (Biohaven) is effective as of the date of final execution (EFFECTIVE DATE).
1. BACKGROUND
1.1 FCCDC has been developing a series of riluzole-based pro-drugs and certain patent applications related thereto and any other patents or patent applications related to the subject matter of this Agreement together with any continuations, divisionals, and continuations-in-part, to the extent the claims of any such patent or patent application arc directed to the subject matter described in the patent applications, any reissues, re-examinations, or extensions thereof, or substitutes therefor; and the relevant international equivalents of any of the foregoing have been filed in the name of FCCDC alone listed on Appendix B hereto (collectively, the SECONDARY PATENT RIGHTS) or in conjunction with Rutgers University (Rutgers) hereinafter listed on Appendix A hereto (the ORIGINAL PATENT RIGHTS and together with the SECONDARY PATENT RIGHTS, the PATENT RIGHTS). If any patents or patent applications covering IMPROVEMENTS are created, they shall also become part of the PATENT RIGHTS.
1.2 FCCDC has entered into (i) a License Agreement with ALS dated August 21, 2014 to allow ALS the right to exploit, utilize, develop and license the PATENT RIGHTS (the ALS LICENSE) and (ii) a Collaboration Agreement with Rutgers dated as of July 2013 related to riluzole pro-drugs for Melanoma and amyotrophic lateral sclerosis, allowing Rutgers to develop and exploit the ORIGINAL PATENT RIGHTS (the COLLABORATION AGREEMENT).
1.3 Pursuant to the ALS LICENSE and COLLABORATION AGREEMENT, ALS has obtained the right from FCCDC and Rutgers to grant licenses, including exclusive licenses, for the ORIGINAL PATENT RIGHTS.
1.4 ALS wishes to enter into this Agreement with Biohaven to further develop and commercialize the technology, compounds, and methods related to the PATENT RIGHTS, including the development of IMPROVEMENTS.
1.5 Biohaven has indicated to both ALS and FCCDC that it needs to own the PATENT RIGHTS, including the IMPROVEMENTS, in order to help Biohaven better develop drugs, raise money and otherwise exploit the PATENT RIGHTS.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.6 ALS and Biohaven desire to enter into a separate collaboration agreement regarding jointly exploring additional Indications for prodrugs of riluzole other than ALS, GAD and oncology, including jointly applying for non-dilutive research grant funding and jointly conducting the related research.
1.7 ALS and FCCDC are willing to transfer pursuant to an ASSIGNMENT the PATENT RIGHTS, including any IMPROVEMENTS, to Biohaven, subject to the terms and conditions of this Agreement, and Biohaven is willing to accept such ASSIGNMENT, each on the terms and conditions set forth herein.
1.8 In consideration of these statements and mutual promises, ALS, FCCDC and Biohaven agree to the terms of this Agreement,
2. DEFINITIONS
The following terms used in this Agreement shall be defined as set forth below:
2.1 AFFILIATE shall mean, with respect to a party, any entity or person that directly or indirectly controls, is controlled by or is under common control with ALS, FCCDC or Biohaven. For purposes of this definition, control means possession of the power to direct the management of such entity or person, whether through ownership of more than fifty percent (50%) of voting securities, by contract or otherwise.
2.2 ASSIGNMENT shall mean the assignment of PATENT RIGHTS and the assignment of any IMPROVEMENTS by ALS to Biohaven in the form of the assignment document attached hereto as Exhibit A hereto.
2.3 CLINICAL TRIAL shall mean a PHASE I CLINICAL TRIAL, PHASE II CLINICAL TRIAL, PHASE III CLINICAL TRIAL, or a PIVOTAL TRIAL.
2.4 CONFIDENTIAL INFORMATION shall mean all information disclosed by one party to the other during the negotiation of or under this Agreement in any manner, whether orally, visually or in tangible form, that relates to riluzole pro-drugs, the PATENT RIGHTS or the Agreement itself, unless such information is subject to an exception described in Article 8.2; provided, however , that CONFIDENTIAL INFORMATION that is disclosed in tangible form shall be marked Confidential at the time of disclosure or shall be of the type that a reasonable person would deem to be confidential and CONFIDENTIAL INFORMATION that is disclosed orally or visually shall be identified as confidential at the time of disclosure and subsequently reduced to writing, marked confidential and delivered to the other party within thirty (30) days of such disclosure. CONFIDENTIAL INFORMATION shall include, without limitation, materials, know-how and data, technical or non-technical, trade secrets, inventions, methods and processes, whether or not patentable. Notwithstanding any other provisions of this Article 4, CONFIDENTIAL INFORMATION of Biohaven that is subject to Article 8 of this Agreement is limited to information that Biohaven supplies
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
pursuant to Biohavens obligations under Articles 7 and 9 of this Agreement, unless otherwise mutually agreed to in writing by the parties.
2.5 EARNED ROYALTY is defined in Article 6.1.
2.6 EFFECTIVE DATE is defined in the introductory paragraph of this Agreement.
2.7 FDA shall mean the U.S. Food and Drug Administration.
2.8 FIELD shall mean the manufacturing, use, sale and/or marketing of therapeutics and related diagnostics for any INDICATION of the treatment of humans or animals.
2.9 IMPROVEMENT means any modification, enhancement, new formulation, new use, new indication or other improvement of any of the PATENT RIGHTS, PATENT METHOD or PATENT PRODUCT, provided that the manufacture, use, sale or import of such modification, enhancement or improvement, new use, new indication or improvement, if unlicensed, would fall within the scope of one or more claims of any of the PATENT RIGHTS. In addition, IMPROVEMENT shall include any data, information, discoveries, conceptions, ideas, inventions, innovations, improvements, enhancements, modifications, technological developments, processes, procedures, methods, techniques, systems, designs, protocols, formulae, formulations, molecules, compounds, compositions, specifications, trade secrets, know how, test results, studies, analyses, raw material sources, samples, production technology, results of research and development, programs and information and works of authorship, and all recordings, graphs, drawings, reports, analyses, and other documents and other information in any form whether or not specifically listed herein and whether or not patentable, copyrightable, or susceptible to any other forma legal protection, made or conceived or reduced to practice in connection with the Research Plan as set forth in Appendix C. For avoidance of doubt, all IMPROVEMENTS that constitute patents or patent applications shall be added to, and made a part of, the PATENT RIGHTS without further reference thereto. ALS and FCCDC covenant and agree that from time to time if requested by Biohaven, each and/or both will execute and deliver such further ASSIGNMENT documents as may be necessary or desirable to transfer such IMPROVEMENTS to Biohaven in a form substantially similar to Exhibit A attached hereto.
2.10 IND shall mean an investigational new drug application filed with the FDA prior to beginning clinical trials in humans in the United States or any comparable application filed with regulatory authorities in or for a country or group of countries other than the United States.
2.11 INDICATION(S) shall mean any disease, illness, mental condition or other malady of humans or animals. INDICATION shall specifically include treatment of amyotrophic lateral sclerosis, [* * *].
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
2.12 INITIATE or INITIATION or INITIATES or any variant thereof shall mean, with respect to a CLINICAL TRIAL, the first dose of a PATENT PRODUCT administered to a human subject by or on behalf of Biohaven, LICENSEE, or any of their respective AFFILIATES.
2.13 INSOLVENT shall (i) have the meaning set forth in the United States Federal Bankruptcy Law, as amended from time to time, or (ii) mean that a party has commenced bankruptcy, reorganization, receivership or insolvency proceedings, or any other proceeding under any Federal, state or other law.
2.14 LICENSEE shall mean any third party licensed by Biohaven to make, have made, use, sell, have sold, import, export or practice any PATENT PRODUCT.
2.15 LICENSEE INCOME shall mean consideration in any form received by Biohaven or an AFFILIATE in connection with a grant to any LICENSEE or ASSIGNEE of a license, cross-license, option, or other right, license, privilege or immunity to make, have made, use, sell, have sold, distribute, practice, import or export PATENT PRODUCTS, but excluding consideration included within EARNED ROYALTIES. LICENSEE INCOME shall include, without limitation, any license signing fee, license maintenance fee, option fee or other payment pursuant to an option, unearned portion or any minimum royalty payment received by Biohaven, equity, distribution or joint marketing fee, research and development funding in excess of Biohavens cost of performing such research and development, and any consideration received for an equity interest in, extension of credit by or other investment in Biohaven to the extent such consideration exceeds the fair market value of the equity or other interest as determined by an independent appraiser mutually agreeable to the parties. LICENSEE INCOME shall also include any sale or extension of credit to Biohaven for less than fair market value, as determined by an independent appraiser. In case an extension of credit or loan to Biohaven by a third party is forgiven in whole or in part by the third party, such amount shall constitute LICENSEE INCOME.
2.16 NDA shall mean New Drug Application filed with the FDA.
2.17 NET SALES shall mean:
(a) gross invoice price received from the sale, lease or other transfer, practice or disposition of the PATENT PRODUCTS, or from services performed using or constituting PATENT PRODUCTS by Biohaven, LICENSEES or any of their respective AFFILIATES or ASSIGNEES to third parties, except as set forth in Article 2.17(b), less the following deductions, provided they actually pertain to the disposition of the PATENT PRODUCTS and are separately invoiced:
i. all discounts, credits and allowances on account of returns;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ii. freight to customers and insurance on PATENT PRODUCTS paid by Biohaven;
iii. duties, taxes and other governmental charges levied on the sale, transportation, delivery or practice of PATENT PRODUCTS, but not including income taxes; and
iv. unpaid accounts or bad debt, provided that the foregoing shall not exceed [* * *] of the amounts invoiced in 2.16(a).
No deductions shall be made for any other costs or expenses, including but not limited to [* * *].
(b) Notwithstanding anything contained herein to the contrary, NET SALES shall not include the gross invoice price for PATENT PRODUCTS sold to, or services performed using PATENT PRODUCTS for, any AFFILIATE unless such AFFILIATE is an end-user of any PATENT PRODUCT, in which case such consideration shall be [* * *].
(c) There shall be no deductions, except as specified in this Article 2.17, made to [* * *].
(d) There shall be no deductions made to NET SALES for the purpose of [* * *].
2.18 OBSERVER RIGHTS shall mean the right to be admitted to all Board of Director meetings, except for compensation and/or executive session discussions.
2.19 PATENT METHOD shall mean any method, procedure, service or process the practice of which is claimed by a VALID CLAIM of a PATENT RIGHT, or which uses a PATENT PRODUCT of the type defined in the definition of PATENT PRODUCT.
2.20 PATENT PRODUCT shall mean any product (including any drug candidate, chemical compound, formulation apparatus or kit) or component part thereof, if the manufacture, use, sale, import, export or practice thereof is claimed by a VALID CLAIM of the PATENT RIGHTS or any PATENT METHOD.
2.21 PATENT RIGHTS shall have the meaning set forth in Articles 1.1 and 2.9.
2.22 PHASE I CLINICAL TRIAL shall mean a human clinical trial constituting the initial introduction of an investigational new drug into humans, as defined in 21 C.F.R §312.21(a) and as practiced according to the standards of the pharmaceutical industry.
2.23 PHASE II CLINICAL TRIAL shall mean a human clinical trial conducted to evaluate the effectiveness of a drug for a particular INDICATION in patients with a disease and to determine the common short-term side effects and risks associated with the drug as
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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defined in 21 C.F.R §312.21(b) and as practiced according to the standards of the pharmaceutical industry.
2.24 PHASE III CLINICAL TRIAL shall mean expanded controlled and uncontrolled human clinical trials performed after PHASE II CLINICAL TRIAL(S) evidence suggesting effectiveness of an investigational new drug, as defined by 21 C.F.R §312.21(c), and as practiced according to the standards of the pharmaceutical industry for a Phase III clinical trial and prior to the filing of an NDA or comparable request for marketing approval.
2.25 PIVOTAL TRIAL shall mean a controlled human clinical trial to evaluate the safety and efficacy of a PATENT PRODUCT in which data are sufficient to form the basis for the filing of an NDA. A PIVOTAL TRIAL may not necessarily be a PHASE III CLINICAL TRIAL.
2.26 PREEMPTIVE RIGHTS shall mean the right of a PARTY to purchase shares of the COMPANY in any offering in proportion to its share or warrant holdings. If a warrant expires, terminates or is exercised, the PREEMPTIVE RIGHTS attached to such warrant expire as well.
2.27 REASONABLE COMMERCIAL EFFORTS shall mean documented efforts that are consistent with those utilized by companies of similar size and type that have successfully developed products and services similar to the PATENT PRODUCTS.
2.28 TERM is defined in Article 3.3.
2.29 TERRITORY shall mean worldwide.
2.30 VALID CLAIM shall mean a pending, issued or unexpired claim of the PATENT RIGHTS that has not been pending as a patent application for more than [* * *] years from the date of filing of the earliest priority application, so long as such claim shall not have been irrevocably abandoned or declared to be invalid in a final unappealable decision of a court or other authority or competent jurisdiction through no fault or cause of Biohaven; provided, however , that if a pending claim results in an issued patent after the period indicated in this Article 2.28, it shall thereafter again be a VALID CLAIM.
3. PATENT RIGHTS ASSIGNMENT AND TERM
3.1 Subject to all the terms and conditions of this Agreement, and upon payment in full to ALS of the consideration described in Article 5.1(a), ALS and FCCDC shall make the ASSIGNMENT, and transfer and convey the PATENT RIGHTS to Biohaven, including the right to license the PATENT RIGHTS, pursuant to an Assignment of Patents and Patent Applications substantially in the form of Exhibit A attached hereto. For the avoidance of doubt, ALS and FCCDC shall assign to Biohaven the ORIGINAL PATENT RIGHTS it owns subject to the previously existing rights of Rutgers, and shall
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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assign to Biohaven their rights in the SECONDARY PATENT RIGHTS free and clear of any claim or encumbrance. ALS and FCCDC shall assign and transfer and convey the IMPROVEMENTS to Biohaven, using a form substantially like the ASSIGNMENT, and when the IMPROVEMENTS are created, free and clear of any claim or encumbrance.
3.2 To the extent that any invention included within the PATENT RIGHTS has been funded in whole or in part by the United States government, the United States government retains certain rights in such invention as set forth in 35 U.S.C. §200-212 and all regulations promulgated thereunder, as amended, and any successor statutes and regulations (the FEDERAL PATENT POLICY). Biohaven acknowledges and shall comply with all aspects of the FEDERAL PATENT POLICY applicable to the PATENT RIGHTS, including the obligation that PATENT PRODUCTS used or sold in the United States be manufactured substantially in the United States. Nothing contained in this Agreement obligates or shall obligate ALS or FCCDC to take any action that would conflict in any respect with its past, current or future obligations to the United States Government under the FEDERAL PATENT POLICY with respect to the PATENT RIGHTS.
3.3 Unless terminated earlier as provided in Article 12, the term of this Agreement (the TERM) shall commence on the EFFECTIVE DATE, and shall expire on a country-by-country basis, on the date on which the last of the VALID CLAIMS of the PATENT RIGHTS in such country expires, lapses or is declared to be invalid by a non-appealable decision of a court or other authority of competent jurisdiction.
3.4 Nothing in this Agreement shall be construed to grant or assign by implication, estoppel or otherwise any licenses or rights under any other patents of any party other than the PATENT RIGHTS. Except as expressly provided in this Agreement, under no circumstances will a party, as a result of this Agreement, obtain any interest in or any other right to any technology, know-how, patents, patent applications, materials or other intellectual or proprietary property of any other party.
3.5 In the event that Biohaven affirmatively abandons the making, having made, using, selling, having sold, development, exploitation, licensing, researching, exporting or importing of all PATENTED PRODUCTS covered by one or more claims of any patent or patent application in the PATENT RIGHTS for PATENT PRODUCTS, Biohaven agrees to reassign to ALS all of its ownership interest in the applicable patent and/or patent application to ALS. Should Biohaven cease operation (other than by sale, merger or consolidation with another entity) and is not prohibited by contract law (including any applicable bankruptcy law) or otherwise from transferring the PATENT RIGHTS to ALS, Biohaven shall do so. All costs and expenses of such reassignment shall be borne by ALS.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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4. DUE DILIGENCE
4.1 Biohaven shall use all REASONABLE COMMERCIAL EFFORTS to diligently commercialize and develop markets for the PATENT PRODUCTS.
4.2 Biohaven shall immediately send ALS a notice of reversion if at any time Biohaven abandons or suspends its research, development or marketing of all the PATENT PRODUCTS, or its intent to research, develop and market PATENT PRODUCTS.
4.3 Biohaven agrees that ALS shall be entitled to a license back with respect to any such PATENT RIGHTS as Biohaven may choose from time to time not to pursue or exploit at present or in the future, as Biohaven determines in its sole discretion. ALS shall pay all costs and expenses associated with any such license of PATENT RIGHTS.
5. PAYMENTS AND MILESTONES
5.1 Initial Payments .
(a) In exchange for the Assignment of Patents and Patent Applications set forth in Section 3.1 hereof, Biohaven shall pay to ALS the sum of One Million Dollars ($1,000,000.00) within Ten (10) Days of the EFFECTIVE DATE.
(b) Biohaven shall pay an additional One and One Half Million Dollars ($1,500,000) to ALS in three equal installments over eighteen (18) months from the EFFECTIVE DATE as funding for research by ALS upon a mutually agreed upon research budget and scheduling for the sole purpose of research related to riluzole prodrugs or their analogs and uses thereof as agreed to by Biohaven (the Research Plan). The parties shall endeavor to complete an agreed upon Research Plan within [* * *]-days of the EFFECTIVE DATE and shall be appended to this Agreement as Appendix C when complete.
(c) ALS shall make all payments to FCCDC required under the Original ALS LICENSE from the amounts paid to ALS by Biohaven pursuant to this Section
5.2 Milestones and other Consideration
(a) Biohaven shall pay to ALS the sum of Three Million Dollars ($3,000,000.00) within [* * *] days of [* * *].
(b) Biohaven shall pay ALS the sum of One Million Dollars ($1,000,000.00) within [* * *] days of [* * *].
(c) Promptly after the EFFECTIVE DATE (but in no event more than forty-five (45) business days thereafter), Biohaven shall grant to ALS one Hundred (100) Shares of its common shares. In addition, promptly after the EFFECTIVE DATE (but in no event more than forty-five (45) business days thereafter), ALS shall receive 550 warrants for Biohaven stock that vest immediately with a strike price of $2800 and 650 additional warrants of Biohaven stock that vest upon the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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filing of the first IND for a PATENT PRODUCT with a strike price of $2800. A form of the warrant is attached in Appendix D.
(d) As a condition to the foregoing, ALS agrees to become a party to the Biohaven Stockholder Agreement dated as of January 6, 2014, as amended from time to time. ALS will receive OBSERVER RIGHTS upon the filing of the first IND for a PATENT PRODUCT. The warrants granted to ALS will also have PREEMPTION RIGHTS.
(e) Any of the payments in this Section 5.2 shall be payable in cash, or, upon the mutual agreement of ALS and Biohaven, some or all of any such payment may be made to ALS in equity of Biohaven, its successors or assigns, with the valuation of such equity to be based on the last round of financing, if Biohaven (or its successors or assigns) is a private company, or at the public stock price, if Biohaven (or its successors or assigns) is a public company on the date that such payment is accrued.
(f) During the TERM while Biohaven remains a private company, ALS shall be granted the opportunity to participate in equity offerings of Biohaven as other current shareholders of Biohaven are offered, upon the same terms and conditions (including valuation) as such other shareholders in such equity offering.
5.3 Neither the consideration set forth in Article 5.1 nor the milestone royalty of Article 5.2 shall be credited against EARNED ROYALTIES payable under Article 6.1.
6. EARNED ROYALTIES
6.1 During the TERM of this Agreement, Biohaven and its AFFILIATES, LICENSEES and ASSIGNS shall pay to ALS an earned royalty on worldwide annual cumulative NET SALES of PATENT PRODUCTS with a VALID CLAIM as follows: (a) for any [* * *] Indication at a rate of [* * *] percent ([* * *]%) per annum; (b) for an [* * *] Indication at a rate of [* * *] percent ([* * *]%) per annum; and (c) for all Indications other that as set forth in (i) and (ii) hereof, at a rate of [* * *] percent ([* * *]%) per annum (EARNED ROYALTIES).
Biohaven shall pay all EARNED ROYALTIES accruing to ALS on a quarterly basis within [* * *] days of the end of each quarter during the TERM beginning in the first year in which NET SALES occur.
6.2 All EARNED ROYALTIES and other payments due under this Agreement shall be paid to ALS in United States Dollars. In the event that conversion from foreign currency is required in calculating a payment under this Agreement, the exchange rate used shall be the Interbank rate quoted by Citibank at the time the payment is due. If overdue, any EARNED ROYALTIES, milestones or any other payments due under this Agreement
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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shall bear interest until payment in full at a per annum rate of [* * *] percent ([* * *]%) above the prime rate in effect at Citibank on the due date.
6.3 In the event that Biohaven is required to pay THIRD PARTY ROYALTIES (as defined below), then Biohaven may deduct an amount equal to [* * *] percent ([* * *]%) of any THIRD PARTY ROYALTIES actually paid by Biohaven from any EARNED ROYALTY amounts due to ALS hereunder; provided, however , that in no event shall the EARNED ROYALTIES under this Article 6.3 otherwise due to ALS be less than [* * *] percent ([* * *]%) of the EARNED ROYALTIES that would be payable to ALS absent the effects of this Article 6.3. THIRD PARTY ROYALTIES shall mean royalties actually paid by Biohaven to a third party pursuant to one or more agreements entered into by Biohaven to license patents that otherwise would be infringed by Biohaven, its AFFILIATES, LICENSEES or ASSIGNEES due to the manufacture, use or sale in the TERRITORY of the PATENT PRODUCT, such obligation to pay THIRD PARTY ROYALTIES to be determined on a country-by-country or territory-by-territory basis for each PATENT PRODUCT. Notwithstanding the foregoing, this Section 6.3 shall not apply to either (1) [* * *]; or (2) [* * *].
7. LICENSES
7.1 Biohaven, its AFFILIATES, LICENSEES or ASSIGNEES shall pay the EARNED ROYALTY to ALS or its assignee on NET SALES received by Biohaven, its AFFILIATES, LICENSEES or ASSIGNEES from the PATENT RIGHTS based on Article 6 above, regardless of the royalty rates payable by LICENSEES to Biohaven under a separate license agreement.
7.2 Biohaven agrees that it has sole responsibility to promptly:
(a) provide ALS with a copy of any amendments to licenses granted by Biohaven related to the PATENT RIGHTS and to notify ALS of termination of any such license; and
(b) deliver copies to ALS of all reports provided to Biohaven by LICENSEES. Such reports from LICENSEES shall include the information required to be provided by Biohaven hereunder.
7.3 ALS acknowledges that it has no interest or claim in any LICENSEE INCOME, but only is due EARNED ROYALTIES related to any LICENSEE or ASSIGNEE use of the PATENT RIGHTS as provided in Article 6 above.
7.4 Subject to the terms of this Agreement, Biohaven hereby grants to ALS a nonexclusive license for the Patent Rights without the right to transfer assign or sublicense, for the sole purpose of conducting research for the Research Plan.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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7.5 Subject to the terms of this Agreement, ALS hereby grants to Biohaven a nonexclusive license to any and all trade secrets and know-how ALS has that are related to, necessary or useful to practice the Patent Rights for the purpose of using, making, manufacturing, selling and promoting Licensed Products in the Territory.
8. CONFIDENTIALITY AND PUBLICITY
8.1 Subject to the parties rights and obligations pursuant to this Agreement, ALS and Biohaven agree that during the TERM and for [* * *] years thereafter, each of them:
(a) will keep confidential and will cause their AFFILIATES and, in the case of Biohaven, its LICENSEES, to keep confidential, CONFIDENTIAL INFORMATION disclosed to it by the other party, by taking whatever action the party receiving the CONFIDENTIAL INFORMATION would take to preserve the confidentiality of its own CONFIDENTIAL INFORMATION, which in no event shall be less than reasonable care; and
(b) will only disclose that part of the others CONFIDENTIAL INFORMATION to its officers, employees or agents (including, without limitation, advisors such as its attorneys and accountants) (collectively, REPRESENTATIVES)who are advised of its confidential nature, who agree to keep such confidential and who need to know such CONFIDENTIAL INFORMATION for purposes of carrying out its rights and responsibilities under this Agreement, except that Biohaven may disclose Confidential Information to its investors. potential investors, banks, AFFILIATES, LICENSEES, ASSIGNEES and advisors; and
(c) will not use the other partys CONFIDENTIAL INFORMATION other than as expressly permitted by this Agreement or disclose the others CONFIDENTIAL INFORMATION to any third parties (other than to its REPRESENTATIVES under requirements of confidentiality) under any circumstance without advance written permission from the other party; and
(d) will be responsible for any breach by this Article 8 by its REPRESENTATIVES as if such REPRESENTATIVES were party hereto; and
(e) will, within [* * *] days of termination of this Agreement, destroy or return all the CONFIDENTIAL INFORMATION disclosed to it by the other party pursuant to this Agreement except for one copy which may be retained by the recipient for monitoring compliance with this Article 8 and any surviving clauses.
8.2 The obligations of confidentiality described above shall not pertain to that part of the CONFIDENTIAL INFORMATION that:
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) is shown to have been known to or developed by the recipient prior to the disclosure by the disclosing party; or
(b) is at the time of disclosure or has become thereafter publicly known through no fault or omission attributable to the recipient; or
(c) is rightfully given to the recipient from sources independent of the disclosing party; or
(d) is independently developed by the receiving party without use of or reference to the CONFIDENTIAL INFORMATION of the other party; or
(e) is required to be disclosed by law in the opinion of recipients attorney, but only after the disclosing party is, to the extent legally permissible, given prompt written notice and an opportunity to seek a protective order.
8.3 The financial terms of this Agreement constitute CONFIDENTIAL INFORMATION of each party.
8.4 Covenant Not to Compete . (a) Each of ALS, FCCDC and Allen Reitz (individually a POTENTIAL COMPETITOR and collectively the POTENTIAL COMPETITORS) hereby agrees that for a period of [* * *] years, such POTENTIAL COMPETITOR will not, singly, jointly, or as an employee, agent or partner of any partnership or as an officer, agent, employee, director, stockholder (except of not more than one percent (1%) of the outstanding stock of any company listed on a national securities exchange or actively traded in the over-the-counter market) or investor in any other corporation or entity, or as a consultant, advisor, or independent contractor to any such partnership, corporation or entity, or in any other capacity, directly, indirectly or beneficially, (i) own, manage, operate, join, control, or participate in the ownership, management, operation, or control of, or work for (as an employee, agent, consultant, advisor or independent contractor), or permit the use of his name by, or provide financial or other assistance to, any person, partnership, corporation, or entity which is in direct or indirect competition anywhere in Europe, the United States or Canada (the PROTECTED TERRITORY) with Biohavens sale of prodrugs of riluzole or PATENTED PRODUCTS, including, but not limited to, the business of designing, manufacturing, marketing, and selling PATENTED PRODUCTS, riluzole prodrugs or their analogs, [* * *] ; (ii) induce or attempt to induce any employee of Biohaven who, on the date hereof or at any time during the period covered by this restrictive covenant is an employee of Biohaven, to terminate his or her employment with Biohaven; provided , that this prohibition shall not apply to solicitations made to the public or the industry generally or employing any person who responds to such general solicitation, and that no POTENTIAL COMPETITOR shall be prohibited from employing any such person who contacts such POTENTIAL COMPETITOR on his or own initiative without any prohibited solicitation, or (iii) induce or attempt to induce any person, business, or entity which is a supplier, dealer, wholesaler, retailer, distributor or
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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customer of Biohaven or which otherwise is a contracting party with Biohaven, as of the date hereof or at any time during the period covered by this restrictive covenant, to terminate or modify in any way adverse to the interests of Biohaven, any written or oral agreement or understanding with Biohaven. Biohaven and each POTENTIAL COMPETITOR agree that the covenants set forth in this Section 8.4 have been negotiated with advice of counsel in the course of the sale of the PATENT RIGHTS, from which sale each POTENTIAL COMPETITOR shall receive substantial economic benefit, and therefore Biohaven and each POTENTIAL COMPETITOR agree that these covenants shall be enforced to the fullest extent permitted by law. Accordingly; if in any judicial or similar proceeding a court or any similar judicial body shall determine that such covenant is unenforceable because it covers too extensive a geographical area or survives too long a period of time, or for any other reason, then the parties intend that such covenant shall be deemed to cover only such maximum geographical area and maximum period of time and shall otherwise be deemed to be limited in such manner as will permit enforceability by such court or similar body.
8.5 Specific Performance . Each POTENTIAL COMPETITOR agrees that any breach by it or him of the provisions of Section 8.4 above may cause irreparable damage to Biohaven and that the recovery by Biohaven of money damages may not constitute an adequate remedy for such breach. Accordingly, each POTENTIAL COMPETITOR agrees that the provisions of Sections 8.4 above may be specifically enforced against him or it in addition to any other rights or remedies available to Biohaven on account of any such breach, and each Potential Competitor expressly waives the defense in any equitable proceeding that there is an adequate remedy at law for any such breach.
9. REPORTS, RECORDS AND INSPECTIONS
9.1 Biohaven, its AFFILIATES and ASSIGNS shall, within [* * *] days after its accounting firm delivers the annual financials for the applicable calendar year in which NET SALES are calculated, provide ALS with a written report detailing the NET SALES and uses, if any, made by Biohaven, its LICENSEES and AFFILIATES of PATENT PRODUCTS during the preceding calendar quarter and calculating the payments due pursuant to Article 6. NET SALES of PATENT PRODUCTS shall be deemed to have occurred on the date of invoice for such PATENT PRODUCTS. Each such report shall be certified and signed by an officer of Biohaven (or the officers designee), and must include:
(a) the number or amount, as appropriate, of PATENT PRODUCTS manufactured, sold, practiced, leased or otherwise transferred or disposed of by Biohaven, LICENSEES and AFFILIATES;
(b) a calculation of NET SALES for the applicable reporting period in each country, including the gross invoice prices charged for the PATENT PRODUCTS and any permitted deductions made, pursuant to Article 2.17 and/or Article 6.3;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(c) a calculation of total EARNED ROYALTIES or other payment due, including any exchange rates used for conversion; and
(d) names and addresses of all LICENSEES.
9.2 Biohaven, its AFFILIATES and its LICENSEES shall keep and maintain complete and accurate records and books containing an accurate accounting of all data in sufficient detail to enable verification of EARNED ROYALTIES and other payments under this Agreement. Biohaven shall preserve such books and records for [* * *]years after the calendar year to which they pertain. Such books and records shall be open to inspection by ALS or an independent certified public accountant selected by ALS, at ALSs expense, no more frequently than [* * *] per fiscal quarter, during normal business hours upon [* * *] days prior written notice, for the purpose of verifying the accuracy of the reports and computations rendered by Biohaven. In the event Biohaven underpaid the amounts due to ALS with respect to the audited period by more than [* * *] percent ([* * *]%), Biohaven shall pay the reasonable cost of such examination, together with the deficiency not previously paid and interest from the due date of such payment within [* * *] days of receiving notice thereof from ALS.
10. PATENT PROTECTION
10.1 After the EFFECTIVE DATE, Biohaven shall be responsible for any and all present and future on-going costs of filing, prosecution and maintenance of the PATENT RIGHTS. Upon the EFFECTIVE DATE, any and all such United States and foreign territory patent applications, and resulting issued patents shall become the property of Biohaven.
10.2 After the EFFECTIVE DATE, Biohaven shall be responsible for present and future ongoing costs and strategies of filing, prosecution and maintenance of all foreign patent applications, and patents contained in the PATENT RIGHTS in the countries outside the United States in the TERRITORY.
10.3 If Biohaven does not intend to pay the expenses of filing, prosecuting or maintaining a given patent application or a given patent in any country including the United States, or fails to pay the expenses of filing, prosecuting or maintaining a given patent application or patent in the United States, then Biohaven shall give ALS prompt written notice of such abandonment pursuant to Section 4.3 hereof unless it determines in good faith that such would not be in its best interest.
10.4 The costs mentioned in Articles 10.2 and 10.3 shall include, but are not limited to, any present and future taxes, annuities, working fees, maintenance fees, renewal and extension charges. ALS shall use its REASONABLE COMMERCIAL EFFORTS to provide Biohaven with a schedule of proposed patent filings, including jurisdictions and instruct patent counsel to provide fee estimates for review by Biohaven.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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10.5 All patent applications under the PATENT RIGHTS shall be prepared, prosecuted, filed and maintained by patent counsel chosen by Biohaven. Biohaven shall instruct patent counsel to keep ALS, FCCDC and Biohaven fully informed of the progress of all patent applications and patents, and to give ALS, FCCDC and Biohaven reasonable opportunity to comment on the type and scope of useful claims and the nature of supporting disclosures. ALS shall have no liability to Biohaven for damages; whether direct, indirect or incidental, consequential or otherwise, allegedly arising from its good faith decisions, actions and omissions in connection with such prosecution.
10.6 Biohaven shall mark, and shall require its AFFILIATES and LICENSEES to mark, all PATENT PRODUCTS that are tangible products, with the numbers of all patents included in PATENT RIGHTS that cover the PATENT PRODUCTS. Without limiting the foregoing, all PATENT PRODUCTS shall be marked in such a manner as to conform with the patent marking notices required by the law of any country where such PATENT PRODUCTS are made, sold, used or shipped, including, but not limited to, the applicable patent laws of that country.
11. INFRINGEMENT AND LITIGATION
11.1 Each party shall promptly notify the other in writing in the event that it obtains knowledge of infringing activity by third parties, or it is sued or threatened with an infringement suit, in any country in the TERRITORY, as a result of activities that concern the PATENT RIGHTS, and shall supply the other party with documentation of the infringing activities that it possesses.
11.2 During the TERM of this Agreement:
(a) Biohaven shall have the first right to defend the PATENT RIGHTS against infringement or interference by third parties. This right includes bringing any legal action for infringement and defending any counter claim of invalidity or action of a third party for declaratory judgment for non-infringement or non-interference. If, in the reasonable opinion of Biohavens counsel, ALS and/or FCCDC is required to be a named party to any such suit for standing purposes, Biohaven may join ALS and/or FCCDC as a party; provided , however , that Biohaven shall keep ALS and FCCDC reasonably apprised of all developments in any such action. Biohaven may settle such suits solely in its own name and moiety at its own expense and through counsel of its own selection; provided further , that to the extent that ALS believes that the EARNED ROYALTIES payable to ALS hereunder were reduced by such infringement, ALS shall be permitted to join any suit brought by Biohaven at ALS own cost and expense, and in such event seek compensation from such third party for its proportional share of any EARNED ROYALTIES determined by the court to be lost because of such infringement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) In the event Biohaven is permanently enjoined from exercising its rights under the PATENT RIGHTS pursuant to an infringement action brought by a third party, or if both Biohaven and ALS elect not to undertake the defense or settlement of a suit alleging infringement for a period of [* * *] months from notice of such suit, then either party shall have the right to terminate this Agreement in the country where the suit was filed with respect to the PATENT RIGHTS following [* * *] days written notice to the other party in accordance with the terms of Article 14.1.
12. TERMINATION
12.1 ALS shall have the right to terminate this Agreement or its applicability to one or more countries within the Territory upon [* * *] days prior written notice to Biohaven (such notice, a TERMINATION NOTICE) in the event Biohaven:
(a) fails to make any undisputed payment due and payable pursuant to this Agreement within the [* * *] day period after receipt of written notice a TERMINATION NOTICE from ALS; or
(b) commits a material breach of any other material provision of this Agreement which is not cured (if capable of being cured) or if such breach is not capable of being cured within [* * *] day period after receipt of a TERMINATION NOTICE from ALS; or
(c) as contemplated by Section 11.2(b) as to one or more countries within the Territory.
12.2 This Agreement shall terminate automatically in the event Biohaven shall cease to carry on its business or becomes INSOLVENT, or a petition in bankruptcy is filed against Biohaven and is consented to, acquiesced in or remains undismissed for [* * *] days, or Biohaven makes a general assignment for the benefit of creditors, or a receiver is appointed for Biohaven.
12.3 Biohaven shall have the right to terminate this Agreement or its applicability to one or more countries within the Territory upon [* * *] days prior written notice to ALS:
(a) in the event ALS commits a material breach of any of the provisions of this Agreement and such breach is not cured (if capable of being cured) within the [* * *] day period after receipt of written notice thereof from Biohaven, or upon receipt of such notice if such breach is not capable of being cured; or
(b) as to a specific country if no VALID CLAIMS exist in such country; or
(c) as contemplated by Section 11.2(b) as to one or more countries within the Territory.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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12.4 Upon termination of this Agreement or the partial termination of this Agreement in a specific country or countries, for any reason, the following shall occur:
(a) if the Agreement is terminated as to a specific country, no further EARNED ROYALTIES are due from PATENT PRODUCT sales within the applicable country or countries;
(b) if the Agreement is terminated in total because no VALID CLAIM exists for a PATENT PRODUCT, no additional EARNED ROYALTIES are due or payable.
(c) no additional reports specified under Article 4 or 9 shall be required as to a terminated country or countries (other than any reports relating to the period prior to such termination); and
(d) all undisputed payments incurred up to and including the effective date of termination shall be due and payable to ALS.
12.5 Termination of this Agreement shall not affect any rights or obligations accrued prior to the effective date of such termination, and specifically Biohavens obligation to pay all EARNED ROYALTIES and other payments specified by Article 4 and Article 6. In particular, but without limitation, the following provisions shall survive any termination: Article 8, the preservation and inspection obligations of Article 9, Article 12, this Article 12.5, Article 13.6, Article 13.8, Article 14, Article 6, Article 15.1, and Article 16. The parties agree that claims giving rise to indemnification may arise after the TERM or termination of the Agreement.
12.6 The rights provided in this Article 12 shall be in addition and without prejudice to any other rights, whether at law or in equity, which the parties may have with respect to any default or breach of the provisions of this Agreement.
12.7 Waiver by either party of one or more defaults or breaches shall not deprive such party of the right to terminate because of any subsequent default or breach.
13. INDEMNIFICATION; INSURANCE; WARRANTIES AND COVENANTS
13.1 Biohaven shall indemnify, defend and hold harmless ALS and its officers, directors, employees (including, without limitation, Allen Reitz), and agents (collectively, ALS INDEMNITEES), from and against any claim, liability, cost, expense, damage, deficiency, less, or obligation, of .any kind or nature (including, without limitation, reasonable attorneys fees and other costs and expenses of defense) (collectively, CLAIMS), based upon, arising out of or otherwise relating to this Agreement, including, without limitation, any cause of action relating to product liability, or any theory of liability (including without limitation tort, warranty; or strict liability) or the death, personal injury, or illness of any person or out of damage to any property related
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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in any way to the PATENT RIGHTS granted under this Agreement; or resulting from the production, manufacture, sale, use, lease, or other disposition or consumption or advertisement of the LICENSED PRODUCTS by Biohaven, its AFFILIATES, LICENSEES or any other transferees; or in connection with any Statement, representation or warranty of Biohaven, its AFFILIATES, LICENSEES or any other transferees with respect: to the PATENT PRODUCTS. Biohaven shall not settle or compromise the CLAIM without the prior written. consent of ALS, such consent not to be unreasonably withheld or delayed. Without limiting the foregoing, ALS may withhold its consent to any settlement or compromise that would in any manner constitute or incorporate an admission by ALS or require ALS to take or refrain from taking any action.
13.2 ALS shall indemnify, defend and hold harmless Biohaven and its officers, directors, employees, and agents (collectively, BIOHAVEN INDEMNITEES), from and against any CLAIMS, based upon, arising out of or otherwise relating to this Agreement, e the PATENT RIGHTS transferred under this Agreement; or in connection with any statement, representation or warranty of ALS or its AFFILIATES with respect to the PATENT PRODUCTS. ALS shall not settle or compromise the CLAIM without the prior written consent of Biohaven, such consent not to be unreasonably withheld or delayed. Without limiting the foregoing, Biohaven may withhold its consent to any settlement or compromise that would in any manner constitute or incorporate an admission by Biohaven or require Biohaven to take or refrain from taking any action.
13.3 Representations and Warranties or ALS . ALS represents and warrants to Biohaven, as of the date hereof and during the TERM, that: (a) ALS is a limited liability company duly formed, validly existing and in good. standing under the laws of the State of Delaware; (b) the Agreement and obligations expressed to be assumed by it under this Agreement are legal, valid, binding and enforceable obligations against ALS in Accordance with their respective terms; (c) the entry into and performance by ALS of this Agreement does not and will not conflict with any law or regulation applicable to it, or its constitutional documents; (d) other than Rutgers, ALS has not sold, assigned, licensed, endorsed, pledged, transferred, deposited under any agreement, or hypothecated the PATENT RIGHTS, or otherwise disposed of or created any encumbrance on the PATENT RIGHTS, and, other than Rutgers, no person, firm, corporation, agency or government. other than that ALS has or has asserted any right, title, claim or interest in the PATENT RIGHTS; (e) there is no action, suit or proceeding pending or currently threatened against ALS which questions the validity of this Agreement or the right of ALS to enter into this Agreement or transfer the PATENT RIGHTS, or to consummate the transactions contemplated hereby; and (f) to the best knowledge and belief of ALS, the PATENT RIGHTS do not infringe the intellectual property rights daily other person; (g) ALS, its affiliates and Allen Reitz do not have or intend to file any intellectual property rights related to riluzole, riluzole related compounds, analogs or prodrugs, riluzole combination compounds or chemical entities that are not included in the PATENT RIGHTS.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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13.4 Representations and Warranties of FCCDC . FCCDC represents and warrants to Biohaven, as of the date hereof and during the term of the Agreement, that: (a) FCCDC is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware; (b) the Agreement and obligations expressed to be assumed by it under this Agreement are legal, valid, binding and enforceable obligations against FCCDC in accordance with their respective terms; (c) the entry into and performance by FCCDC of this Agreement does not and will not conflict with any law or regulation applicable to it, or its constitutional documents; (d) other than Rutgers, FCCDC has not sold, assigned, licensed, endorsed, pledged; transferred, deposited under any agreement, or hypothecated the PATENT RIGHTS, or otherwise disposed of or created any encumbrance, on the PATENT RIGHTS, and, other than Rutgers, no person, firm, corporation, agency or government other than the FCCDC has or has asserted any right, title, claim or interest in the PATENT RIGHTS; (e) there is no action, suit or proceeding, pending or currently threatened against FCCDC which questions the. validity of this Agreement or the right of FCCDC to enter into this Agreement or transfer the PATENT RIGHTS, or to consummate the transactions contemplated hereby; and (f) to the best knowledge and belief of FCCDC, the PATENT RIGHTS do not infringe the intellectual property rights of any other person; (g) FCCDC, its affiliates and Allen Reitz do not. have or intend to file for any intellectual property rights related to riluzole, riluzole related compounds, analogs or prodrugs, riluzole combination compounds or chemical entities that are not included in the PATENT RIGHTS.
14. NOTICES
14.1 Any monetary payment, notice or other communication required by this Agreement (a) shall be in writing, (b) may be delivered personally or sent by reputable overnight courier with written verification of receipt or by registered or certified first class United States Mail, postage prepaid, return receipt requested, (c) shall be sent to the following addresses or to such other address as such party shall designate by written notice to the other party, and (d) shall be effective upon receipt:
FOR ALS : |
FOR Biohaven : |
Allen B. Reitz, Ph.D.
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President
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Locke Lord LLP
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Allen B. Reitz, Ph.D.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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15. LAWS, FORUM AND REGULATIONS
15.1 Any matter arising out of or related to this Agreement shall be governed by and in accordance with the substantive laws of the State of Delaware, without regard to its conflicts of law principles, except where the federal laws of the United States are applicable and have precedence. Any dispute arising out of or related to this Agreement shall be brought exclusively in a court of competent jurisdiction in the State of Delaware, and the parties hereby irrevocably submit to the jurisdiction of such courts.
15.2 Biohaven shall comply, and shall cause its AFFILIATES and LICENSEES to comply, with all foreign and United States federal, state, and local laws, regulations, rules and orders applicable to the testing, production, transportation, packaging, labeling, export, practice, sale and use of the PATENT PRODUCTS. In particular, Biohaven shall be responsible for assuring compliance with all United States export laws and regulations applicable to this Agreement and Biohavens activities under this Agreement.
16. MISCELLANEOUS
16.1 This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors and permitted assigns.
16.2 This Agreement constitutes the entire agreement of the parties relating to the PATENT RIGHTS and PATENT PRODUCTS, and all prior representations, agreements and understandings, written or oral, are merged into it and are superseded by this Agreement.
16.3 The provisions of this Agreement shall be deemed separable. If any part of this Agreement is rendered void, invalid, or unenforceable, such determination shall not affect the validity or enforceability of the remainder of this Agreement unless the part or parts which are void, invalid or unenforceable shall substantially impair the value of the entire Agreement as to either party.
16.4 Paragraph headings are inserted for convenience of reference only and do not form a part of this Agreement.
16.5 No person not a party to this Agreement, including any employee of any party to this Agreement, shall have or acquire any rights by reason of this Agreement. Nothing contained in this Agreement shall be deemed to constitute the parties partners or joint venturers with each other or any third party; and neither party shall be deemed the agent of the other.
16.6 This Agreement may not be amended or modified except by written agreement executed by each of the parties.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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16.7 Biohaven, or any LICENSEE or assignee, will not create, assume or permit to exist any lien, pledge, security interest or other encumbrance on this Agreement.
16.8 The failure of any party hereto to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver of either such provision or of the right of such party thereafter to enforce each and every provision of this Agreement.
16.9 This Agreement may be executed in any number of counterparts and any party may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.
16.10 Publicity . Neither Biohaven nor ALS will make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other partys express prior written consent, except as required under Laws or by any governmental agency or by the rules of any stock exchange on which the securities of the disclosing Party are listed, in which ease the party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other Party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure. Notwithstanding the foregoing, ALS and Biohaven agree to issue a joint press release regarding the Agreement with wording to be mutually agreed upon.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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IN WITNESS to their Agreement, the parties have caused this Agreement to be executed in duplicate originals by their duly authorized representatives.
ALS BIOPHARMA, LLC
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Allen B. Reitz |
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Declan Doogan |
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CEO |
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FOX CHASE CHEMICAL CENTER
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ALLEN REITZ, individually as to
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By: |
/s/ Allen B. Reitz |
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By: |
/s/ Allen B. Reitz |
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Name: |
Allen B. Reitz |
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Title: |
CEO |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT A
Assignment of Patents and Patent Applications
KNOW ALL MEN BY THESE PRESENTS , that ALS Biopharma LLC ( ALS ), a Delaware corporation having a place of business at 3805 Old Easton Road, Doylestown, PA 18902 (the Assignor ) and Biohaven Pharmaceutical Holding Company Ltd. , a company organized and existing under the laws of the Territory of the British Virgin Islands and having a place of business at 234 Church Street, Suite 301, New Haven, Connecticut 06520 (the Assignee ) have entered into an agreement with ALS Biopharma, LLC, dated as of August , 2015 (the Agreement ), pursuant to which the Assignor agreed to sell and Assignee agreed to buy patent and patent application rights listed on Exhibit A hereto. Except as otherwise stated herein, all terms used herein shall have the same meaning as set forth in the. Agreement.
W I T N E S S E T H:
WHEREAS , Assignor will receive substantial benefit from the consummation of the transaction contemplated by the Agreement; and
WHEREAS , Assignor is the owner of the patents which are pending and registered as listed on the schedule annexed hereto and made a part hereof as Appendix A ; and
WHEREAS , Assignor is the owner of certain patent rights which are pending and registered as listed on the schedule annexed hereto and made a part hereof as Appendix B ; and
WHEREAS , Assignee is desirous of acquiring the entire right, title and interest in said pending and registered patents and the issued letter patent thereof; and
WHEREAS , Assignee would not have entered into the Agreement nor consummated the transaction contemplated thereby unless it received all right, title and interests in and to the patents and patent applications listed on Exhibit Appendix A and Appendix B; and
NOW, THEREFORE , for ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby sell assign, transfer and set over unto Assignee all of its right, title and interest in and to the patents and patent applications listed in Appendix A and Appendix B , including, without limiting the generality of the foregoing, the right of priority to file corresponding applications in any and all countries; the patents to be held by Assignee for its own use and enjoyment and for the use and enjoyment of its successors and assigns as fully and entirely as they would have been held and enjoyed by Assignor had such assignment not been made.
Assignor hereby authorizes and requests the duly authorized officials of any jurisdiction to take such action as may be required to give effect to the sale, assignment and transfer made herein, including the issuance of any patents and patent applications on Appendix A and Appendix B to Assignee, its successors and assigns; and Assignor further agrees, at no additional cost or expense
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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to Assignor, to do all things as Assignee may reasonably request to effectuate such sale, assignment and transfer in respect to each such patent and patent applications.
If Assignor owns or has rights to any patents or patent applications relating to prodrugs of riluzole that are not listed on Appendix A and Appendix B , Assignor agrees to assign such patents and patent applications to Assignee, and Assignor further agrees, at no additional cost or expense to Assignor, to do all things as Assignee may reasonably request to effectuate such sale, assignment and transfer in respect to each such patent and patent applications.
IN WITNESS WHEREOF , Assignor, expressly intending to be legally bound hereby, has caused this assignment to be executed as of the day of July, 2015.
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ACKNOWLEDGMENT
STATE OF
COUNTY OF
On this day of August, 2015, Allen B. Reitz; Ph.D. personally appeared before me, and to me personally known, stating that the foregoing instrument was signed on behalf of him, and acknowledged the execution of the instrument as his free act and deed.
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Notary Public |
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My Commission Expires: |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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APPENDIX A
ORIGINAL PATENT RIGHTS
[* * *]
APPENDIX B
SECONDARY PATENT RIGHTS
[* * *]
[* * *]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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APPENDIX C
RESEARCH PLAN
[* * *]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT B
FORM OF WARRANT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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WARRANT No. 1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO A STOCKHOLDERS AGREEMENT, DATED AS OF JANUARY 6, 2014, BY AND AMONG BIOHAVEN PHARMACEUTICAL HOLDING COMPANY, LTD. (THE COMPANY ), CERTAIN STOCKHOLDERS OF THE COMPANY, AND THE ORIGINAL HOLDER HEREOF (AS AMENDED FROM TIME TO TIME, THE STOCKHOLDERS AGREEMENT ). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT. A COPY OF THE STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.
Warrant Certificate No.: 1
Original Issue Date: August 15, 2015
FOR VALUE RECEIVED, BIOHAVEN PHARMACEUTICAL HOLDING COMPANY, LTD., a British Virgin Island company (the Company ), hereby certifies that ALS BIOPHARMA, LLC, a Delaware limited liability company, or its registered assigns (the Holder ) is entitled to purchase from the Company Five Hundred Fifty (550) duly authorized, validly issued, fully paid and nonassessable Common Shares at a purchase price per share of U.S.$2,800.00 (subject to adjustment as provided herein, the Exercise Price ), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.
This Warrant has been issued pursuant to the terms of the ALS Biopharma Agreement, dated as of August 10, 2015 (the ALS Agreement ), among the Company, Fox Chase Chemical Diversity Center Inc., a Delaware corporation, and the Holder.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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1. Definitions . As used in this Warrant, the following terms have the respective meanings set forth below:
Aggregate Exercise Price means an amount equal to the prod net of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.
ALS Agreement has the meaning set forth in the preamble.
Board means the board of directors of the Company.
Business Day means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the British Virgin Islands are authorized or obligated by law or executive order to close.
Common Shares means the common shares, no par value, of the Company, and any capital stock into which such Common Shares shall have been converted, exchanged. or reclassified following the date hereof
Company has the meaning set forth in the preamble.
Exercise Date means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., New York time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Notice, the Warrant and the Aggregate Exercise Price.
Exercise Notice has the meaning set forth in Section 3(a)(i) .
Exercise Period has the meaning set forth in Section 2 .
Exercise Price has the meaning set forth in the preamble.
Fair Market Value means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Shares for such day on all United States securities exchanges on which the Common Shares may at the time be listed; (b) if there have been no sales of the Common Shares on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Shares on all such exchanges at the end of such day; (c) if on any such day the Common Shares are not listed on a United States securities exchange, the closing sales price of the Common Shares on the principal stock exchange on which the Common Shares may at the time be listed; (d) if on any such day the Common Shares are not listed on a United States securities exchange and there is no other principal stock exchange on which the Common Shares are listed, the closing sales price of the Common Shares as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Shares on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day,
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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the average of the highest bid and lowest asked prices for the Common Shares quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which Fair Market Value is being determined; provided , that if the Common Shares are listed on any securities exchange under clause (a), (b) or (c) above; the term Business Day as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Shares are not listed on any United States securities exchange or any other principal stock exchange and are not quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the Fair Market Value of the Common Shares shall be the fair market value per share as determined jointly by the Board and the Holder; provided, that if the Board and the Holder are unable to agree on the fair market value per share of the Common Shares within a reasonable period of time (not to exceed ten (10) Business Days) from the Companys receipt of the Exercise Notice), such fair market value shall be determined by a nationally recognized investment banking, accounting or valuation firm jointly selected by the Board and the Holder. The determination of such firm shall be final and conclusive, and the fees and expenses of such valuation firm shall be borne equally by the Company and the Holder.
Holder has the meaning set forth in the preamble.
Original Issue Date means August 15, 2015.
OTC Bulletin Board means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.
Person means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.
Pink OTC Markets means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.
Stockholders Agreement has the meaning set forth in the legend endorsed hereon.
Warrant means this Warrant No. 1 and all warrants issued upon division or combination of, or in substitution for, this Warrant.
Warrant Shares means the Common Shares or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.
2. Term of Warrant . Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., New York time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the closest preceding Business Day (the Exercise Period ), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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3. Exercise of Warrant .
(a) Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:
(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Notice in the form attached hereto as Exhibit A (each, an Exercise Notice ), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and
(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b) .
(b) Payment of the Aggregate Exercise Price . Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Notice, by the following methods:
(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price; or
(ii) by instructing the Company to issue Warrant Shares then issuable upon all or any part of this Warrant on a net basis such that, without payment of any cash consideration or other immediately available funds, the Holder shall surrender this Warrant in exchange for the number of Warrant Shares as is computed using the following formula:
X = Y(A-B) ÷ A
where:
X = the number of Warrant Shares to be issued to the Holder;
Y = the total number of Warrant Shares for which the Holder has elected to exercise this Warrant pursuant to Section 3(a) ;
A = the Fair Market Value of one Warrant Share as of the applicable Exercise Date; and
B = the Exercise Price in effect under this Warrant as of the applicable Exercise Date.
In the event of any withholding of Warrant Shares to effect a net settlement pursuant to clause (ii) above where the number of shares issuable thereunder is not a whole number, the number of shares issued by the Company on a net basis under clause (ii) shall be rounded down to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
incremental fraction of a share being so withheld by the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld multiplied by (y) the Fair Market Value per Warrant Share as of the Exercise Date.
(c) Delivery of Stock Certificates . Upon receipt by the Company of the Exercise Notice, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within five (5) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, with any appropriate transfer restrictions thereon, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock Certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or, subject to compliance with Section 6 below, such other Persons name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.
(d) Fractional Shares . The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.
(e) Delivery of New Warrant . Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.
(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:
(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.
(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any shareholder of the Company and free and clear of all taxes, liens and charges.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any primary securities exchange upon which Common Shares or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).
(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any primary securities exchange upon which Common Shares or other securities constituting Warrant Shares are listed at the time of such exercise.
(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided , that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.
(g) Conditional Exercise . Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to he made in connection with a sale of the Company (pursuant to a merger, safe of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.
(h) Reservation of Shares . During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Shares or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant.
4. Adjustment to Exercise Price and Number of Warrant Shares . The Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4 ).
(a) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Shares . If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Shares or any other capital stock of the Company that is payable in Common Shares, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding Common Shares into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding Common Shares into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.
(b) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger . In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Companys assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(a) ), in each case which entitles the holders of Common Shares to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Shares, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holders rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Shares reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions, The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(b) , the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(b) with respect to this Warrant.
(c) Certificate as to Adjustment .
(i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.
(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.
(d) Notices . In the event:
(i) that the Company shall take a record of the holders of its Common Shares (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(ii) of any capital reorganization of the Company, any reclassification of the Common Shares of the Company, any consolidation or Merger of the Company with or into another Person, or sale of all or substantially all of the Companys assets to another Person; or
(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;
then, and in each such case, the Company shall send or cause to be sent to the Holder at least five (5) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
which the holders of record of Common Shares (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their Common Shares (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.
5. Stockholders Agreement . All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Stockholders Agreement, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to become and remain a party to the Stockholders Agreement.
6. Transfer of Warrant . Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B , together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the, assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.
7. Holder Not Deemed a Stockholder; Limitations on Liability . Except as otherwise specifically provided herein and far common shares held directly by Holder not subject to this Warrant, prior to the issuance to the Holder of the Warrant Shares which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
8. Replacement on Loss; Division and Combination .
(a) Replacement of Warrant on Loss . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided , that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.
(b) Division and Combination of Warrant . Subject to compliance with the applicable provisions of this Warrant and the Stockholders Agreement as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with .a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant and the Stockholders Agreement as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.
9. No Impairment . The Company shall not, by amendment of its Articles of Association or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any ether voluntary action, avoid. or seek to avoid the observance or performance of any of the terms to he observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.
10. Compliance with the Securities Act .
(a) Agreement to Comply with the Securities Act; Legend . The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 10 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the Securities Act ). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
(b) Representations of the Holder . In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:
(i) The Holder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.
(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are restricted securities under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.
11. Warrant Register . The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.
12. Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12 ).
If to the Company: |
Biohaven Pharmaceutical Holding Company Ltd. |
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234 Church Street, Suite 301 |
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New Haven, CT 06520 |
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E-mail: [***] |
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Attention: |
Vice President |
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If to the Holder: |
ALS Biopharma LLC |
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3805 Old Easton Road |
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Doyletown, PA 18902 |
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E-mail: [***] |
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Attention: |
Allen B. Reitz, Ph.D. |
13. Cumulative Remedies . Except to the extent expressly provided in Section 7 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.
14. Equitable Relief . Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.
15. Entire Agreement . This Warrant, together with the Stockholders Agreement and the ALS Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant, the Stockholders Agreement and the ALS Agreement, the statements in the body of this Warrant shall control.
16. Successor and Assigns . This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
17. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.
18. Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.
19. Amendment and Modification; Waiver . Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as at waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
20. Severability . If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.
21. Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws of the Territory of the British Virgin Islands without giving effect to any choice or conflict of law provision or rule (whether of the Territory of the British Virgin Islands or any other jurisdiction) that would cause the application of the domestic substantive laws of any other jurisdiction.
22. Submission to Jurisdiction . Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the courts located in Road Town, Tortola, British Virgin Islands, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such partys address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
23. Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.
24. Counterparts . This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.
25. No Strict Construction . This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.
[SIGNATURE PAGE FOLLOWS]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.
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BIOHAVEN PHARMACEUTICAL |
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HOLDING COMPANY LTD. |
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/s/ Vlad Coric |
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Name: Vlad Coric MD |
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Title: CEO |
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Accepted and agreed, |
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ALS Biopharma LLC |
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/s/ Allen B. Reitz |
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Name: Allen B. Reitz |
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Title: CEO |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
EXHIBIT A
Form of Exercise Notice
(To be executed by the Holder to purchase Common Shares
under the foregoing Warrant)
Ladies and Gentlemen:
(1) The undersigned is the Holder of Warrant No. 1 (the Warrant) issued by Biohaven Pharmaceutical Holding Company Ltd., a British Virgin Islands corporation (the Company). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.
(2) The undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.
(3) The Holder intends that payment of the Exercise Price shall be made as (check one):
o Cash Exercise
o Cashless Exercise under Section 10
(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ in immediately available funds to the Company in accordance with the terms of the Warrant.
(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.
Dated: , 20
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(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Exhibit B
Biohaven Pharmaceutical Holding Company Ltd.
FORM OF ASSIGNMENT
(To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (the Transferee) the right represented by the within Warrant to purchase shares of Common Stock of Biohaven Pharmaceutical Holding Company Ltd. (the Company) to which the within Warrant relates and appoints attorney to transfer said right on the books of the Company with full power of substitution in the premises.
Dated: , 20
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Warrant) |
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Address of Transferee |
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In the presence of: |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
AMENDMENT NO. 1 TO
ALS BIOPHARMA AGREEMENT
This Amendment No. 1 to ALS Biopharma Agreement (this Amendment), by and among ALS Biopharma, LLC, a Delaware limited liability company having a place of business at 3805 Old Easton Road, Doylestown, PA 18902 (ALS), Fox Chase Chemical Diversity Center Inc., a Delaware corporation having a place of business at 3805 Old Easton Road, Doylestown, PA 18902 (FCCDC) and Biohaven Pharmaceutical Holding Company, Ltd., a British Virgin Island company with a business office located at 234 Church Street, Suite 301, New Haven, Connecticut 06520 (Biohaven) is effective as of February , 2017 (the Effective Date).
WHEREAS, Biohaven, ALS and FCCDC entered into the ALS Biopharma Agreement (the Original Agreement) on August 10, 2015; and
WHEREAS, the parties desire to amend the Original Agreement to remove ALSs Observer Rights (as defined in the Original Agreement) upon the effectiveness of the registration statement for the initial public offering of the Companys common shares.
NOW, THEREFORE, the parties agree to amend the Original Agreement as follows, with such changes being effective upon the effectiveness of the registration statement for the initial public offering of the Companys common shares:
1. Section 2.18 of the Original Agreement is deleted in its entirety and replaced by the words Intentionally omitted.
2. The second sentence of Section 5.2(d) (ALS will receive OBSERVER RIGHTS upon the filing of the first IND for a PATENT PRODUCT.) is deleted in its entirety.
3. The remaining terms and conditions of the Original Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives.
ALS BIOPHARMA, LLC |
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Allen B. Reitz |
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Vlad Coric MD |
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CEO |
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CEO |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
FOX CHASE CHEMICAL CENTER |
ALLEN REITZ, individually as to |
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FOR CHEMICAL DIVERSITY |
Sections 8.4 and 8.5 |
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CENTER INC. |
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/s/ Allen B. Reitz |
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Allen B. Reitz |
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CEO |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.4
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Table of Contents
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1. |
BACKGROUND |
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2. |
DEFINITIONS |
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3. |
LICENSE GRANT AND TERM |
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4. |
DUE DILIGENCE |
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EQUITY, REIMBURSEMENT OF PATENT EXPENSES; LICENSE MAINTENANCE ROYALTY; MILESTONE ROYALTIES |
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EARNED ROYALTIES; MINIMUM ROYALTY PAYMENTS |
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SUBLICENSES |
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8. |
CONFIDENTIALITY AND PUBLICITY |
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9. |
REPORTS, RECORDS AND INSPECTIONS |
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10. |
PATENT PROTECTION |
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11. |
INFRINGEMENT AND LITIGATION |
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12. |
USE OF YALES NAME |
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13. |
TERMINATION |
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14. |
INDEMNIFICATION; INSURANCE; NO WARRANTIES |
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15. |
NOTICES |
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16. |
INVENTOR AGREEMENTS |
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17. |
LAWS, FORUM AND REGULATIONS |
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18. |
MISCELLANEOUS |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
THIS AGREEMENT (the Agreement) by and between YALE UNIVERSITY, a corporation organized and existing under and by virtue of a charter granted by the general assembly of the Colony and State of Connecticut and located in New Haven, Connecticut (YALE), and BioHaven Pharmaceutical Holding Company, Ltd a British Virgin Island company with principal offices located in [Stonington, Connecticut] (LICENSEE) is effective as of the date of final execution (EFFECTIVE DATE).
1. BACKGROUND
1.1 In the course of research conducted under YALE auspices, Drs. Vladimir Conic, Gerard Sanacora, and John H. Krystal, in the Department of Psychiatry at YALE (the INVENTORS), have produced inventions described by the LICENSED PATENTS and also known as [* * *] (the INVENTION).
1.2 INVENTORS have assigned to YALE all of INVENTORS right, title and interest in and to the INVENTION and any resulting patents.
1.3 YALE wishes to have the INVENTION and any resulting patents commercialized to benefit the public good.
1.4 LICENSEE has represented to YALE that it shall act diligently to develop and commercialize the LICENSED PRODUCTS.
1.5 YALE is willing to grant a license to LICENSEE, subject to the terms and conditions of this Agreement.
1.6 In consideration of these statements and mutual promises, YALE and LICENSEE agree to the terms of this Agreement.
2. DEFINITIONS
The following terms used in this Agreement shall be defined as set forth below:
2.1 AFFILIATE shall mean any entity or person that directly or indirectly controls, is controlled by or is under common control with LICENSEE. For purposes of this definition, control means possession of the power to direct the management of such entity or person, whether through ownership of more than fifty percent (50%) of voting securities, by contract or otherwise.
2.2 CHANGE OF CONTROL shall mean:
(a) any consolidation, merger, combination, reorganization or other transaction in which LICENSEE is not the surviving entity, irrespective of whether LICENSEE is maintained as an AFFILIATE or subsidiary of the new controlling entity, or dissolved and absorbed into the new controlling entity; or
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
(b) any transaction or series of related transactions in which the shares of stock or other issued equity interests of LICENSEE constituting in excess of fifty percent (50%) of the then actual voting power of LICENSEE are exchanged for or converted into other stock or securities, cash, and/or any other property thereby giving a third party control of LICENSEE; provided, however, that the sale of equity, warrants and/or option securities for financing purposes (even if more than fifty percent (50%) of the voting securities of LICENSEE are sold in such a transaction), shall not be deemed a CHANGE OF CONTROL hereunder; or
(c) an initial public offering as that term is defined in the Securities Exchange Act of 1934, as amended; or
(d) a sale or other disposition of all or substantially all of the assets of the LICENSEE;
(e) an assignment of this Agreement to a QUALIFIED ASSIGNEE.
2.3 CLINICAL TRIAL shall mean either a PHASE I CLINICAL TRIAL, PHASE II CLINICAL TRIAL, PHASE III CLINICAL TRIAL, or a PIVOTAL TRIAL.
2.4 CONFIDENTIAL INFORMATION shall mean all information disclosed by one party to the other during the negotiation of or under this Agreement in any manner, whether orally, visually or in tangible form, that relates to LICENSED PATENTS or the Agreement itself, unless such information is subject to an exception described in Article 8.2; provided, however , that CONFIDENTIAL INFORMATION that is disclosed in tangible form shall be marked Confidential at the time of disclosure and CONFIDENTIAL INFORMATION that is disclosed orally or visually shall be identified as confidential at the time of disclosure and subsequently reduced to writing, marked confidential and delivered to the other party within [* * *] days of such disclosure. CONFIDENTIAL INFORMATION shall include, without limitation, materials, know-how and data, technical or non-technical, trade secrets, inventions, methods and processes, whether or not patentable. Notwithstanding any other provisions of this Article 2.2, CONFIDENTIAL INFORMATION of LICENSEE that is subject to Article 8 of this Agreement is limited to information that LICENSEE supplies pursuant to LICENSEEs obligations under Articles 7 and 9 of this Agreement, unless otherwise mutually agreed to in writing by the parties.
2.5 DEVELOPING ECONOMIES shall mean those countries that are designated by The World Bank or its successor organization as having economies that are low- and middle-income economies (excluding The Peoples Republic of China and India, which shall not be considered countries with developing economies).
2.6 EARNED ROYALTY is defined in Article 6.1.
2.7 EFFECTIVE DATE is defined in the introductory paragraph of this Agreement.
2.8 Intentionally Omitted.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2.9 FDA shall mean the U.S. Food and Drug Administration to obtain marketing approval for a LICENSED PRODUCT in the United States, or any comparable application filed with regulatory authorities in or for a country or group of countries other than the United States
2.10 FIELD shall mean therapeutics for any INDICATION of the central nervous system in humans.
2.11 FIRST SALE shall mean the first sale, lease or other transfer, practice or disposition to a third party of any LICENSED PRODUCT in any country.
2.12 IND shall mean an investigational new drug application filed with the United States Food and Drug Administration prior to beginning clinical trials in humans in the United States or any comparable application filed with regulatory authorities in or for a country or group of countries other than the United States.
2.13 INDICATION(S) shall mean any indication bearing a distinct reference number under the list of diseases officially published by the World Health Organization (WHO) or list of disorders published in the American Psychiatric Associations Diagnostic and Statistical Manual of Mental Disorders (DSM 5, or above) or such successor organizations that are in effect at the relevant time during the term of this Agreement.
2.14 INITIATE or INITIATION or INITIATES or any variant thereof shall mean, with respect to a CLINICAL TRIAL, the first dose of a LICENSED PRODUCT administered to a human subject by or on behalf of LICENSEE, SUBLICENSEE, or AFFILIATE.
2.15 INVENTION and INVENTORS are defined in Article 1.1.
2.16 INVENTOR AGREEMENT shall mean a consulting or other agreement directly between LICENSEE and an INVENTOR.
2.17 INSOLVENT shall mean that LICENSEE (i) as defined by the United States Federal Bankruptcy Law, as amended from time to time, or (ii) has commenced bankruptcy, reorganization, receivership or insolvency proceedings, or any other proceeding under any Federal, state or other law for the relief of debtors.
2.18 LICENSE refers to the license granted under Article 3.1.
2.19 LICENSED METHOD shall mean any method, procedure, service or process the practice of which is claimed by a VALID CLAIM of a LICENSED PATENT, or which uses a LICENSED PRODUCT of the type defined in subsection (a) of the definition of LICENSED PRODUCT.
2.20 LICENSED PATENTS shall mean the United States or foreign patent application(s) and patents(s) listed in Appendix A and owned by YALE during the term of this Agreement, together with any continuations, divisionals, and continuations-in-part, to the extent the claims of any such patent or patent application are directed to subject matter
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
specifically described in the patent applications listed on Appendix A; any reissues, re-examinations, or extensions thereof, or substitutes therefor; and the relevant international equivalents of any of the foregoing. Appendix A is incorporated into this Agreement.30.
2.21 LICENSED PRODUCT shall mean
(a) any product (including any apparatus or kit) or component part thereof, if the manufacture, use, sale, import, export or practice thereof is claimed by a VALID CLAIM of a LICENSED PATENT.
(b) any LICENSED METHOD.
2.22 LICENSED TERRITORY shall mean worldwide. 2.23.
2.23 NDA shall mean New Drug Application filed with the.
2.24 NET SALES shall mean:
(a) gross invoice price from the sale, lease or other transfer, practice or disposition of the LICENSED PRODUCTS, or from services performed using or constituting LICENSED PRODUCTS by LICENSEE, SUBLICENSEES or AFFILIATES to third parties, except as set forth in Article 2.24(b), less the following deductions, provided they actually pertain to the disposition of the LICENSED PRODUCTS and are separately invoiced:
i. [* * *];
ii. [* * *];
iii. [* * *]; and
iv. [* * *].
No deductions shall be made for any other costs or expenses, including but not limited to commissions to independents, agents or those on LICENSEEs, SUBLICENSEEs or an AFFILIATEs payroll or for the cost of collection.
(b) NET SALES shall not include the gross invoice price [* * *].
(c) There shall be no deductions, except as specified in this Article 2.24, made to NET SALES for the purpose of calculating EARNED ROYALTIES owed to YALE as a result of royalties or other payments made to third parties.
(d) There shall be no deductions made to NET SALES for the purpose of calculating EARNED ROYALTIES owed to YALE as a result of combination products.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2.25 PATENT CHALLENGE shall mean a challenge or opposition to the validity, patentability, enforceability and/or non-infringement of any of the LICENSED PATENTS or otherwise opposing any of the LICENSED PATENTS.
2.26 PHASE I CLINICAL TRIAL shall mean a human clinical trial constituting the initial introduction of an investigational new drug into humans, as defined in 21 C.F.R §312.21(a) and as practiced according to the standards of the pharmaceutical industry.
2.27 PHASE II CLINICAL TRIAL shall mean a human clinical trial conducted to evaluate the effectiveness of a drug for a particular indication in patients with a disease and to determine the common short-term side effects and risks associated with the drug as defined in 21 C.F.R §312,21(b) and as practiced according to the standards of the pharmaceutical industry.
2.28 PHASE III CLINICAL TRIAL shall mean expanded controlled and uncontrolled human clinical trials performed after PHASE II CLINICAL TR1AL(S) evidence suggesting effectiveness of an investigational new drug, as defined by 21 C.F.R §312.21(c), and as practiced according to the standards of the pharmaceutical industry for a Phase III clinical trial and prior to the filing of an NDA or comparable request for marketing approval.
2.29 PIVOTAL TRIAL shall mean a controlled human clinical trial to evaluate the safety and efficacy of a LICENSED PRODUCT in which data are sufficient to form the basis for the filing of an NDA. A PIVOTAL TRIAL may not necessarily be a PHASE III CLINICAL TRIAL,
2.30 PRECLINICAL shall mean prior to the INITIATION of a first CLINICAL TRIAL by or on behalf of a LICENSEE, SUBLICENSEE, or AFFILIATE.
2.31 QUALIFIED SUBLICENSEE and QUALIFIED ASSIGNEE shall mean a pharmaceutical or biopharmaceutical that is a top [* * *] global company based upon annual sales of pharmaceutical or biopharmaceutical products.
2.32 REASONABLE COMMERCIAL EFFORTS shall mean documented efforts that are consistent with those utilized by companies of similar size and type that have successfully developed products and services similar to LICENSED PRODUCTS.
2.33 SUBLICENSE INCOME shall mean consideration in any form received by LICENSEE or an AFFILIATE in connection with a grant to any third party or parties of a sublicense, cross-license, option, or other right, license, privilege or immunity to make, have made, use, sell, have sold, distribute, practice, import or export LICENSED PRODUCTS, but excluding consideration included within EARNED ROYALTIES. SUBLICENSE INCOME shall include without limitation any license signing fee, license maintenance fee, option fee or other payment pursuant to an option, unearned portion of any minimum royalty payment received by LICENSEE, equity, distribution or joint marketing fee, research and development funding in excess of LICENSEEs cost of performing such research and development, and any consideration received for an equity
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
interest in, extension of credit by or other investment in LICENSEE to the extent such consideration exceeds the fair market value of the equity or other interest as determined by an independent appraiser mutually agreeable to the parties. SUBLICENSE INCOME shall also include any sale or extension of credit to LICENSEE for less than fair market value, as determined by an independent appraiser. In case an extension of credit or loan to LICENSEE by a third party is forgiven in whole or in part by the third party, such amount shall constitute SUBLICENSE INCOME
2.34 SUBLICENSEE shall mean any third party sublicensed by LICENSEE to make, have made, use, sell, have sold, import, export or practice any LICENSED PRODUCT.
2.35 SUCCESSFUL FINANCING is defined in Article5.1.
2.36 TERM is defined in Article 3.4.
2.37 VALID CLAIM shall mean a pending, issued or unexpired claim of a LICENSED PATENT that has not been pending more than (i) [* * *] years from the EFFECTIVE DATE or (ii) [* * *] years from the date of filing of an application claiming priority to the earliest priority application, so long as such claim shall not have been irrevocably abandoned or declared to be invalid in an unappealable decision of a court or other authority or competent jurisdiction through no fault or cause of LICENSEE; provided, however, that if a pending claim results in an issued patent after the periods indicated in (i) and/or (ii) in this Article 2.37, it shall thereafter again be a VALID CLAIM.
2.38 GENERIC(S) shall mean shall mean third party products sold in the FIELD, but not products sold by LICENSEE, AFFILIATES, or SUBLICENSEE, for an INDICATION that was previously exclusive due to a VALID CLAIM of a LICENSED PATENT and is a pharmaceutical product containing as an active pharmaceutical ingredient an agent that is the same as a LICENSED PRODUCT with respect to pharmacokinetic and pharmacodynamics properties, dose, strength route of administration, safety, efficacy, and intended use (or any salt, pro-drug, free acid or base, solvate, hydrate, stereoisomer, enantiomer, noncrystalline form, isotopic (including but not limited deuterated) form, and/or polymorphic form, crystalline or noncrystalline form of such LICENSED PRODUCT) whether filed under an NDA, abbreviated NDA (such as an ANDA) or otherwise (such as, without limitation, an application under 505(b)(2)). A GENERIC product sold by LICENSEE, SUBLICENSEE, or AFFILIATE shall not be a GENERIC.
2.39 GENERIC COMPETITION is defined in Article 6.8.
3. LICENSE GRANT AND TERM
3.1 Subject to all the terms and conditions of this Agreement, and upon payment to YALE of the consideration described in Article 5, YALE hereby grants to LICENSEE:
(a) an exclusive license, subject to the reservation of rights by YALE under Article 3.3, under the LICENSED PATENTS to make, have made, use, sell, have sold,
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
import, export, or practice LICENSED PRODUCTS within the FIELD in the LICENSED TERRITORY; and
(b) The right to sublicense the rights granted under Article 3.1(a);
(c) together, the rights granted under Article 3.1 (a), and (b) shall be the license granted hereunder (the LICENSE).
3.2 To the extent that any invention included within the LICENSED PATENTS has been funded in whole or in part by the United States government, the United States government retains certain rights in such invention as set forth in 35 U.S.C. §200-212 and all regulations promulgated thereunder, as amended, and any successor statutes and regulations (the Federal Patent Policy). As a condition of the license granted hereby, LICENSEE acknowledges and shall comply with all aspects of the Federal Patent Policy applicable to the LICENSED PATENTS, including the obligation that LICENSED PRODUCTS used or sold in the United States be manufactured substantially in the United States. Nothing contained in this Agreement obligates or shall obligate YALE to take any action that would conflict in any respect with its past, current or future obligations to the United States Government under the Federal Patent Policy with respect to the LICENSED PATENTS.
3.3 The LICENSE is expressly made subject to YALEs reservation of the right, on behalf of itself and all other non-profit academic and/or research institutions, to make, use and practice the LICENSED PATENTS and LICENSED PRODUCTS for research, clinical research by YALE and its bone fide research partners, teaching or other non-commercial purposes, and not for purposes of commercial development, use, manufacture or distribution.
3.4 Unless terminated earlier as provided in Article 13, the term of this Agreement (the TERM) shall commence on the EFFECTIVE DATE and shall expire on the later of (i) on a country-by-country basis, on the date on which the last of the VALID CLAIMS of the patents described in the LICENSED PATENTS in such country expires, lapses or is declared to be invalid by a non-appealable decision of a court or other authority of competent jurisdiction through no fault or cause of LICENSEE; or (ii) ten (10) years from the date of FIRST SALE.
3.5 Nothing in this Agreement shall be construed to grant by implication, estoppel or otherwise any licenses under patents of YALE other than the LICENSED PATENTS. Except as expressly provided in this Agreement, under no circumstances will LICENSEE, as a result of this Agreement, obtain any interest in or any other right to any technology, know-how, patents, patent applications, materials or other intellectual or proprietary property of YALE.
4. DUE DILIGENCE
4.1 LICENSEE has designed a plan for developing and commercializing the LICENSED PATENTS that includes a description of research and development, testing, government
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
approval, manufacturing, marketing and sale or lease of LICENSED PRODUCTS (PLAN). A copy of the PLAN is attached to this Agreement as Appendix B and incorporated herein by reference.
4.2 LICENSEE shall use all REASONABLE COMMERCIAL EFFORTS, within [* * *] days after the EFFECTIVE DATE of this Agreement, to begin to implement the PLAN at its sole expense and thereafter to fully implement the PLAN and to diligently commercialize and develop markets for the LICENSED PRODUCTS.
4.3 Annually after the EFFECTIVE DATE of this Agreement, and on each anniversary of the EFFECTIVE DATE, LICENSEE shall provide YALE with an updated and revised copy of the PLAN which shall:
(a) indicate LICENSEEs progress and problems to date in development and commercialization of LICENSED PRODUCTS;
(b) include a forecast and schedule of major events required to market the LICENSED PRODUCTS; and
(c) include a statement clearly indicating which of LICENSEES products or services are a LICENSED PRODUCT and which LICENSED PATENTS claim each such LICENSED PRODUCT utilized (e.g., see Exhibit 4.3).
4.4 At least [* * *] days prior to assignment by LICENSEE pursuant to Article 18.7, the assignee shall provide YALE with an updated and revised copy of the PLAN. [* * *].
4.5 LICENSEE shall immediately send YALE a notice of abandonment if at any time LICENSEE (a) abandons or suspends its research, development or marketing of the LICENSED PRODUCTS, or its intent to research, develop and market LICENSED PRODUCTS, or (b) fails to comply with its obligations under this Article for a period exceeding [* * *] days. Such notices shall be deemed by YALE to be a breach that is incapable of being cured and YALE may, at its sole discretion, immediately terminate this Agreement by written notice at any time after such notice of abandonment.
4.6 LICENSEE agrees that YALE shall be entitled to terminate this Agreement pursuant to Article 13.1(b) upon the occurrence of any of the following in the event that LICENSEE fails to cure in a timely manner as provided in ARTICLE 13:
(a) LICENSEE shall fail to provide the written reports as provided in Article 4.3; or
(b) LICENSEE shall fail to receive written approval of the PLAN as defined in Article 4.1 or Article 4.2; or
(c) LICENSEE shall fail to implement the PLAN in accordance with this Article or otherwise fails to fulfill any of its obligations under this Article 4; or
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(d) LICENSEE gives notice pursuant to Article 4.5 (which shall be deemed a material breach not capable of being cured); or
(e) Upon the occurrence of any of the events set forth in Section 4.5; or
(f) LICENSEE has failed to achieve any of the following:
(1) raise funds towards the payment of incurred direct expenses expressly for the implementation of the PLAN in amounts set forth below (CUMULATIVE RAISE) and indicated in the following schedule:
By the end of License
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[* * *] |
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; or
(2) INITIATE a PHASE I CLINICAL TRIAL within [* * *] of the EFFECTIVE DATE; or
(3) INITIATE a PHASE II CLINICAL TRIAL within [* * *] of the EFFECTIVE DATE; or
(4) INITIATE a PHASE III CLINICAL TRIAL or designate a CLINICAL TRIAL a PIVOTAL TRIAL and file an NDA within [* * *] of the EFFECTIVE DATE.
provided, however, that LICENSEE may elect to extend any of the diligence milestones in this Article 4.6(f) by a total of One (1) Year upon payment to YALE of
(i). [* * *]; or
(ii). [* * *]; or
(iii). [* * *];
(iv). each such extension shall be a DILIGENCE EXTENSION.
A DILIGENCE EXTENSION shall apply to the elected diligence milestone and all subsequent diligence milestones in this Article 4.6(f). LICENSEE may elect no more than [* * *] DILIGENCE EXTENSIONS total for the diligence milestones in this Article 4.6(f);
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
and provided further that any DILIGENCE EXTENSION must be requested at least [* * *] days prior to the date of the specific diligence obligation under Article 4.6(f) for which a DILIGENCE EXTENSION is being requested by LICENSEE. The DILIGENCE EXTENSION shall take effect only if payment is made to YALE by the date of the specific diligence obligation for which a DILIGENCE EXTENSION has been requested.
Notwithstanding the foregoing in this Article 4.6, if LICENSEE has not employed REASONABLE COMMERCIAL EFFORTS in developing and selling LICENSED PRODUCTS on a country-by-country basis within the LICENSED TERRITORY for any reason or no reason, then YALE may, upon [* * *] days prior written notice, at its sole discretion, terminate this LICENSE pursuant to Article 13 herein in the applicable jurisdiction.
4.7 During the Term of this Agreement, LICENSEE hereby grants YALE observer rights for one (1) person at all of LICENSEEs Board of Director meetings. YALE shall be permitted to attend and participate in meetings of the board of directors and to receive all information provided to members of the board (including minutes of board meetings), but shall not permitted to formally vote on matters submitted for a vote. YALE shall be responsible for paying costs and expenses such observer to attend the meetings. LICENSEE will make commercially reasonable efforts to provide call-in access to such meetings.
5. EQUITY, REIMBURSEMENT OF PATENT EXPENSES; LICENSE MAINTENANCE ROYALTY; MILESTONE ROYALTIES
5.1 Equity Issuance and Unreimbursed Patent Expenses .
(a) Equity issuance . Within [* * *] days of the EFFECTIVE DATE, LICENSEE shall issue to YALE an equity ownership of LICENSEE in an amount equivalent to Five Percent (5%) of the fully diluted common stock equity of LICENSEE. Such five percent (5%) equity interest shall take into account issued, reserved or presently planned management restricted stock, options and warrants but shall exclude subsequently issued, reserved or planned equity, common stock, Preferred Shares, options and Warrants issued to investors pursuant to the initial SUCCESSFUL FINANCING. In the event that YALEs resulting fully diluted ownership position as a result of the closing of the first two SUCCESSFUL FINANCINGS goes below One Percent (1%), then LICENSEE shall issue to YALE an additional number of shares of common stock such that YALEs ownership position is restored to no less than One Percent (1%).
SUCCESSFUL FINANCING means a bona fide investment in LICENSEE from a single or group of institutional investors of at least Three Million Five Hundred Thousand Dollars ($3,500,000);
and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) Unreimbursed Patent Expenses . LICENSEE shall pay YALE for its unreimbursed patent expenses directly and solely related to the LICENSED PATENTS, which as of the EFFECTIVE DATE is not less than Eighteen Thousand Six Hundred Ninety-Eight Dollars ($18,698.00). [* * *].
[* * *].
5.2 LICENSEE shall pay to YALE for the first LICENSED PRODUCT developed by LICENSEE, SUBLICENSEE, or AFFILIATE a non-refundable milestone royalty of Two Million Dollars ($2,000,000.00) within 6 months of when LICENSEE, SUBLICENSEE, or AFFILIATE receives approval of an NDA for such a LICENSED PRODUCT.
5.3 Neither the consideration set forth in Article 5.1 nor the milestone royalty of Article 5.2 shall be credited against EARNED ROYALTIES payable under Article 6.1.
5.4 Participation in Future Private Equity Offerings If LICENSEE proposes to sell any equity securities or securities that are convertible into equity securities of LICENSEE, then YALE and/or its Assignee (as defined below) will have the right to purchase up to 10% of the securities issued in each offering on the same terms and conditions as are offered to the other purchasers in each such financing. The term Assignee means (a) any entity to which YALEs participation rights under this section have been assigned either by YALE or another entity, or (b) any entity that is controlled by YALE.
5.5 Change of Control
Within Five (5) Days after the first CHANGE OF CONTROL, LICENSEE shall pay to YALE a fee of the lesser of (a) Five Percent (5%) of the dollar value of all initial and future potential consideration paid or payable by acquirer to LICENSEE shareholders, or (b) One and One Half Million Dollars ($1,500,000.00) (the CHANGE OF CONTROL FEE). If the CHANGE OF CONTROL is an initial public offering as described in Article 2.2(c), then the CHANGE OF CONTROL FEE shall be reduced by the dollar value of YALEs equity interest, if any, in LICENSEE as set forth in Article 5.1 on the first day when YALE is free to sell its equity interest, such reduction to be limited to One and One Half Million Dollar ($1,500,000.00). If, however, LICENSEE has paid the CHANGE OF CONTROL FEE in full prior to YALE crediting the value of the equity interest to the LICENSEE, then YALE shall refund to LICENSEE the value of YALEs equity interest within Sixty (60) days from the first day when YALE is free to sell its equity interest, such refund to be limited to no more than One and One Half Million Dollar ($1,500,000.00).
6. EARNED ROYALTIES; MINIMUM ROYALTY PAYMENTS
6.1 During the TERM of this Agreement, as partial consideration for the LICENSE, LICENSEE shall pay to YALE an earned royalty on worldwide annual cumulative NET SALES of LICENSED PRODUCTS according to the following schedules (a) in this Article 6.1 (EARNED ROYALTIES).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(a) EARNED ROYALTIES from NET SALES by LICENSEE, SUBLICENSEE, or AFFILIATES . LICENSEE shall pay to YALE an EARNED ROYALTY on worldwide annual NET SALES of LICENSED PRODUCTS by LICENSEE, SUBLICENSEE, or AFFILIATES according to the following schedule:
[* * *]
[* * *]%
6.2 In the event that (i) LICENSEE or any of its AFFILIATES or SUBLICENSEES brings a PATENT CHALLENGE anywhere in the world, or (ii) LICENSEE or any of its AFFILIATES or SUBLICENSEES assists another party in bringing a PATENT CHALLENGE anywhere in the world (except as required under a court order or subpoena), and (iii) YALE does not choose to exercise its rights to terminate this Agreement pursuant to Article 13, then the following provisions shall apply.
(a) All payments due to YALE under this Agreement other than patent costs shall be tripled during the pendency of the PATENT CHALLENGE and shall remain payable to YALE when due.
(b) If the PATENT CHALLENGE is inconclusive or results in a determination that at least one challenged claim is both valid and infringed,
(1) all payments due to YALE under this Agreement other than patent costs shall be tripled for the remainder of the TERM of the Agreement.
(2) LICENSEE shall promptly reimburse YALE for all legal fees and expenses incurred in YALEs defense against the PATENT CHALLENGE.
(c) In the event that such a PATENT CHALLENGE is successful, LICENSEE will have no right to recoup any payments made prior to the final, non-appealable determination of a court of competent jurisdiction.
6.3 Neither LICENSEE nor any of its AFFILIATES or SUBLICENSEES shall bring a PATENT CHALLENGE without first providing YALE [* * *] months written notice setting forth (a) precisely which claims and patents are being challenged or claimed not to be infringed, (b) a clear statement of the factual and legal basis for the challenge, and (c) an identification of all prior art and other matter believed to invalidate any claim of the LICENSED PATENT or which supports the claim that the LICENSED PATENT is not infringed.
6.4 LICENSEE shall pay all EARNED ROYALTIES accruing to YALE within [* * *] days from the end of each calendar quarter (March 31, June 30, September 30 and December 31), beginning in the first calendar quarter in which NET SALES occur. Unless YALE requests otherwise, LICENSEE shall report all EARNED ROYALTIES and other payments accruing to YALE on a quarterly basis, but shall defer payments accruing to YALE that do not, in total, exceed [* * *] ($[* * *]) in any given quarter until the earlier
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of (1) the end of the calendar year, or (2) the quarter upon which the cumulative accrued royalties and other payments exceed [* * *] ($[* * *])
6.5 Minimum Royalty Payments . During the term of this Agreement, LICENSEE agrees to pay YALE annual Minimum Royalty Payments (MRP), commencing on the first January 1 to occur after the date of the first sale that results in NET SALES. The MRP shall be payable to YALE in the amounts indicated in the following schedule:
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[* * *] |
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[* * *] |
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6.6 LICENSEE shall continue to pay the MRP until the end of the TERM. YALE shall fully credit each MRP made against any EARNED ROYALTIES payable by LICENSEE in the same calendar year.
All EARNED ROYALTIES and other payments due under this Agreement shall be paid to YALE in United States Dollars. In the event that conversion from foreign currency is required in calculating a payment under this Agreement, the exchange rate used shall be the Interbank rate quoted by Citibank at the time the payment is due. If overdue, the royalties and any other payments due under this Agreement shall bear interest until payment at a per annum rate [* * *] above the prime rate in effect at Citibank on the due date and YALE shall be entitled to recover reasonable attorneys fees and costs related to the administration or enforcement of this Agreement, including collection of royalties or other payments, following such failure to pay. The payment of such interest shall not foreclose YALE from exercising any other right it may have as a consequence of the failure of LICENSEE to make any payment when due.
6.7 If, during the TERM on a country-by-country basis and on a LICENSED PRODUCT-by LICENSED PRODUCT basis, there are sales of one or more GENERICS by one or more third parties in such country in a calendar quarter, the EARNED ROYALTIES payable to YALE with respect to NET SALES of such a LICENSED PRODUCT by LICENSEE, a SUBLICENSEE, or AFFILIATE in such country will be reduced as follows on a quarterly basis:
(a) [* * *];
(b) [* * *];
(c) [* * *];
(d) [* * *];
(e) [* * *];
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(f) [* * *]; and
(g) [* * *].
MARKET SHARE means the aggregate of the unit volume of all GENERICS and the LICENSED PRODUCT in a country as reported by an independent third party source of market share of GENERICS (for example, Synovate, Verispan or Walters Kluwer, or the like), such source, if not Synovate, Verispan or Walters Kluwer, to be identified in the report to be provided by LICENSEE under Section 9.1. In the event that the available third party source provides data on the percentage of MARKET SHARE achieved by GENERICS based on an indicator other than by unit volume (for example, patient share or number of prescriptions written or filled), then such alternate indicator shall be used to determine the percentage of MARKET SHARE achieved by GENERICS.
In the event MARKET SHARE of GENERICS is not measured and reported by a THIRD PARTY source in a given country, the EARNED ROYALTIES payable to YALE with respect to NET SALES by LICENSEE or a SUBLICENSEE in such country will be reduced as follows, when calculated on a quarterly basis:
(i) [* * *]; and
(ii) [* * *]
(h) No reductions due to GENERIC(S) under this Article 6.8 shall be permitted without reporting on a country-by-country basis of the actual determination of the amount of GENERIC sales of a given LICFNED PRODUCT. Such a report shall be provided pursuant to Section 9.1.
6.8 [* * *].
7. SUBLICENSES
7.1 LICENSEE shall not sublicense the rights granted to it under this Agreement without the prior written consent of YALE, unless such a sublicense is to a QUALIFIED SUBLICENSEE. In the event YALE consents to a sublicense under this Article 7.1, in addition to any other terms and conditions YALE may require, the provisions of Articles 7.2, 7.3 and 7.4 shall apply.
7.2 Any sublicense granted.by LICENSEE shall include substantially the same definitions and provisions, and such other provisions as are needed to enable LICENSEE to provide Yale the protections and benefits contemplated herein. LICENSEE will provide YALE with a copy of each sublicense agreement (and all amendments thereof) promptly after execution, LICENSEE shall also include provisions in all sublicenses to provide that in the event that SUBLICENSEE brings a PATENT CHALLENGE anywhere in the world or assists another party in bringing a PATENT CHALLENGE anywhere in the world (except as required under a court order or subpoena) then LICENSEE shall immediately terminate the sublicense. LICENSEE shall remain responsible for the performance of all
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SUBLICENSEES under any such sublicense as if such performance were carried out by LICENSEE itself, including, without limitation, the payment of any royalties or other payments provided for hereunder, regardless of whether the terms of any sublicense provide for such amounts to be paid by the SUBLICENSEE directly to YALE. A breach of this provision shall constitute a material breach that is subject to Article 13.1(b).
7.3 LICENSEE shall pay royalties to YALE on NET SALES of SUBLICENSEES based on the same royalty rate as apply to NET SALES by LICENSEE and its AFFILIATES, regardless of the royalty rates payable by SUBLICENSEES to LICENSEE under a sublicense agreement. In addition, LICENSEE shall pay to YALE [* * *] of any SUBLICENSE INCOME.
7.4 LICENSEE agrees that it has sole responsibility to promptly:
(a) provide YALE with a copy of any amendments to sublicenses granted by LICENSEE under this Agreement and to notify YALE of termination of any sublicense; and
(b) deliver copies of all reports provided to LICENSEE by SUBLICENSEES. Such reports from SUBLICENSEE shall include the information required to be provided by LICENSEE and at the intervals required under Article 4.3; and
(c) provide YALE with notice of the existence of any INVENTOR AGREEMENT(S) and notify YALE when such INVENTOR AGREEMENTS are no longer in effect, in any event, no less than once per year during the TERM.
8. CONFIDENTIALITY AND PUBLICITY
8.1 Subject to the parties rights and obligations pursuant to this Agreement, YALE and LICENSEE agree that during the term of this Agreement and for [* * *] years thereafter, each of them:
(a) will keep confidential and will cause their AFFILIATES and, in the case of LICENSEE, its SUBLICENSEES, to keep confidential, CONFIDENTIAL INFORMATION disclosed to it by the other party, by taking whatever action the party receiving the CONFIDENTIAL INFORMATION would take to preserve the confidentiality of its own CONFIDENTIAL INFORMATION, which in no event shall be less than reasonable care; and
(b) will only disclose that part of the others CONFIDENTIAL INFORMATION to its officers, employees or agents, under requirements of confidentiality, for purposes of carrying out its rights and responsibilities under this Agreement; and
(c) will not use the other partys CONFIDENTIAL INFORMATION other than as expressly permitted by this Agreement or disclose the others CONFIDENTIAL INFORMATION to any third parties (other than to agents under requirements of
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
confidentiality) under any circumstance without advance written permission from the other party; and
(d) will, within [* * *] of termination of this Agreement, return all the CONFIDENTIAL INFORMATION disclosed to it by the other party pursuant to this Agreement except for one copy which may be retained by the recipient for monitoring compliance with this Article 8 and any surviving clauses.
8.2 The obligations of confidentiality described above shall not pertain to that part of the CONFIDENTIAL INFORMATION that:
(a) is shown to have been known to or developed by the recipient prior to the disclosure by the disclosing party; or
(b) is at the time of disclosure or has become thereafter publicly known through no fault or omission attributable to the recipient; or
(c) is rightfully given to the recipient from sources independent of the disclosing party; or
(d) is independently developed by the receiving party without use of or reference to the CONFIDENTIAL INFORMATION of the other party; or
(e) is required to be disclosed by law in the opinion of recipients attorney, but only after the disclosing party is given prompt written notice and an opportunity to seek a protective order.
8.3 The financial terms of this Agreement constitute CONFIDENTIAL INFORMATION of each party.
9. REPORTS, RECORDS AND INSPECTIONS
9.1 LICENSEE shall, within [* * *] days after the calendar year in which NET SALES first occur, and within [* * *] days after each calendar quarter (March 31, June 30, September 30 and December 31) thereafter, provide YALE with a written report detailing the NET SALES and uses, if any, made by LICENSEE, its SUBLICENSEES and AFFILIATES of LICENSED PRODUCTS during the preceding calendar quarter and calculating the payments due pursuant to Article 6. NET SALES of LICENSED PRODUCTS shall be deemed to have occurred on the date of invoice for such LICENSED PRODUCTS. Each such report shall be signed by an officer of LICENSEE (or the officers designee), and must include:
(a) the number or amount, as appropriate, of LICENSED PRODUCTS manufactured, sold, practiced, leased or otherwise transferred or disposed of by LICENSEE, SUBLICENSEES and AFFILIATES;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) a calculation of NET SALES for the applicable reporting period in each country, including the gross invoice prices charged for the LICENSED PRODUCTS and any permitted deductions made pursuant to Article 2,24, Article 6.8, and/or Article 6.9;
(c) a calculation of total royalties or other payment due, including any exchange rates used for conversion; and
(d) names and addresses of all SUBLICENSEES and the type and amount of any SUBLICENSE INCOME received from each SUBLICENSEE.
9.2 LICENSEE, AFFILIATES and its SUBLICENSEES shall keep and maintain complete and accurate records and books containing an accurate accounting of all data in sufficient detail to enable verification of EARNED ROYALTIES and other payments under this Agreement. LICENSEE shall preserve such books and records for [* * *] years after the calendar year to which they pertain. Such books and records shall be open to inspection by YALE or an independent certified public accountant selected by YALE, at YALE s expense, no more frequently than once per year, during normal business hours upon [* * *] days prior written notice, for the purpose of verifying the accuracy of the reports and computations rendered by LICENSEE. In the event LICENSEE underpaid the amounts due to YALE with respect to the audited period by more than [* * *] ([* * *]%), LICENSEE shall pay the reasonable cost of such examination, together with the deficiency not previously paid and interest from the due date of such payment, calculated at the rate set forth in Article 6.8, within [* * *] days of receiving notice thereof from YALE.
9.3 On or before the [* * *] day following the close of LICENSEEs fiscal year, LICENSEE shall provide YALE with LICENSEEs financial statements for the preceding fiscal year including, at a minimum, a balance sheet and an income statement with a certificate from an authorized officer of LICENSEE
10. PATENT PROTECTION
10.1 LICENSEE shall be responsible for past United States patent expenses for which Yale has not received consideration associated with LICENSED PATENTS pursuant to Article 5.1(b), and present and future on-going costs of filing, prosecution and maintenance of all United States patent applications contained in the LICENSED PATENTS. Any and all such United States patent applications, and resulting issued patents, shall remain the property of YALE.
10.2 LICENSEE shall be responsible for past foreign patent expenses for which Yale has not received consideration associated with LICENSED PATENTS pursuant to Article 5.1(b), and present and future on-going costs of filing, prosecution and maintenance of all foreign patent applications, and patents contained in the LICENSED PATENTS in the countries outside the United States in the LICENSED TERRITORY selected by YALE and agreed to by LICENSEE. All such applications or patents shall remain the property of YALE. LICENSEE acknowledges that YALE shall not be required to file any such
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applications in low or lower-middle income countries, as designated by the World Bank (www.worldbank.org). Furthermore, LICENSEE agrees not to file any patent rights that are owned by LICENSEE and that claim LICENSED PRODUCTS in any such low-income or lower-middle income countries.
10.3 If, upon the request of YALE, LICENSEE does not agree in writing to pay the expenses of filing, prosecuting or maintaining a given patent application or a given patent in any country outside the United States, or fails to pay the expenses of filing, prosecuting or maintaining a given patent application or patent in the United. States, then LICENSEEs rights under this Agreement shall terminate automatically with respect to that given patent in that country.
10.4 The costs mentioned in Articles 10.2 and 10.3 shall include, but are not limited to, any past, present and future taxes, annuities, working fees, maintenance fees, renewal and extension charges. Payment of such costs shall be made, at YALES option, either directly to patent counsel or by reimbursement to YALE. In either case, LICENSEE shall make payment directly to the appropriate party within [* * *] days of receiving its invoice. YALE shall provide LICENSEE with a schedule of proposed patent filings, including jurisdictions and instruct patent counsel to provide fee estimates for review by LICENSEE. If LICENSEE elects in advance not to pay for such filings, or subsequently fails to make payment to YALE or patent counsel of such fees, as the case may be, within the [* * *] day period from receipt by LICENSEE of the applicable invoice, LICENSEE shall be charged a [* * *] ([* * *]%) surcharge on the invoiced amount plus interest at the rate of [* * *]% per month or fraction thereof or such higher amount as may be charged by patent counsel. Failure of LICENSEE to pay the costs of patent prosecution in a given territory within [* * *] days of invoice by YALE shall be grounds for termination by YALE of LICENSE under Article 13 in that territory for which such patent expenses have not been paid..
10.5 All patent applications under the LICENSED PATENTS shall be prepared, prosecuted, filed and maintained by independent patent counsel chosen by YALE and reasonably acceptable to LICENSEE. Said independent patent counsel shall be ultimately responsible to YALE. YALE shall instruct patent counsel to keep both YALE and LICENSEE fully informed of the progress of all patent applications and patents, and to give both YALE and LICENSEE reasonable opportunity to comment on the type and scope of useful claims and the nature of supporting disclosures. YALE will not finally abandon any patent application for which LICENSEE is bearing expenses without LICENSEEs consent. YALE shall have no liability to LICENSEE for damages, whether direct, indirect or incidental, consequential or otherwise, allegedly arising from its good faith decisions, actions and omissions in connection with such prosecution.
10.6 LICENSEE shall mark, and shall require AFFILIATES and SUBLICENSEES to mark, all LICENSED PRODUCTS, that are tangible products, with the numbers of all patents included in LICENSED PATENTS that cover the LICENSED PRODUCTS. Without limiting the foregoing, all LICENSED PRODUCTS shall be marked in such a manner as to conform with the patent marking notices required by the law of any country where
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such LICENSED PRODUCTS are made, sold, used or shipped, including, but not limited to, the applicable patent laws of that country.
11. INFRINGEMENT AND LITIGATION
11.1 Each party shall promptly notify the other in writing in the event that it obtains knowledge of infringing activity by third parties, or is sued or threatened with an infringement suit, in any country in the LICENSED TERRITORY as a result of activities that concern the LICENSED PATENTS, and shall supply the other party with documentation of the infringing activities that it possesses.
11.2 During the TERM of this Agreement:
(a) LICENSEE shall have the first right to defend the LICENSED PATENTS against infringement or interference in the FIELD and in the LICENSED TERRITORY by third parties. This right includes bringing any legal action for infringement and defending any counter claim of invalidity or action of a third party for declaratory judgment for non-infringement or non-interference. If, in the reasonable opinion of both LICENSEEs and YALEs respective counsel, YALE is required to be a named party to any such suit for standing purposes, LICENSEE may join YALE as a party; provided, however, that (i) YALE shall not be the first named party in any such action, (ii) the pleadings and any public statements about the action shall state that the action is being pursued by LICENSEE and that LICENSEE has joined YALE as a party; and (iii) LICENSEE shall keep YALE reasonably apprised of all developments in any such action. LICENSEE may settle such suits solely in its own name and solely at its own expense and through counsel of its own selection; provided, however, that no settlement shall be entered without YALEs prior written consent, such consent not to be unreasonably withheld or delayed. Without limiting the foregoing YALE may withhold its consent to any settlement that would in any manner constitute or incorporate an admission by YALE or require YALE to take or refrain from taking any action. LICENSEE shall bear the expense of such legal actions. Except for providing reasonable assistance, at the request and expense of LICENSEE, YALE shall have no obligation regarding the legal actions described in Article 11.2 unless required to participate by law. However, YALE shall have the right to participate in any such action through its own counsel and at its own expense. Any recovery shall first be applied to LICENSEEs out of pocket expenses and second shall be applied to YALEs out of pocket expenses, including legal fees. YALE shall recover [* * *]% of any excess recovery over those expenses.
(b) Except as provided in Article 11(a) above, in the event LICENSEE fails to initiate and pursue or participate in the actions described in Article (a) within [* * *] days of (a) notification of infringement from YALE or (b) the date LICENSEE otherwise first becomes aware of an infringement, whichever is earlier, YALE may, in its sole discretion, convert the LICENSE granted in Article 3 only in the jurisdiction subject to such alleged infringement to a nonexclusive license, and
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issue licenses to third parties under the LICENSED PATENTS to make, have made, use, sell, have sold, import, or practice LICENSED PRODUCTS within the FIELD in the applicable jurisdiction within the LICENSED TERRITORY. Additionally, YALE shall have the right to initiate legal action such as that described in Article 11.2(a) at its own expense and YALE may use the name of LICENSEE as party plaintiff to uphold the LICENSED PATENTS in such jurisdiction. In such case, LICENSEE shall provide reasonable assistance to YALE if requested to do so. YALE may settle such actions solely through its own counsel. Any recovery shall be retained by YALE. .
(c) In the event LICENSEE is permanently enjoined from exercising its LICENSE under this Agreement pursuant to an infringement action brought by a third party, or if both LICENSEE and YALE elect not to undertake the defense or settlement of a suit alleging infringement for a period of [* * *] months from notice of such suit, then either party shall have the right to terminate this Agreement in the country where the suit was filed with respect to the licensed patent following [* * *] days written notice to the other party in accordance with the terms of Article 15.
(d) Notwithstanding the foregoing, neither LICENSEE nor YALE shall take any action to enforce the LICENSED PATENTS, or patent rights owned by LICENSEE and which claim the LICENSED PRODUCTS, in DEVELOPING ECONOMIES, where such action is intended to prevent the sale of LICENSED PRODUCTS solely in any such countries. However, LICENSEE and/or YALE may take such action in any such country, provided that such action is intended to prevent the manufacturing of LICENSED PRODUCTS for export to countries that DEVELOPING ECONOMIES.
12. USE OF YALES NAME
12.1 LICENSEE shall not use the name Yale or Yale University, nor any variation or adaptation thereof, nor any trademark, tradename or other designation owned by YALE, nor the names of any of its trustees, officers, faculty, students, employees or agents, for any purpose without the prior written consent of YALE in each instance, such consent to be granted or withheld by YALE in its sole discretion, except that LICENSEE may state that it has licensed from YALE one or more of the patents and/or applications comprising the LICENSED PATENTS.
13. TERMINATION
13.1 YALE shall have the right to terminate this Agreement upon [* * *] days prior written notice to LICENSEE in the event LICENSEE:
(a) fails to make any payment whatsoever due and payable pursuant to this Agreement unless LICENSEE shall make all such payments (and all interest due on such payments under Article 6.4) within the [* * *] day period after receipt of written notice from YALE; or
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(b) commits a material breach of any other material provision of this Agreement which is not cured (if capable of being cured) within the [* * *] day period after receipt of written notice thereof from YALE, or upon receipt of such notice if such breach is not capable of being cured; or
(c) fails to obtain or maintain adequate insurance as described in Article 14.2, whereupon YALE may terminate this Agreement immediately upon written notice to LICENSEE.
(d) If LICENSEE or any of its AFFILIATES brings a PATENT CHALLENGE against YALE, or assists others in bringing a PATENT CHALLENGE against YALE (except as required under a court order or subpoena), whereupon YALE may terminate this Agreement immediately, unless YALE raises the royalty rate pursuant to Article 6.2.
(e) If a SUBLICENSEE brings a PATENT CHALLENGE or assists another party in bringing a PATENT CHALLENGE (except as required under a court order or subpoena), then YALE may send a written demand to LICENSEE to terminate such sublicense. If LICENSEE fails to so terminate such sublicense within [* * *] days after YALEs demand, YALE may immediately terminate this Agreement unless YALE raises the royalty rate pursuant to Article 6.2.
13.2 This Agreement shall terminate automatically without any notice to LICENSEE in the event LICENSEE shall cease to carry on its business or becomes INSOLVENT, or a petition in bankruptcy is filed against LICENSEE and is consented to, acquiesced in or remains undismissed for [* * *] days, or LICENSEE makes a general assignment for the benefit of creditors, or a receiver is appointed for LICENSEE.
13.3 LICENSEE shall have the right to terminate this Agreement upon written notice to YALE:
(a) at any time on [* * *] months notice to YALE, provided LICENSEE is not in breach and upon payment of all amounts due YALE throughout the effective date of termination; or
(b) in the event YALE commits a material breach of any of the provisions of this Agreement and such breach is not cured (if capable of being cured) within the [* * *] day period after receipt of written notice thereof from LICENSEE, or upon receipt of such notice if such breach is not capable of being cured; or
(c) as to a specific country if no VALID CLAIMS exist in such country pursuant to (i) or (ii) in Article 2.37 or as provided in ARTICLE 11.2(c).
13.4 Upon termination of this Agreement, for any reason, all rights and licenses granted to LICENSEE under the terms of this Agreement are terminated and YALE has the option, in its discretion, to terminate any sublicense granted by LICENSEE. Upon such termination, LICENSEE shall cease to make, have made, use, sell, have sold, distribute,
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practice, import or export LICENSED PRODUCTS. Within [* * *] days of the effective date of termination LICENSEE shall return to YALE:
(a) All materials relating to or containing the LICENSED PATENTS, LICENSED PRODUCTS or CONFIDENTIAL INFORMATION disclosed by YALE;
(b) the last report required under Article 4 or Article 9; and
(c) all payments incurred up to the effective date of termination.
13.5 Termination of this Agreement shall not affect any rights or obligations accrued prior to the effective date of such termination and specifically LICENSEEs obligation to pay all royalties and other payments specified by Article 4 and Article 6. In particular, but without limitation, the following provisions shall survive any termination: Article 8, the preservation and inspection obligations of Article 9, Article 12, this Article 13.5, Article 13.6, Article 13.8, Article 14, Article 15, Article 17.1, and Article 18. The parties agree that claims giving rise to indemnification may arise after the TERM or termination of the LICENSE granted herein.
13.6 The rights provided in this Article 13 shall be in addition and without prejudice to any other rights, whether at law or in equity, which the parties may have with respect to any default or breach of the provisions of this Agreement.
13.7 Waiver by either party of one or more defaults or breaches shall not deprive such party of the right to terminate because of any subsequent default or breach.
13.8 Upon termination of this Agreement for any reason other than breach by YALE, LICENSEE shall permit YALE and its future licensees to utilize, reference and otherwise have the benefit of all regulatory approvals of, or clinical trials or other studies conducted on, and all filings made with regulatory agencies with respect to, the LICENSED PRODUCTS. In addition, at YALEs request, LICENSEE shall deliver to YALE within six months of such request all records required by regulatory authorities to be maintained with respect to the sale, storage, handling, shipping and use of the LICENSED PRODUCTS, all reimbursement approval files, all documents, data and information related to clinical trials and other studies of LICENSED PRODUCTS, any other data, techniques, know-how and other information developed or generated that relate to the LICENSED PATENTS or LICENSED PRODUCTS, and all copies and facsimiles of such materials, documents, information and files. YALE agrees that, subject to the provisions of Article 8, LICENSEE may retain one copy thereof to the extent LICENSEE is required by law to maintain such copy.
14. INDEMNIFICATION; INSURANCE; NO WARRANTIES
14.1 LICENSEE shall indemnify, defend by counsel acceptable to YALE, and hold harmless YALE and its trustees, officers, employees, and agents (collectively, YALE Indemnitees), from and against any claim, liability, cost, expense, damage, deficiency, loss, or obligation, of any kind or nature (including, without limitation, reasonable
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attorneys fees and other costs and expenses of defense) (collectively, CLAIMS), based upon, arising out of or otherwise relating to this LICENSE, including without limitation any cause of action relating to product liability, or any theory of liability (including without limitation tort, warranty, or strict liability) or the death, persona! injury, or illness of any person or out of damage to any property related in any way to the rights granted under this Agreement; or resulting from the production, manufacture, sale, use, lease, or other disposition or consumption or advertisement of the LICENSED PRODUCTS by LICENSEE, its AFFILIATES, SUBLICENSEES or any other transferees; or in connection with any statement, representation or warranty of LICENSEE, its AFFILIATES, SUBLICENSEES or any other transferees with respect to the LICENSED PRODUCTS. LICENSEE shall not settle or compromise the CLAIM without the prior written consent of YALE, such consent not to be unreasonably withheld or delayed. Without limiting the foregoing, YALE may withhold its consent to any settlement or compromise that would in any manner constitute or incorporate an admission by YALE or require YALE to take or refrain from taking any action.
14.2 Subject to the timing requirements set forth in ARTICLE 14.3,LICENSEE shall purchase and maintain in effect and shall require its SUBLICENSEES to purchase and maintain in effect a policy of commercial, general liability insurance to protect YALE with respect to events described in Article 14.1. Such insurance shall:
(a) list YALE, its trustees, directors, officers, employees and agents as additional insured parties under the policy;
(b) provide that such policy is primary and not excess or contributory with regard to other insurance YALE may have;
(c) be endorsed to include product liability coverage in amounts no less[* * *] Dollars ($[* * *]) per incident and [* * *] Dollars ($[* * *]) annual aggregate; and
(d) be endorsed to include contractual liability coverage for LICENSEEs indemnification under Article 14.1; and
(e) by virtue of the minimum amount of insurance coverage required under Article 14.2(c), not be construed to create a limit of LICENSEEs liability with respect to its indemnification under Article 14.1.
14.3 By signing this Agreement, LICENSEE certifies that the requirements of Article 14.2 will be met on or before the earlier of (a) the date of FIRST SALE of any LICENSED PRODUCT or (b) the date any LICENSED PRODUCT is tested or used on humans, and will continue to be met thereafter. Upon YALEs request, LICENSEE shall furnish a Certificate of Insurance and a copy of the current insurance policy to YALE. LICENSEE shall secure agreement from its insurer to give [* * *] days written notice to YALE prior to any cancellation of or material change to the policy.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(a) YALE MAKES NO, AND EXPRESSLY DISCLAIMS ALL, REPRESENTATIONS OR WARRANTIES THAT ANY CLAIMS OF THE LICENSED PATENTS, ISSUED OR PENDING, ARE VALID, OR THAT THE MANUFACTURE, USE, PRACTICE, SALE OR OTHER DISPOSAL OF THE LICENSED PRODUCTS DOES NOT OR WILL NOT INFRINGE UPON ANY PATENT OR OTHER RIGHTS NOT VESTED IN YALE.
(b) YALE MAKES NO, AND EXPRESSLY DISCLAIMS ALL, REPRESENTATIONS AND WARRANTIES WHATSOEVER WITH RESPECT TO THE LICENSED PATENTS AND LICENSED PRODUCTS, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(c) LICENSEE SHALL MAKE NO STATEMENTS, REPRESENTATION OR WARRANTIES WHATSOEVER TO ANY THIRD PARTIES THAT ARE INCONSISTENT WITH THE DISCLAIMERS BY YALE IN ARTICLE 14.3(a) AND (b).
(d) IN NO EVENT SHALL YALE, OR ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER YALE SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.
(e) IN NO EVENT SHALL YALE, OR ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES, BE LIABLE. FOR DAMAGES IN EXCESS OF AMOUNTS YALE HAS RECEIVED FROM LICENSEE UNDER THIS LICENSE.
15. NOTICES
15.1 Any monetary payment, notice or other communication required by this Agreement (a) shall be in writing, (b) may be delivered personally or sent by reputable overnight courier with written verification of receipt or by registered or certified first class United States Mail, postage prepaid, return receipt requested, (c) shall be sent to the following addresses or to such other address as such party shall designate by written notice to the other party, and (d) shall be effective upon receipt:
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New Haven, CT 06511 |
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16. INVENTOR AGREEMENTS
16.1 If LICENSEE and INVENTOR enter into an INVENTOR AGREEMENT, LICENSEE shall so notify YALE in writing within [* * *] days. The LICENSEE acknowledges that: (i) the INVENTOR is a faculty member, other employee, or student of YALE; (ii) the INVENTOR is subject to certain policies of YALE, as such policies may be revised from time to time, including policies concerning consulting, conflicts of interest, and intellectual property (YALE POLICIES); (iii) to the extent any provision of the INVENTOR AGREEMENT conflicts with YALE POLICIES, or imposes obligations or responsibilities compliance with which would require the INVENTOR to act in violation of YALE POLICIES, such provision shall be void. INVENTOR is a third party beneficiary of this paragraph.
17. LAWS, FORUM AND REGULATIONS
17.1 Any matter arising out of or related to this Agreement shall be governed by and in accordance with the substantive laws of the State of Connecticut, without regard to its conflicts of law principles, except where the federal laws of the United States are applicable and have precedence. Any dispute arising out of or related to this Agreement shall be brought exclusively in a court of competent jurisdiction in the State of Connecticut, and the parties hereby irrevocably submit to the jurisdiction of such courts.
17.2 LICENSEE shall comply, and shall cause its AFFILIATES and SUBLICENSEES to comply, with all foreign and United States federal, state, and local laws, regulations, rules and orders applicable to the testing, production, transportation, packaging, labeling, export, practice, sale and use of the LICENSED PRODUCTS. In particular, LICENSEE shall be responsible for assuring compliance with all United States export laws and regulations applicable to this LICENSE and LICENSEE s activities under this Agreement.
18. MISCELLANEOUS
18.1 This Agreement shall be binding upon and inure to the benefit of the parties and their respective legal representatives, successors and permitted assigns.
18.2 This Agreement constitutes the entire agreement of the parties relating to the LICENSED PATENTS and LICENSED PRODUCTS, and all prior representations, agreements and understandings, written or oral, are merged into it and are superseded by this Agreement.
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18.3 The provisions of this Agreement shall be deemed separable. If any part of this Agreement is rendered void, invalid, or unenforceable, such determination shall not affect the validity or enforceability of the remainder of this Agreement unless the part or parts which are void, invalid or unenforceable shall substantially impair the value of the entire Agreement as to either party.
18.4 Paragraph headings are inserted for convenience of reference only and do not form a part of this Agreement.
18.5 No person not a party to this Agreement, including any employee of any party to this Agreement, shall have or acquire any rights by reason of this Agreement. Nothing contained in this Agreement shall be deemed to constitute the parties partners or joint venturers with each other or any third party, and neither party shall be deemed the agent of the other.
18.6 This Agreement may not be amended or modified except by written agreement executed by each of the parties.
18.7 This Agreement is personal to LICENSEE and shall not be assigned by LICENSEE without the prior written consent of YALE, unless such an assignee is a QUALIFIED ASSIGNEE. Any attempted assignment in contravention of this Article 18.7 shall be null and void and shall constitute a material breach of this Agreement.
18.8 LICENSEE, or any SUBLICENSEE or assignee, will not create, assume or permit to exist any lien, pledge, security interest or other encumbrance on this Agreement or any sublicense.
18.9 The failure of any party hereto to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver of either such provision or of the right of such party thereafter to enforce each and every provision of this Agreement.
18.10 This Agreement may be executed in any number of counterparts and any party may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.
Signature Page Follows
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IN WITNESS to their Agreement, the parties have caused this Agreement to be executed in duplicate originals by their duly authorized representatives.
YALE UNIVERSITY |
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/s/E. Jonathan Sanderstrom |
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E. Jonathan Sanderstrom, Ph.D. |
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16 Sept 2013 |
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30 Sept 2013 |
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Appendix A LICENSED PATENTS
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Application
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Appendix B
DRAFT PLAN
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EXHIBIT 4.3: Intellectual Property associated with LICENSED PRODUCTS Reporting Example:
[* * *]
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AMENDMENT TO AGREEMENT
This Amendment ( Amendment ) to the Agreement by and between Yale University, a corporation organized and existing under and by virtue of a charter granted by the general assembly of the Colony and State of Connecticut and located in New Haven, Connecticut ( Yale ), and Biohaven Pharmaceutical Holding Company Ltd., a British Virgin Island company with principal offices located in New Haven, Connecticut ( Biohaven and together with Yale, the Parties ) dated as of September 30, 2013 (Yale Reference OCR4001.50; the Original Agreement ) is effective as of the date set forth on the signature page below (the Effective Date ).
WHEREAS, the Parties desire to amend the Original Agreement to revise the change of control payment provision contained in Section 5.5 and the board observer rights contained in Section 4.7 of the Original Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the Parties agree to amend the Original Agreement as follows:
1. Section 5.5 of the Original Agreement ( Change of Control ) is hereby deleted in its entirety and replaced by the following Section 5.5, with such change effective as of the Effective Date:
5.5 Change of Control
Within Five (5) Days after the first CHANGE OF CONTROL, LICENSEE shall pay to YALE a fee of the lesser of (a) Five Percent (5%) of the dollar value of all initial and future potential consideration paid or payable by acquirer to LICENSEE shareholders, or (b) One and One Half Million Dollars ($1,500,000.00) (the CHANGE OF CONTROL FEE). If the CHANGE OF CONTROL is an initial public offering as described in Article 2.2(c), then (i) the CHANGE OF CONTROL FEE shall be due to YALE on the first trading day when YALE is free to sell its equity interest (rather than within Five (5) Days after the CHANGE OF CONTROL as stated above) and (ii) the CHANGE OF CONTROL FEE shall be reduced by the dollar value of YALEs equity interest, if any, in LICENSEE as set forth in Article 5.1 on the first trading day when YALE is free to sell its equity interest, such reduction to be limited to One and One Half Million Dollar ($1,500,000.00). If, however, LICENSEE has paid the CHANGE OF CONTROL FEE in full prior to YALE crediting the value of the equity interest to the LICENSEE, then YALE shall refund to LICENSEE the value of YALEs equity interest within Sixty (60) days from the first day when YALE is free to sell its equity interest, such refund to be limited to no more than One and One Half Million Dollar ($1,500,000.00).
2. Section 4.7 of the Original Agreement is hereby deleted in its entirety and replaced by the words Intentionally omitted. This change is effective immediately upon the effectiveness of the registration statement for the initial public offering of the Companys common shares.
3. The remaining terms and conditions of the Original Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives.
Effective Date: April 1, 2017
YALE UNIVERSITY |
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BIOHAVEN PHARMACEUTICAL
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/s/ E. Jonathan Soderstrom |
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/s/ Vlad Coric |
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E. Jonathan Soderstrom, Ph.D. |
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Vlad Coric, M.D. |
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Managing Director, OCR |
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CEO |
Exhibit 10.5
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
ZYDIS® DEVELOPMENT AND LICENSE AGREEMENT
(Riluzole)
This Zydis® Development and License Agreement ( Agreement ) is made as of this 9th day of March, 2015 ( Effective Date ), by and between Biohaven Pharmaceutical Holding Company Ltd., a corporation duly formed under the laws of the British Virgin Islands ( Client ), and Catalent U.K. Swindon Zydis Limited, a company organized under the laws of Scotland (registered number SC070961), with a place of business at Frankland Road, Blagrove, Swindon, Wiltshire, UK SN5 8YG ( Catalent ) and Client are sometimes referred to in this Agreement as the Parties and individually as a Party .
RECITALS
A. Client is a pharmaceutical company that develops, markets and sells pharmaceutical products, including the Drug (as defined below);
B. Catalent and its Affiliates have developed proprietary drug delivery technology for the manufacture of the Orally Disintegrating Tablets ( ODT ) including the patented Zydis® Fast Dissolving Dosage Form ( Zydis ) for the administration of pharmaceutical drugs (collectively, along with the Zydis Patents and all data, results and information relating to Zydis and the Zydis Patents (whether produced prior to or after the Effective Date), the Zydis Technology );
C. A feasibility study by Catalent pursuant to that certain Biohaven Riluzole Zydis® Feasibility Programme dated March 5, 2014 (the Evaluation Agreement ) has been initiated to determine the likelihood of compatibility between the Zydis Technology and the Drug; and
D. Client desires to engage Catalent to conduct the Development Program (as defined herein), upon satisfactory results of the feasibility studies under the Evaluation Agreement, to develop additional data for the regulatory approval and commercialization of a Zydis Formulation, and Catalent desires to provide such services, all pursuant to the terms and conditions set forth in this Agreement.
THEREFORE , in consideration of the mutual covenants, terms and conditions set forth below, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms have the following meanings in this Agreement:
1.1 Action means any legal action, claim, suit or proceeding, including any declaratory judgment action.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.2 Affiliate(s) means, with respect to Client or any third party, any corporation, firm, partnership or other entity that controls, is controlled by or is under common control with such entity; and with respect to Catalent, Catalent Pharma Solutions, Inc. and any corporation, firm, partnership or other entity controlled by it. For purposes of this definition, control means the ownership of at least 50% of the voting share capital of an entity or any other comparable equity or ownership interest.
1.3 Agreement has the meaning set forth in the introductory paragraph, and includes all its Attachments and other appendices (all of which are incorporated herein by reference) and any amendments to any of the foregoing made as provided herein or therein.
1.4 Applicable Laws means, with respect to Client, all laws, ordinances, rules and regulations, currently in effect or enacted or promulgated during the Term, and as amended from time to time, of each jurisdiction in which Drug or Zydis Formulation is produced, marketed, distributed, used or sold; and with respect to Catalent, all laws, ordinances, rules and regulations, currently in effect or enacted or promulgated during the Term, and as amended from time to time, of the jurisdiction in which Catalent performs services; provided , that cGMP shall not constitute Applicable Laws except to the extent expressly stated in the Development Program.
1.5 Catalent has the meaning set forth in the introductory paragraph, or any successor or permitted assign. Catalent shall have the right to cause any of its Affiliates to perform any of its obligations hereunder, and Client shall accept such performance as if it were performance by Catalent.
1.6 Catalent Indemnitees has the meaning set forth in Section 8.2 .
1.7 Catalent IP has the meaning set forth in Section 6.1 .
1.8 cGMP current Good Manufacturing Practices promulgated by the Regulatory Authorities in the jurisdictions included in Applicable Laws (as applicable to Client and Catalent respectively). In the United States, this includes 21 C.F.R. Parts 210 and 211, as amended; and in the European Union, this includes 2003/94/EEC Directive (as supplemented by Volume 4 of EudraLex published by the European Commission), as amended, if and as implemented in the relevant constituent country.
1.9 Change Order has the meaning set forth in Section 2.3 .
1.10 Client has the meaning set forth in the introductory paragraph, or any successor or permitted assign.
1.11 Client-supplied Materials means any materials to be supplied by or on behalf of Client to Catalent for Catalent to conduct the Development Program, as provided in the Development Program, including Drug and reference standards.
1.12 Client Indemnitees has the meaning set forth in Section 8.1 .
1.13 Client Inventions has the meaning set forth in Section 6.1 .
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.14 Client IP has the meaning set forth in Section 6.1 .
1.15 Commencement Date has the meaning set forth in the Evaluation Agreement, as in effect on the date hereof.
1.16 Confidential Information has the meaning set forth in Section 5.1 .
1.17 CPR has the meaning set forth in Section 13.10 .
1.18 DEA means the U.S. Drug Enforcement Agency or any successor agency thereto.
1.19 Development Batch has the meaning set forth in Section 4.6 .
1.20 Development Program has the meaning set forth in Section 2.1 .
1.21 Discloser has the meaning set forth in Section 5.1 .
1.22 Drug means the active pharmaceutical compound riluzole, riluzole prodrugs and [* * *] of riluzole and riluzole prodrugs.
1.23 Effective Date has the meaning set forth in the introductory paragraph.
1.24 EMA means the European Medicines Agency or any successor agency thereto.
1.25 Evaluation Agreement has the meaning set forth in Recital C .
1.26 Facility means Catalents facility located in Swindon, UK, or such other facility as agreed by the Parties.
1.27 FDA means the U.S. Food and Drug Administration or any successor agency thereto.
1.28 Field means medical disorders treatable by the Drug in humans.
1.29 First Launch Date means the date of Launch for the first Product developed hereunder.
1.30 GAAP means U.S. generally accepted accounting principles, consistently applied over the relevant period.
1.31 Intellectual Property has the meaning set forth in Section 6.1 .
1.32 Inventions has the meaning set forth in Section 6.1 .
1.33 Launch means, with respect to each Product developed hereunder, the first commercial sale of such Product by or on behalf of Client or Clients permitted sublicensees in the Territory after receipt of Regulatory Approval and, if required, Pricing Approval.
1.34 Losses has the meaning set forth in Section 8.1 .
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.35 Net Sales means, for the measured period, the gross invoiced amounts for Products sold or commercially disposed of for value by Client or its permitted sublicensees (including its Affiliates) or distributors, less the following:
A. customary trade allowances, discounts [* * *];
B. credits or allowances given or made for rejection, recall or return of previously sold Product actually taken or allowed;
C. [* * *] payments and rebates [* * *];
D. [* * *];
E. sales taxes, value-added taxes, excise or use taxes, tariffs, duties and customs fees and other taxes, [* * *];
F. freight, insurance, inventory and other transportation expenses [* * *];
G. [* * *]; and
deductions for [* * *].
In addition, Net Sales shall include (A) [* * *] and (B) [* * *].
Sales of Products between Client and its permitted sublicensees (including its Affiliates) shall be disregarded for the purposes of calculating Net Sales, and in such case Net Sales shall include only subsequent sales by the relevant sublicensee to a third party. Subject to the foregoing sentence, if any Products are sold or disposed of by Client or its permitted sublicensees other than in a bona fide arms length sale exclusively for money, then Net Sales for such products shall be deemed to be [* * *].
The amount of any reduction or reversal of any accrual or reserve related to any deduction from the amount invoiced for Products shall be included in Net Sales in the Quarter in which such reduction or reversal occurs. All calculations shall be made in accordance with GAAP.
1.36 Parties and Party have the meaning set forth in the introductory paragraph.
1.37 Pricing Approval means subsequent to Regulatory Approval, pricing and any relevant reimbursement approval to allow marketing and sales of Products in the given country within the Territory for which such Regulatory Approval relates.
1.38 Process Inventions has the meaning set forth in Section 6.1 .
1.39 Product means each product developed hereunder which uses, contains, comprises or otherwise incorporates a Zydis Formulation.
1.40 Quarter means each respective period of three (3) consecutive months ending on March 31 st , June 30 th , September 30 th and December 31 st .
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.41 Recipient has the meaning set forth in Section 5.1 .
1.42 Records has the meaning set forth in Section 4.5 .
1.43 Regulatory Approval means any approvals, permits, product and/or establishment licenses, registrations or authorizations, including approvals pursuant to U.S. Investigational New Drug applications, New Drug Applications and Abbreviated New Drug Applications (or equivalent non-U.S. filings, such as European marketing authorization applications), as applicable of any Regulatory Authorities that are necessary or advisable in connection with the development, manufacture, testing, use, storage, exportation, importation, transport, promotion, marketing, distribution or sale of Products in the Territory, excluding Pricing Approvals.
1.44 Regulatory Authorities means the international, federal, state or local governmental or regulatory bodies, agencies, departments, bureaus, courts or other entities in the Territory that are responsible for (A) the regulation (including pricing) of any aspect of pharmaceutical or medicinal products intended for human use or (B) health, safety or environmental matters generally. In the United States, this includes the FDA; and in the European Union, this includes the EMA.
1.45 Representatives of an entity means any of such entitys duly-authorized officers, directors, employees, agents, accountants, attorneys or other professional advisors.
1.46 Review Period has the meaning set forth in Section 4.5 .
1.47 Supplies has the meaning set forth in Section 2.4(B) .
1.48 Supply Agreement has the meaning set forth in Section 2.6 .
1.49 Term has the meaning set forth in Section 11.1 .
1.50 Territory means worldwide, but excluding any countries that are targeted by the comprehensive sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom, or the United States. Catalent shall not be obliged to develop or manufacture Products for sale in any of such countries if it is prevented from doing so, or would be required to obtain or apply for special permission to do so, due to any restrictions (such as embargoes) imposed on it by any governmental authorities, including without limitation, those imposed by the U.S. Office of Foreign Assets Control.
1.51 Valid Claim means a claim within the Zydis Patents that is issued or has not been pending more than [* * *] years from the priority date and has not been held invalid by a court of competent jurisdiction after all avenues for appeal have been taken or the time period for the same has expired, or disclaimed or admitted to be invalid or unenforceable through reissue or otherwise, or held unpatentable in a re-examination, opposition or similar proceeding from a patent office of competent jurisdiction after all avenues for appeal have been taken or the time period for the same has expired.
1.52 Zydis has the meaning set forth in Recital B.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.53 Zydis Formulations means the formulations of Drug developed hereunder whose development, formulation, manufacture, or sale utilizes or incorporates the Zydis Technology for use in the Field.
1.54 Zydis Patents mean the patents and patent applications (until such time as such applications or any of them are denied, abandoned or issued into patents), and patent disclosures, together with all revisions, renewals, extensions, reexaminations, provisionals, reissuances, continuations, continuations-in-part, divisionals, foreign cognates, patents of addition, confirmation patents, registration patents, pipeline protections or supplementary protection certificate related thereto, that include claims relating to fast dissolving drug delivery systems, that Catalent or its Affiliates own or under which Catalent or its Affiliates have in- licensed with the right to sublicense and that would be infringed or misappropriated by the development, manufacture, sale or use of any Product in the Territory.
1.55 Zydis Technology has the meaning set forth in Recital B .
ARTICLE 2
DEVELOPMENT PROGRAM
2.1 Development Program . The Parties have agreed upon, and set forth in Attachment A , requirements and objectives for a program to develop and produce for clinical trials Products suitable for Regulatory Approval and commercialization (as the same may be amended in accordance with the terms of this Agreement, the Development Program ).
2.2 Performance Standards . Each Party shall use its commercially reasonable efforts to carry out the responsibilities assigned to it in the Development Program, if any, in a timely manner. In addition, Client shall use its commercially reasonable efforts to cooperate with Catalents conduct of the Development Program, including by timely providing any approvals that may be required during each phase of the Development Program. Catalent shall keep Client reasonably informed of the progress and all significant developments of the Development Program by delivery of written reports as specified in Attachment A and by participation in telephone conferences from time to time as reasonably requested by Client.
2.3 Amendments to Development Program . Any material change in the details of the Development Program or the assumptions upon which the Development Program is based may require changes in the pricing and/or time lines, and shall require a written amendment to the Development Program, sometimes referred to as a Quotation Amendment Request or a QAR (a Change Order ). Each Change Order shall detail the requested changes to the applicable task, responsibility, duty, pricing, time line or other matter. The Change Order will become effective upon the execution of the Change Order by both Parties, and following such execution shall be appended hereto as part of Attachment A . Catalent will be given a reasonable period of time within which to implement the changes in an executed Change Order. Both Parties agree to act in good faith and promptly when considering a Change Order requested by the other Party. Without limiting the foregoing, Client agrees that it will not unreasonably withhold approval of a Change Order if the proposed changes in pricing or time lines result from, among other appropriate reasons, forces outside the reasonable control of Catalent or changes in the assumptions upon which the initial pricing or time lines were
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
based. Catalent shall not be obligated to perform any modified or additional changes in the Development Programs scope until such time as the Parties execute the corresponding Change Order.
2.4 Materials and Supplies .
A. Client shall arrange for the delivery, at its own cost and risk, of Drug and any other Client-supplied Materials to the Facility in sufficient quantities and sufficiently in advance of the commencement of the Development Program to permit Catalent to timely perform its obligations hereunder. Client shall retain title to Client-supplied Materials at all times and shall bear the risk of loss thereof. Catalent shall take all reasonable steps to store and properly preserve Drug and any other Client-supplied Materials in Catalents Facility. Client shall be responsible at its expense for securing any necessary DEA, export or import, similar clearances, permits or certifications required in respect of the Drug and any other Client-supplied Materials. Prior to delivery of any such items, Client shall provide to Catalent a copy of all associated material safety data sheets, safe handling instructions and health and environmental information and any Regulatory certifications or authorizations that may be required under Applicable Laws relating to the Drug and any other Client-supplied Materials, and shall promptly provide any updates thereto. Following receipt of Client-supplied Materials, Catalent shall inspect such items to verify their identity. Unless otherwise expressly required by the Development Program, Catalent shall have no obligation to test such items to confirm that they meet the associated specifications or certificate of analysis or otherwise; but in the event that Catalent detects a nonconformity with applicable specifications, Catalent shall give Client prompt notice of such nonconformity.
B. Shipment of all samples and clinical supplies of Products and Zydis Formulations to be provided to Client pursuant to the Development Program (collectively, the Supplies ) shall be Ex Works (Incoterms 2010) the Facility. Catalent shall assist Client and cooperate with Clients designated common carrier in coordinating such shipments. Title to the Supplies shall pass to Client when released by Catalent at the Facility to Clients designated common carrier.
2.5 Clinical and Regulatory .
A. Within [* * *] months after the execution of this Agreement, but in any event prior to the delivery by Catalent of any Supplies required to be manufactured in accordance with cGMP, including Supplies to be used in human clinical trials, the Parties shall negotiate in good faith and enter into a Quality Agreement substantially in the form attached hereto as Attachment B . In the event of a conflict between any of the provisions of this Agreement and the Quality Agreement with respect to quality-related activities, including compliance with cGMP, the provisions of the Quality Agreement shall govern. In the event of a conflict between any of the provisions of this Agreement and the Quality Agreement with respect to any commercial matters, including allocation of risk, liability and financial responsibility, the provisions of this Agreement shall govern.
B. Except as provided for in the following Section 2.5(C) , Catalent shall obtain and maintain all necessary Regulatory Approvals with respect to general Facility operations
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
or that may be required for Catalent to conduct the Development Program, including manufacturing of the Supplies, and to comply with all Applicable Laws in this respect.
C. Client shall be responsible for conducting the clinical program (i.e., all activities relating to the planning and execution of pre-clinical and clinical studies in animals or humans directed towards obtaining Regulatory Approval for marketing) with respect to Products and for preparing and filing regulatory submissions in the Territory with respect thereto, including any expenses associated therewith pursuant to Section 4.4 . Client shall obtain and maintain all necessary Regulatory Approvals and Pricing Approvals that may be required for Client to conduct the clinical program with respect to Products and commercialize Products in the Territory and to comply with all Applicable Laws in this respect, including filing all periodic reports, safety reports, and all other notifications as required by the Regulatory Authorities. Client shall be responsible for retaining and maintaining all study records, financial information, and reserve samples, as required under Applicable Law, generated or used in the execution of the pre-clinical and clinical studies in animals or humans performed in accordance with this Agreement.
D. Catalent will co-operate with Client, upon Clients reasonable request and at Clients cost, to assist Client in obtaining and maintaining Regulatory Approvals that may be required for Client to fulfill its obligations under Section 2.5(C) ; provided, however , Client shall not identify Catalent in any regulatory filing or submission without Catalents prior written consent unless required by Applicable Law, including disclosure of Catalent as the manufacturer of the Product. Such consent shall not be unreasonably withheld or delayed and shall be memorialized in a writing signed by authorized representatives of both Parties.
E. Client shall use its commercially reasonable efforts to carry out its responsibilities under this Section 2.5 with the objective of satisfying the requirements of Regulatory Authorities as effectively and expeditiously as possible and to enhance the prospects of the overall commercial success of the Products.
F. Each Party shall (i) promptly notify the other Party promptly of any Regulatory Authority inspection, inquiry or correspondence concerning the Products, including inspections of investigational sites or laboratories and (ii) to the extent permitted by Applicable Laws promptly forward to the other Party copies of any correspondence from or to any Regulatory Authority relating to any such inspection, inquiry or correspondence or otherwise relating to Products, including FDA Form 483 notices, and FDA refusal to file, deficiency, rejection or warning letters (or equivalent non-U.S. documents), purged only of Confidential Information that is unrelated to the Products.
2.6 Commercial Supply . After the receipt of the final report required pursuant to the Development Program, Client shall notify Catalent within [* * *] thereafter whether or not it desires to proceed with commercialization of any Products; provided that such time period may be extended by Catalent upon the reasonable request of Client for up to an additional [* * *]. If Client desires to proceed with commercialization, then Client and Catalent (or one of its Affiliates) shall enter into good faith negotiations for a separate supply agreement [* * *] (any such agreement, a Supply Agreement ).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
2.7 Exclusivity . Catalent agrees that, for the period commencing on the Effective Date and ending when Client notifies Catalent, in accordance with Section 2.6 , whether or not it desires to proceed with commercialization of any Products, Catalent will not enter into any agreement, arrangement, understanding or negotiations with any third party relating to the application of the Zydis Technology to formulations of Drug in the Territory. If Client notifies Catalent that it does desire to proceed with such commercialization, the period described in the preceding sentence will be extended for an additional thirty (30) days (or until a Supply Agreement is executed, if earlier).
2.8 Non-Compete . Catalent agrees that during the Term of this Agreement and for a period of [* * *] after the end of such Term (the Non-Compete Period ), Catalent shall not, without the prior written consent of Client, directly or indirectly develop or manufacture for itself or for any other person or entity, other than Client, a formulation of the Drug that uses or employs the Zydis Technology in the Field. This non-compete covenant shall terminate upon any earlier termination of this Agreement pursuant to Sections 11.2, 11.3 or 11.4 hereof and may only be extended by mutual written agreement of the Parties. During the Term or Non-Compete Period, if Client no longer wishes to pursue a formulation of the Drug that uses or employs the Zydis Technology in the Field, then Client shall promptly provide Catalent with written notification of its decision, and the non-compete covenant described herein shall terminate as of the date of such notice.
ARTICLE 3
LICENSE
3.1 Grant . Subject to the terms of this Agreement, including the payment of the license fees and royalties described in Sections 4.1(D) and (E) , Catalent hereby grants to Client an exclusive license, with the right to sublicense subject to Section 3.2 , under the Zydis Technology for the sole purposes of using and selling (but not manufacturing except as provided in Attachment C and the Supply Agreement) Products in the Field in the Territory. Notwithstanding the foregoing, Catalent shall retain such rights under the Zydis Technology as may be required to allow Catalent to carry out its obligations under the Development Program and any Supply Agreement. Any rights under the Zydis Technology not expressly granted to Client in this Section 3.1 shall be retained by Catalent.
3.2 Sublicenses . Client may sublicense to any of its Affiliates any of the rights granted to Client pursuant to Section 3.1 (without the right to further sublicense), or to third parties any of the rights granted to Client pursuant to Section 3.1 (without the right to further sublicense) upon the prior written consent of Catalent, which shall not be unreasonably withheld; provided , that Client shall provide to Catalent within five (5) days after execution a copy of each sublicense agreement with any sublicensee that is not an Affiliate. Client shall ensure that each sublicensee accepts in writing and complies with all of the terms and conditions of this Agreement as if such sublicensee were a Party to this Agreement, and Client shall guarantee and be responsible for its sublicensees performance under (and breach of) this Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
3.3 Trademark . In the event Client desires to use the trademark ZYDIS® in connection with the use or sale of the Products permitted hereunder, the Parties shall negotiate in good faith a royalty-free trademark license agreement on Catalents standard terms.
3.4 Client Technology . Client hereby grants to Catalent a non-exclusive, fully paid-up and royalty-free license, with the right to sublicense to Catalents Affiliates, under any and all technology owned by or licensed to Client with respect to the Drug or any formulations of the Drug for the sole purpose of carrying out Catalents obligations under this Agreement, the Development Program and any Supply Agreement.
ARTICLE 4
PAYMENTS
4.1 Fees . In consideration for Catalent conducting the Development Program and granting to Client the rights pursuant to Section 3.1 :
A. Performance Fees . Client shall pay to Catalent the milestone or other performance-based fees described in the Development Program. Such fees shall be paid within [* * *] days following invoice, which invoice shall be submitted to Client by Catalent upon the occurrence of each such milestone event, and shall be non-refundable and non-creditable.
B. Fees for Supplies . Client shall pay to Catalent the fees relating to the manufacture and delivery of Supplies as described in the Development Program, if any, and as described in Section 2.4 . Such fees shall be paid within [* * *] days following invoice, which invoice shall be submitted to Client by Catalent upon tender of delivery of the relevant Supplies to the designated carrier.
C. Retesting . All retesting performed that is not due to a Catalent error will be billed to Client. All required investigational studies or additional Client requests not outlined in the Development Program will be invoiced for the cost of performance at the current standard pricing.
D. Milestones .
(i) On the Effective Date, Client shall pay to Catalent $275,000.00.
(ii) For each Product developed hereunder, Client shall pay to Catalent the following non-refundable and non-creditable milestone payments in connection with Clients license of the Zydis Technology:
i. $[* * *] invoiced after [* * *]; and
ii. $[* * *] invoiced after [* * *].
Client shall notify Catalent of the achievement of each such milestone within [* * *] business days following achievement. Such milestones shall be paid within [* * *]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
days following invoice, which invoice shall be submitted to Client by Catalent promptly following receipt of Clients notification.
E. Royalties . Client shall pay to Catalent, on a calendar quarter basis, a royalty in connection with Clients license of the Zydis Technology equal to [* * *]% of Net Sales. The foregoing royalty shall decrease by [* * *]% to [* * *]% of Net Sales effective as of the first Quarter following the expiration or other lapse of the last Valid Claim covering any Zydis Formulation; provided, however, in the event that a patent is issued that protects any Zydis Formulation or an extension of an existing patent covering any Zydis Formulation be granted, such royalty rate shall be increased back to [* * *]% of Net Sales for the life of such patents Valid Claim(s). Client shall deliver to Catalent within [* * *] days following the end of each Quarter following the First Launch Date: (i) a written statement setting forth in reasonable detail its calculation of the royalty due for such most recently completed Quarter, including its calculation of Net Sales and all appropriate backup information, and (ii) payment of the royalty due on such Net Sales.
F. Other Fees . Client shall pay Catalent for all other fees and expenses of Catalent owing in accordance with the terms of this Agreement, including, if and when applicable, any cancellation fees set forth in the Development Program and any payments Catalent is required to make to any Regulatory Authority pursuant to Applicable Laws resulting from Catalents formulation, development, manufacturing, processing, filling, packaging or testing of Product at the Facility (including without limitation any payments or fees Catalent is required to make pursuant to the Generic Drug User Fee Act of 2012, if applicable). Such fees and expenses shall be paid within [* * *] days following invoice, which invoice shall be submitted to Client by Catalent as and when appropriate.
4.2 Payment Terms . Client shall make payment as directed in the applicable invoice. In the event payment (except for any amount disputed that will be subject to Section 13.10) is not received by Catalent on or before the [* * *] day after the date of the invoice, then Catalent may, in addition to any other remedies available at equity or in law, at its option, elect to do any one or more of the following: (A) charge interest on the outstanding sum from the due date (both before and after any judgment) at [* * *]% per month until paid in full (or, if less, the maximum amount permitted by Applicable Laws); (B) suspend any further performance hereunder until such invoice is paid in full; and/or (C) terminate this Agreement pursuant to Section 3 . Except as expressly set forth in the Development Program, all payments hereunder shall be made in U.S. dollars. If Net Sales are invoiced by Client or its Affiliates or any permitted sublicensees to third parties in other currencies, royalties due on such Net Sales pursuant to Section 4.1(E) shall be converted into U.S. dollars in accordance with GAAP at the closing rates of exchange as published in The Wall Street Journal , in effect on the last business day of the month within the calendar quarter for which royalties are due.
4.3 Taxes . All taxes, duties and other amounts assessed (excluding tax based on net income and franchise taxes) on services, components, Drug or Supplies prior to or upon provision or sale to Catalent or Client, as the case may be, and on any other Client-supplied Materials, are the responsibility of Client, and Client shall reimburse Catalent for all such taxes, duties or other expenses paid by Catalent or such sums will be added to invoices directed at Client, where applicable. If any deduction or withholding in respect of tax or
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
otherwise is required by law to be made from any of the sums payable as mentioned in Section 4.1 , Client shall be obliged to pay to Catalent such greater sum as will leave Catalent, after deduction or withholding as is required to be made, with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding.
4.4 Client and Third Party Expenses . Except as may be expressly set forth in the Development Program, Client shall be responsible for 100% of its own and all third-party expenses associated with the development, Regulatory Approval and commercialization of Products, including regulatory filings, pre-clinical studies and clinical studies.
4.5 Records; Audit Rights . Client will keep complete and accurate books and records relating to all amounts payable to Catalent hereunder, sales of Products, its calculation of royalties and Net Sales (including all relevant deductions) and is achievement of the milestone events referred to in Section 4.1(D) for at least [* * *] years after the expiration of the year to which they relate, in each case, in sufficient detail to enable the calculation and verification of all payments payable to Catalent hereunder ( Records ). Upon the written request and not more than once per calendar year, Catalent shall be entitled to audit, or to have an independent accountant audit, such books and records. Client shall provide Catalent or such auditors, as applicable, with access during normal business hours to appropriate space at Clients relevant location and to such of the pertinent Records of Client as may be reasonably necessary to verify the matters in question. Such access shall include the right of Catalent or the independent accounting firm to interview Catalents personnel as Catalent or such independent accounting firm determines appropriate. Each such examination shall be limited to pertinent Records for any year ending not more than [* * *] years prior to the date of such request. Before permitting such independent accounting firm to have access to such Records and personnel, Client may require such independent accounting firm and its personnel involved in such audit, to sign to sign a confidentiality agreement reasonably acceptable to Catalent to prohibit the independent accounting firm from disclosing Clients financial and proprietary information except as contemplated by this Agreement. Prior to disclosing the results of any such audit to Catalent, the auditors shall present Client with a preliminary report of findings and provide Client with up to [* * *] days to respond to any questions raised or issues identified (the Review Period ). Following the Review Period, the auditors will prepare and provide to Client and Catalent a written report stating whether the payments made to Catalent for the audit period are correct or incorrect and the details of any discrepancies. If an audit discloses an underpayment by Client of any amounts paid pursuant to any provision of this Agreement, such amounts shall be paid to Catalent within [* * *] days after the date Client receives the auditors final written report. Any fees and expenses of the audit shall be paid by Catalent unless the audit discloses an understatement by Client of more than [* * *]% of the aggregate amounts payable to Catalent pursuant to this Agreement during such audit period, in which case Client shall bear the responsibility for any such reasonable fees and expenses.
4.6 Development Batches . Each batch of Supplies produced under this Agreement will be considered to be a Development Batch until manufacturing, testing and storage methods and processes have been validated or qualified in accordance with industry standards (including production of at least [* * *] consecutive batches of Supplies that meet the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
applicable specifications). The term Development Batch shall include any batch manufactured following (A) a Change Order, or (B) a scale-up in the manufacturing process to produce greater quantities of Supplies, until Catalent has manufactured at least [* * *] consecutive batches of Supplies meeting the new specifications. Client shall be responsible for the cost of each Development Batch, even if such batch fails to meet the specifications therefor, unless Catalent was grossly negligent in the manufacture of the out-of-specification batch. Catalent and Client shall cooperate in good faith to resolve any problems causing the out-of-specification batch.
ARTICLE 5
CONFIDENTIALITY AND NON-USE
5.1 Definition . As used in this Agreement, the term Confidential Information includes all information furnished by or on behalf of Catalent or Client (the Discloser ), its Affiliates or any of its or their respective Representatives, to the other Party (the Recipient ), its Affiliates or any of its or their respective Representatives, whether furnished before, on or after the Effective Date and furnished in any form, including written, verbal, visual, electronic or in any other media or manner and information acquired by observation or otherwise during any site visit at the other Partys facility. Confidential Information includes all proprietary technologies, inventions and any other Intellectual Property, analyses, compilations, business or technical information and other materials prepared by either Party, their respective Affiliates, or any of its or their respective Representatives, containing or based in whole or in part on any information furnished by the Discloser, its Affiliates or any of its or their respective Representatives. Confidential Information also includes the existence of this Agreement and its terms (including all Attachments).
5.2 Exclusions . Notwithstanding Section 5.1 , Confidential Information does not include information that (A) is or becomes generally available to the public or within the industry to which such information relates other than as a result of a breach of this Agreement, (B) is already known by the Recipient at the time of disclosure as evidenced by the Recipients written records, (C) becomes available to the Recipient on a non-confidential basis from a source that is entitled to disclose it on a non-confidential basis or (D) was or is independently developed by or for the Recipient without reference to the Confidential Information of the Discloser as evidenced by the Recipients written records.
5.3 Mutual Obligation . The Recipient agrees that it will not use the Disclosers Confidential Information except in connection with the performance of its obligations hereunder (except that Confidential Information necessary for manufacture or production of a Product may be used during any commercialization pursuant to a Supply Agreement). Recipient will not disclose, without the prior written consent of the Discloser, Confidential Information of the Discloser to any third party, except that the Recipient may disclose the Disclosers Confidential Information to any of its Affiliates and its or their respective Representatives that (A) need to know such Confidential Information for the purpose of performing under this Agreement, (B) are advised of the contents of this Article 5 and (C) are bound to the Recipient by obligations of confidentiality at least as restrictive as the terms of this Article 5 . Each Party shall be responsible for any breach of this Article 5 by its Affiliates or any of its or their respective Representatives.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
5.4 Permitted Disclosure . The Recipient may disclose the Disclosers Confidential Information to the extent required by Applicable Law, regulation or court or administrative order; provided , that prior to making any such legally required disclosure, the Recipient shall give the Discloser as much prior notice of the requirement for and contents of such disclosure as is practicable under the circumstances. Any such disclosure, however, shall not relieve the Recipient of its obligations contained herein.
5.5 No Implied License . Except as expressly set forth in this Article 5 , the Recipient will obtain no right of any kind or license under any Confidential Information of the Discloser, including any patent application or patent, by reason of this Agreement. Subject to Article 6 , all Confidential Information will remain the sole property of the Discloser.
5.6 Return of Confidential Information . Upon expiration or termination of this Agreement, the Recipient will (and will cause its Affiliates and its and their respective Representatives to) cease its and their use and, upon written request, within thirty (30) days either return or destroy (and certify as to such destruction) all Confidential Information of the Discloser, including any copies thereof, except for a single copy which may be retained for the sole purpose of ensuring compliance with its obligations under this Agreement; provided that such retained copy shall remain subject to the obligations of confidentiality set forth herein.
5.7 Survival . The obligations of this Article 5 will terminate five (5) years from the expiration or termination of this Agreement.
ARTICLE 6
INTELLECTUAL PROPERTY
6.1 Definitions . For purposes hereof, Intellectual Property means all intellectual property (whether or not patented), including without limitation, patents, patent applications, know-how, trade secrets, copyrights, trademarks, designs, concepts, technical information, manuals, standard operating procedures, instructions, specifications, inventions, discoveries, processes, data, improvements and developments. Client IP means (i) all Intellectual Property and embodiments thereof owned by or licensed (other than by Catalent) to Client as of the date hereof or developed (other than by Catalent) by or for Client other than in connection with this Agreement, including Clients proprietary formulation of the Drug, and (ii) all Inventions (as defined in the Evaluation Agreement) described in subclauses (A) and (B) in the third sentence of clause K of Attachment A to the Evaluation Agreement developed at any time during the term of the Evaluation Agreement. Catalent IP means all Intellectual Property and embodiments thereof owned by or licensed to Catalent as of the date hereof or developed by Catalent other than in connection with this Agreement; Invention means any Intellectual Property developed by either Party or jointly by the Parties in connection with this Agreement (including all Change Orders under this Agreement); [* * *].
6.2 Disclosure of Inventions . Client shall promptly provide written notice to Catalent of Inventions developed by Client.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
6.3 Ownership of Intellectual Property . All Client IP and Client Inventions shall be owned solely by Client and no right therein is granted to Catalent under this Agreement, except that Catalent shall have a non-exclusive, fully paid-up, royalty-free license pursuant to Section 3.4 to such Client IP and Client Inventions and, as applicable, the Client-supplied Materials, solely to the extent necessary to perform its obligations under this Agreement, the Development Program and any Supply Agreement. All Catalent IP and Process Inventions shall be owned solely by Catalent and except as set forth in Section 3.1 no other right therein is granted to Client under this Agreement.
6.4 Patentable Inventions . In the event that any Inventions may be patentable:
A. the Party owning such Invention pursuant to Section 6.3 shall have the right, in its sole discretion, to determine the patent strategy for such Invention, which may include not obtaining patent protection in a particular country or any country;
B. without prejudice to the generality of Section 6.4 , the Party not owning an Invention shall cooperate with the other Party and/or its attorneys upon reasonable request, at the expense of the other Party, in (i) properly filing and prosecuting patent applications, (ii) vesting title herein provided and (iii) providing non-financial assistance in enforcing any patents resulting from such patent applications; and
C. the cost of patenting Inventions will be borne by the owner of the Invention.
6.5 Assignment of Rights . Each of Client and Catalent shall, and does hereby, assign, and shall cause its Affiliates, employees, consultants and agents to so assign with full title guarantee, to the other Party, without additional compensation, such right, title and interest in and to any Intellectual Property (including Inventions) as is necessary to fully effect the ownership provisions set out in this Article 6 and any accrued rights of action in respect thereof. Each of Client and Catalent shall, if so requested by the other Party, execute all such documents and do all such other acts and things as may be reasonably required to comply with this Article 6 to vest in the appropriate Party all rights in the relevant Intellectual Property and shall procure execution by any named inventor of all such documents as may reasonably be required by the other Party in connection with any related patent application.
6.6 [* * *].
6.7 Enforcement of Zydis Patents . If either Party becomes aware of any third party infringement or threatened infringement of any of the Zydis Patents, the following shall apply:
A. The Party becoming so aware shall promptly give written notice to the other Party of such infringement or threatened infringement describing the facts relating thereto in reasonable detail, including a copy of any written correspondence received from third parties.
B. If there is disagreement between the Parties as to whether the third party act is in fact an infringement of any of the Zydis Patents or whether an infringement Action would stand a reasonable chance of success, the Parties shall refer such issue to an independent experienced intellectual property counsel, and the costs incurred in this regard shall be borne
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
by the Party whose view does not prevail. Each Party shall have the right to present evidence in support of its position to the independent intellectual property counsel.
C. With or without the advice of independent intellectual property counsel pursuant to clause (B), Catalent shall have the initial right, but not the obligation, to pursue any alleged third party infringement of any of the Zydis Patents in any country, within or outside the Territory. Catalent shall notify Client within ninety (90) days after delivery of any notice pursuant to clause (A) (or, if later, thirty (30) days after the decision of the intellectual property counsel described in clause (B)) whether it intends to so pursue. Catalent may agree to settle any such Action in its sole discretion; provided that Catalent will not settle any such Action if such settlement would adversely affect the rights or interests of Client without the prior written consent of Client, which shall not be unreasonably withheld, conditioned or delayed. If Catalent elects to pursue such third party infringement, then Catalent shall bear the cost of such Action and Catalent shall be entitled to retain all sums recovered in such Action for its own account.
D. If Catalent elects not to pursue any Action in accordance with clause (C) and the intellectual property counsel described in clause (B) has opined that the third party act is, or most likely is, an infringement of a Zydis Patent in the relevant country of the Territory, then Client may, in its sole discretion and expense, bring suit in its name to restrain such third party infringement in such country of the Territory. To the extent that Catalent must be named as a necessary party to the litigation, Catalent agrees to be so named. In such event, Client shall conduct such Action properly and diligently and shall keep Catalent reasonably informed, including by providing copies of all litigation filings and material correspondence. Client will not settle any such Action without the prior written consent of Catalent. If Client elects to pursue such third party infringement Action, then Client shall bear the cost of such Action. Any proceeds recovered by Client from such Action shall be used to reimburse Client and Catalent for their costs and expenses reasonably incurred in connection with such Action (including attorneys and experts fees), if any, and then any remaining proceeds shall be retained by Client and treated as Net Sales accruing during the Quarter in which such proceeds are actually remitted to Client.
6.8 Defense of Zydis Formulations . If either Party becomes aware of any third party Action alleging infringement or threatened infringement of any third party Intellectual Property rights by the development, use, sale or manufacture of any Zydis Formulation, the following shall apply:
A. The Party becoming so aware shall promptly give written notice to the other Party of such Action describing the facts relating thereto in reasonable detail, including a copy of any written correspondence received from third parties, and shall keep the other Party informed of all developments related to such alleged infringement. Without limiting the generality of the foregoing, Client shall promptly inform Catalent in writing if Client becomes aware that a third party has initiated or filed any Action alleging that the Zydis Technology embodied in any Zydis Formulation infringes the Intellectual Property rights of such third party.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
B. Catalent shall have the initial right, but not the obligation, to prosecute and control the defense of any such third party Action using counsel of its choice. Catalent may agree to settle any such Action in its sole discretion; provided that Catalent will not settle any such Action with a third party plaintiff if such settlement would adversely affect the rights or interests of Client without the prior written consent of Client, which shall not be unreasonably withheld, conditioned or delayed. If Catalent assumes the defense of such Action, then Catalent shall bear the cost of such defense, and Catalent shall be entitled to retain all sums recovered in such Action for its own account.
C. If Catalent elects not to defend such Action in accordance with clause (B) within 75 days after delivery of any notice pursuant to clause (A), or not less than 7 days before a response is due as is required to respond to a complaint if a complaint has been filed, then Client may assume the defense of such Action using counsel of its choice solely to the extent that such Action involves the Zydis Technology embodied in any Zydis Formulation. Client shall not settle any Action without (i) a full release of both Parties and their respective Affiliates from such third party plaintiff and (ii) the prior written consent of Catalent, which shall not be unreasonably withheld, delayed or conditioned. If Client assumes the defense of such Action, then Client shall bear the cost of such defense. Any proceeds recovered by Client from such Action shall be used to reimburse Client and Catalent (to the extent either Party incurs any costs or expenses in relation to such Action) for their costs and expenses reasonably incurred in connection with such Action (including attorneys and experts fees) and then any remaining proceeds shall be retained by Client and treated as Net Sales accruing during the Quarter in which such proceeds are actually remitted to Client.
D. Notwithstanding the foregoing, where any Action alleges that (i) Catalent IP and/or Process Inventions and (ii) Client IP and/or Client Inventions, infringe the Intellectual Property rights of a third party, then irrespective of which Party controls the defense of such Action, the Parties will discuss in good faith how to defend such Action.
6.9 Cooperation . In any Action pursuant to Sections 6.7 or 6.8 , the Parties shall provide each other with reasonable cooperation and assistance and, upon the request and at the expense of the Party making such request, the other Party shall make available, at reasonable times and under appropriate conditions, all relevant records and personnel currently employed by such Party.
6.10 No Challenge . As long as Client has any license rights pursuant to this Agreement, Client shall not dispute or challenge in any manner Catalents ownership of, rights to or the validity or enforceability of any of the Zydis Technology licensed to Client pursuant to this Agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Catalent . Catalent represents, warrants and undertakes to Client that:
A. this Agreement has been duly executed and delivered by Catalents authorized representative and, assuming the due authorization, execution and delivery hereof by Client,
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
constitutes and will at all times constitute the legal, valid and binding obligation of Catalent enforceable against Catalent in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally and to general principles of equity;
B. Catalent has no obligations, contractual or otherwise, that would conflict with Catalent entering into and performing its obligations set forth in this Agreement;
C. at the time of delivery by Catalent to the designated carrier hereunder, the Supplies shall have been manufactured in accordance with Applicable Laws and shall not be adulterated, misbranded or mislabeled within the meaning of Applicable Laws; provided, that Catalent shall not be liable for defects attributable to Drug or other Client-supplied Materials (including artwork, advertising, packaging and labeling) provided to Catalent by Client or its Affiliates;
D. (i) to Catalents knowledge, it has all necessary authority to use and to permit Client to use pursuant to the terms of this Agreement and the performance of services contemplated hereunder, all Catalent IP related to the Drug and the Zydis Technology, including any copyrights, trademarks, trade secrets, patents, inventions and developments; (ii) to Catalents knowledge and except pursuant to which Catalent has a valid license, there are no patents, trade secrets or other proprietary rights owned by others that would be infringed or misused by Catalents performance of the Agreement; and (iii) to Catalents knowledge and except pursuant to which Catalent has a valid license, no trade secrets or other proprietary rights of others related to the Catalent IP utilized with the Drug or Zydis Technology that would be infringed or misused by Catalents performance of this Agreement;
E. no transactions or dealings under this Agreement shall be conducted with or for an individual or entity that is designated as the target of any sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom or the United States of America; and
F. Catalent will not in the performance of its obligations under this Agreement use the services of any person debarred or suspended under 21 U.S.C. §335(a) or (b).
7.2 Client . Client represents, warrants and undertakes to Catalent that:
A. this Agreement has been duly executed and delivered by Clients authorized representative and, assuming the due authorization, execution and delivery hereof by Catalent, constitutes and will at all times constitute the legal, valid and binding obligation of Client enforceable against Client in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors rights generally and to general principles of equity;
B. Client has no obligations, contractual or otherwise, that would conflict with Client entering into and performing its obligations set forth in this Agreement;
C. at the time of delivery hereunder, to Clients knowledge, all Drug and other Client-supplied Materials supplied by it or its Affiliates hereunder shall have been
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
manufactured in accordance with Applicable Laws, shall not be adulterated, misbranded or mislabeled within the meaning of Applicable Laws and shall meet the applicable specifications and will continue to do so until the applicable expiration date;
D. Client has provided to Catalent all safe handling instructions, health and environmental information and material safety data sheets applicable to the Drug and other Client-supplied Materials supplied by it or its Affiliates hereunder in sufficient time for review and training by Catalent;
E. (i) to Clients knowledge and except pursuant to which Client has a valid license, it has all necessary authority to use and to permit Catalent to use pursuant to the terms of this Agreement and the performance of services contemplated hereunder, all Client IP related to the Drug and all other Client-supplied Materials, including any copyrights, trademarks, trade secrets, patents, inventions and developments; (ii) to Clients knowledge and except pursuant to which Client has a valid license, there are no patents owned by others that would be infringed or misused by Clients performance of the Agreement; and (iii) to Clients knowledge and except pursuant to which Client has a valid license, no trade secrets or other proprietary rights of others related to the Client IP utilized with the Drug or other Client-supplied Materials that would be infringed or misused by Clients performance of this Agreement;
F. all Products, Supplies, results, data, samples and other materials and deliverables provided to Client by Catalent hereunder shall be held, used and disposed of by or on behalf of Client as set forth in the Development Program and otherwise in accordance with all Applicable Laws (including, in connection with any Supplies or other Products that are not labeled, 21 CFR § 201.150 and equivalent non-U.S. regulations); specifically, Client shall not permit the human consumption of any Supplies or other Products, except to the extent such consumption occurs in the course of clinical studies that expressly permit such use and that have been approved by appropriate governmental authorities; and Client will otherwise comply with all Applicable Laws applicable to Clients performance under this Agreement;
G. to Clients knowledge, the services to be performed by Catalent under this Agreement will not violate or infringe upon any trademark, trade name, copyright, patent, trade secret, or other intellectual property or other right held by any person or entity; and
H. no transactions or dealings under this Agreement shall be conducted with or for an individual or entity that is designated as the target of any sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom or the United States of America.
7.3 Limitations . THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 7 ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY EACH PARTY TO THE OTHER PARTY, AND NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING ANY IMPLIED
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Catalent . Catalent shall indemnify and hold harmless Client, its Affiliates, and their respective directors, officers, employees and agents ( Client Indemnitees ) from and against any and all suits, claims, losses, demands, liabilities, damages, costs and expenses (including reasonable attorneys fees and reasonable investigative costs) in connection with any suit, demand or action by any third party ( Losses ) arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement or (B) any gross negligence or willful misconduct by Catalent; except to the extent that any of the foregoing arises out of or results from any Client Indemnitees negligence, willful misconduct or breach of this Agreement.
8.2 Indemnification by Client . Client shall indemnify and hold harmless Catalent, its Affiliates, and their respective directors, officers, employees and agents ( Catalent Indemnitees ) from and against any and all Losses arising out of or resulting from (A) any breach of its representations, warranties or obligations set forth in this Agreement, (B) any development, manufacture, packaging, sale, promotion, distribution, importation, exportation, storage, handling, transportation, disposition or use of or exposure to the Drug, Supplies or any other Zydis Formulation, including product liability or strict liability, (C) Clients exercise of control over the Development Program to the extent that Clients instructions or directions violate Applicable Laws, (D) the conduct of any clinical trials utilizing the Drug, Supplies or any other Zydis Formulation, (E) any actual or alleged infringement or violation of any third party patent, trade secret, copyright, trademark or other proprietary rights arising from or by intellectual property or information provided by Client, including Client-supplied Materials, or (F) any gross negligence or willful misconduct by Client; except to the extent that any of the foregoing arises out of or results from any Catalent Indemnitees negligence, willful misconduct or breach of this Agreement.
8.3 Indemnification Procedures . All indemnification obligations in this Agreement are conditioned upon the Party seeking indemnification (A) promptly notifying the indemnifying Party of any claim or liability of which the Party seeking indemnification becomes aware (including a copy of any related complaint, summons, notice or other instrument); provided , that failure to provide such notice within a reasonable period of time shall not relieve the indemnifying Party of any of its obligations hereunder except to the extent the indemnifying Party is prejudiced by such failure, (B) allowing the indemnifying Party, if the indemnifying Party so requests, to conduct and control the defense of any such claim or liability and any related settlement negotiations (at the indemnifying Partys expense), (C) cooperating with the indemnifying Party in the defense of any such claim or liability and any related settlement negotiations (at the indemnifying Partys expense) and (D) not compromising or settling any claim or liability without prior written consent of the indemnifying Party. Without limiting the generality of the foregoing, the indemnifying Party is authorized to direct all aspects of the defense for which it has an obligation of indemnification and defense hereunder, including without limitation, selection of counsel, discovery, motions and settlement;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
provided, however , the indemnifying Party may not settle or dispose of any such matter (i) without obtaining a full release in favor of the indemnified Party with respect to such matter and (ii) if such settlement or disposition would confess wrongdoing or otherwise adversely impact the rights or interests of the indemnified Party, in each case, without the prior written consent of the indemnified Party.
ARTICLE 9
LIMITATIONS OF LIABILITY
9.1 CATALENT SHALL HAVE NO LIABILITY UNDER THIS AGREEMENT FOR ANY AND ALL CLAIMS FOR LOST, DAMAGED OR DESTROYED DRUG OR OTHER CLIENT-SUPPLIED MATERIALS, WHETHER OR NOT SUCH DRUG OR CLIENT-SUPPLIED MATERIALS ARE INCORPORATED INTO ZYDIS FORMULATIONS, EXCEPT ARISING FROM CATALENTS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
9.2 CATALENTS TOTAL LIABILITY UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED THE TOTAL FEES PAID UNDER THIS AGREEMENT BY CLIENT TO CATALENT FOR THE DEVELOPMENT PROGRAM. Nothing in this Section 9.2 or in any other provision of this Agreement shall, to the extent applicable, limit the liability of Catalent for (A) death or personal injury arising from Catalents or any of its Affiliates negligence, (B) for the fraud of Catalent, any of its Affiliates or any their respective Representatives, (C) any breach of Catalents obligations under s12 of the Sale of Goods Act 1979 or s2 of the Supply of Goods and Services Act 1982 or (D) any matter for which it would be illegal for Catalent or any of its Affiliates to exclude or to attempt to exclude liability.
9.3 NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOSS OF REVENUES, PROFITS OR DATA ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR IN TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 10
INSURANCE
Each Party shall, at its own cost and expense, obtain and maintain in full force and effect during the Term the following: (A) Commercial General Liability Insurance with a per-occurrence limit of an amount equivalent to $[* * *]; (B) Products and Completed Operations Liability Insurance (including coverage for Products used in clinical trials) with a per-occurrence limit of an amount equivalent to (i) $[* * *] prior to the first administration of Product in a human and (ii) $[* * *] in the aggregate thereafter; (C) Workers Compensation Insurance with statutory limits and Employers Liability Insurance with limits of an amount equivalent to $[* * *] per accident; and (D) All Risk Property Insurance, including transit coverage, in an amount equal to the full replacement value of its property while in, or in transit to, a Catalent facility as required under this Agreement. Each Party may self-insure all or any portion of the required insurance as long as, together with its Affiliates, its US GAAP
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
net worth is greater than $[* * *] million or its annual EBITDA (earnings before interest, taxes, depreciation and amortization) is greater than $[* * *] million. Each required insurance policy, other than self-insurance, shall be obtained from an insurance carrier with an A.M. Best rating of at least A-VII. If any of the required policies of insurance are written on a claims made basis, such policies shall be maintained throughout the Term and for a period of at least [* * *] years thereafter. Each Party shall obtain a waiver of subrogation clause from its property insurance carriers in favor of the other Party. Each Party shall be named as an additional insured within the other Partys products liability insurance policies; provided, that such additional insured status will apply solely to the extent of the insured Partys indemnity obligations under this Agreement. Such waivers of subrogation and additional insured status obligations will operate the same whether insurance is carried through third parties or self-insured. Upon the other Partys written request from time to time, each Party shall promptly furnish to the other Party a certificate of insurance or other evidence of the required insurance.
ARTICLE 11
TERM AND TERMINATION
11.1 Term . This Agreement shall commence on the Effective Date and shall continue on a country-by-country basis until the later of (A) ten (10) years after Launch of the most recently Launched-Product in such country and (B) the expiration of the last Valid Claim covering each Product in such country unless earlier terminated in accordance with Section 11.3 (as may be extended in accordance with this Section 11.1 , the Term ). The Term shall automatically be extended for successive one (1) year periods unless and until one Party gives the other Party at least one hundred eighty (180) days prior written notice of its desire to terminate as of the end of the then-current Term.
11.2 Termination by Catalent . Catalent may, at its option in its sole discretion, (x) terminate this Agreement in its entirety or (y) terminate the exclusive nature of this Agreement by adding multiple additional licensees on a country-by-country basis in the Territory with respect to the relevant country, at any time during the Term immediately on written notice to Client if with respect to any country in the Territory:
A. Client directly or indirectly (i) opposes or assists any Party to oppose the grant of a patent on any patent application or any extension of or the grant of a supplementary protection certificate within the Zydis Patents or (ii) disputes or directly or indirectly assists any third party to dispute the validity or enforceability of any patent within the Zydis Patents or any of the claims thereof;
B. Client shall have failed to file an investigational new drug (IND) application (or equivalent) with the FDA or EMA within [* * *] of the Effective Date;
C. Client fails to file a new drug application (NDA) (or equivalent) with the FDA or EMA within [* * *] of the Effective Date;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
D. Client fails to obtain Regulatory Approval to market and sell the Products within [* * *] after the filing of a NDA (or equivalent) with a Regulatory Authority except for circumstances outside Clients control;
E. Client shall have failed to Launch a Product within [* * *] following receipt of all required Regulatory Approvals and Pricing Approvals; or
F. Client shall have failed to use its commercially reasonable efforts to promote the demand for Products within the Territory.
Notwithstanding the foregoing, Client may extend any of the deadlines in clauses A, B, C, D, E and F in this Section 11.2 by a period of [* * *] by providing prior notice to Catalent that a deadline will be missed and by paying Catalent an extension payment of $[* * *] on or before the date of the applicable deadline prior to its extension. Client shall have the right to exercise this remedy up to [* * *] times during the life of the definitive agreement.
11.3 Voluntary Termination by Client . Client may terminate this Agreement without cause at any time during the Term on 90 days prior written notice to Catalent. Upon receipt by Catalent of any such termination notice, Catalent will promptly cease or wind down, as appropriate, work under the Development Program unless otherwise requested by Client in such notice.
11.4 Mutual Termination Rights . Either Party may terminate this Agreement immediately without further action if (A) the other Party files a petition in bankruptcy, or enters into an agreement with its creditors, or applies for or consents to the appointment of a receiver, administrative receiver, trustee or administrator, or makes an assignment for the benefit of creditors, or suffers or permits the entry of any order adjudicating it to be bankrupt or insolvent and such order is not discharged within thirty (30) days, or takes any equivalent or similar action in consequence of debt in any jurisdiction or (B) the other Party materially breaches any of the provisions of this Agreement and such breach is not cured within [* * *] days after the giving of written notice requiring the breach to be remedied; provided , that in the case of a failure of Client to make payments in accordance with the terms of this Agreement, Catalent may terminate this Agreement if such payment breach is not cured within [* * *] days of receipt of written notice of non-payment from Catalent.
11.5 Effect of Termination . Expiration or termination of this Agreement shall be without prejudice to any rights or obligations that accrued to the benefit of either Party prior to such expiration or termination. In the event this Agreement is terminated, Client shall pay Catalent (A) for all services performed pursuant to the Development Program up to the effective date of termination, (B) for all costs and expenses incurred, and all noncancellable commitments made, by Catalent or its Affiliates in the performance of the Development Program, and (C) any applicable cancellation fees as set forth in the Development Program, is not in connection with a completed phase of the Development Program and was not effected prior to the commencement of the next phase of the Development Program, an amount equal to the value of the services that would have been performed by Catalent in order to complete the then-current phase of the Development Program.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
11.6 Survival . The rights and obligations of the Parties shall continue under Articles 5 (Confidentiality and Non-Use), 6 (Intellectual Property), 8 (Indemnification), 9 (Limitations of Liability), 12 (Notice), 13 (Miscellaneous) and 10 (Insurance); and under Sections 2.6 (Commercial Supply), 4.2 (Payment Terms), 4.3 (Taxes), 4.4 (Client and Third Party Expenses), 4.5 (Records; Audit Rights), 7.3 (Limitations on Warranties), 11.5 (Effect of Termination) and 11.6 (Survival), in each case in accordance with their respective terms if applicable, notwithstanding expiration or termination of this Agreement.
ARTICLE 12
NOTICE
All notices and other communications hereunder shall be in writing and shall be deemed given: (A) when delivered personally or by hand; (B) when delivered by facsimile transmission (receipt verified); (C) when received or refused, if sent by registered or certified mail (return receipt requested), postage prepaid; (D) when sent by electronic mail or email transmission (receipt verified) or (E) when delivered, if sent by express courier service, in each case, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided , that notices of a change of address shall be effective only upon receipt thereof):
To Client: |
Biohaven Pharmaceutical Holding Company Ltd. |
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234 Church Street, Suite 301 |
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New Haven, CT 06510 USA |
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Attn: Robert M. Berman, M.D. Chief Medical Officer |
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email: [* * *] |
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With a copy to: |
Locke Lord LLP |
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2800 Financial Plaza |
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Providence, RI 02903 USA |
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Attn: Douglas Gray, Esq. |
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Facsimile: (888) 325-9018 |
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email: [* * *] |
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To Catalent: |
Catalent U.K. Swindon U.K. Zydis Ltd. |
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Frankland Road, Blagrove |
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Swindon, Wiltshire, UK SN5 8YG |
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Attn: General Manager |
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Facsimile: 44 1793 548340 |
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With a copy to: |
Catalent Pharma Solutions, LLC |
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14 Schoolhouse Road |
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Somerset, New Jersey 08873 |
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USA |
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Attn: General Counsel (Legal Department) |
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Facsimile: +1 (732) 537-6491 |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
ARTICLE 13
MISCELLANEOUS
13.1 Entire Agreement; Amendments . This Agreement, including any Change Orders or other amendments to any of the foregoing constitutes the entire understanding between the Parties, and supersedes any contracts, agreements or understandings (oral or written) of the Parties, with respect to the subject matter hereof, including, for avoidance of doubt, the Evaluation Agreement; provided, however, Attachment B to the Evaluation Agreement shall be of no further force and effect and in the event of a conflict between any of the provisions of this Agreement and Attachment B to the Evaluation Agreement, the provisions of this Agreement shall govern. For the avoidance of doubt, this Agreement does not supersede any existing generally applicable confidentiality agreement between the Parties as it relates to time periods prior to the date hereof or to business dealings not covered by this Agreement. No term of this Agreement may be amended except upon written agreement of both Parties, unless otherwise expressly provided in this Agreement.
13.2 Captions; Certain Conventions . The captions in this Agreement are for convenience only and are not to be interpreted or construed as a substantive part of this Agreement. Unless otherwise expressly provided herein or the context of this Agreement otherwise requires, (A) words of any gender include each other gender, (B) words such as herein, hereof, and hereunder refer to this Agreement as a whole and not merely to the particular provision in which such words appear, (C) words using the singular shall include the plural, and vice versa, (D) the words include(s) and including shall be deemed to be followed by the phrase but not limited to, without limitation or words of similar import, (E) the word or shall be deemed to include the word and (e.g., and/or), (F) references to Article, Section, subsection, clause or other subdivision, or to an Attachment or other appendix, without reference to a document are to the specified provision or Attachment of this Agreement and (G) all monetary amounts expressed herein shall be in U.S. dollars unless otherwise stated. This Agreement shall be construed as if it were drafted jointly by the Parties.
13.3 Further Assurances . The Parties agree to execute, acknowledge and deliver such further instruments and to take all such other incidental acts as may be reasonably necessary or appropriate to carry out the purpose and intent of this Agreement.
13.4 No Waiver . Failure by either Party to insist upon strict compliance with any term of this Agreement in any one or more instances will not be deemed to be a waiver of its rights to insist upon such strict compliance with respect to any subsequent failure.
13.5 Severability . If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect.
13.6 Independent Contractors . The relationship of the Parties is that of independent contractors, and neither Party will incur any debts or make any commitments for the other Party except to the extent expressly provided in this Agreement. Nothing in this Agreement is intended to create or will be construed as creating between the Parties the relationship of
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
joint ventures, co-partners, employer/employee or principal and agent. Neither Party shall have any responsibility for the hiring, termination or compensation of the other Partys employees or contractors or for any employee benefits of any such employee or contractor.
13.7 Successors and Assigns . This Agreement will be binding upon and inure to the benefit of the Parties, their successors and permitted assigns. Neither Party may assign this Agreement, in whole or in part, without the prior written consent of the other Party, except that either Party may, without the other Partys consent (but subject to prior written notice), assign this Agreement in its entirety to an Affiliate or to a successor to substantially all of the business or assets of the assigning company or the assigning companys business unit responsible for performance under this Agreement.
13.8 No Third Party Beneficiaries . This Agreement shall not confer any rights or remedies upon any person or entity other than the Parties named herein and their respective successors and permitted assigns.
13.9 Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware, USA, excluding its conflicts of law provisions. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.
13.10 Alternative Dispute Resolution . Any dispute arises between the Parties in connection with this Agreement shall first be presented to the respective senior executives of the Parties for their consideration and resolution. If such Parties executives cannot resolve such dispute within ninety (90) days, then such dispute shall be submitted to arbitration by the International Institute for Conflict Prevention and Resolution, 575 Lexington Avenue, 21st Floor, New York, NY 10022 ( CPR ) by one arbitrator mutually agreed upon by the Parties. If no agreement can be reached within thirty (30) days after names of potential arbitrators have been proposed by the CPR, then the CPR will choose one arbitrator having reasonable experience in commercial transactions of the type provided for in this Agreement. The arbitration shall take place in the English language in New York City, New York, in accordance with the CPR administered arbitration rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. The arbitration shall commence within sixty (60) days of the date on which a written demand for arbitration is filed. The arbitrators decision shall set forth a reasoned basis for any award of damages or finding of liability. The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages. The arbitrator shall award to the prevailing party, if any, the costs and attorneys fees reasonably incurred by the prevailing party in connection with the arbitration.
13.11 Publicity . Neither Party will make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other Partys express prior written consent, except as required under Applicable Laws or by any governmental agency or by the rules of any stock exchange on which the securities of the disclosing Party are listed, in which case the Party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure. Without limiting the generality of the foregoing, Client shall not use Catalents name in a manner that could be construed as an endorsement of Clients Drug, including any scientific conclusion as to safety or efficacy.
13.12 Right to Dispose and Settle . If Catalent requests in writing from Client direction with respect to disposal of any inventories of Supplies, Client-supplied Materials, Drug, equipment, samples or other items belonging to Client and is unable to obtain a response from Client within a reasonable time period after making reasonable efforts to do so, Catalent shall be entitled in its sole discretion to (A) dispose of all such items and (B) set-off any and all amounts due to Catalent or any of its Affiliates from Client against any credits Client may hold with Catalent or any of its Affiliates.
13.13 Force Majeure . Except as to payments required under this Agreement, neither party shall be liable in damages for, nor shall this Agreement be terminable or cancelable by reason of, any delay or default in such partys performance hereunder if such default or delay is caused by events beyond such partys reasonable control, including acts of God, law or regulation or other action or failure to act of any government or agency thereof, war or insurrection, civil commotion, destruction of production facilities or materials by earthquake, fire, flood or weather, labor disturbances, epidemic or failure of suppliers, vendors, public utilities or common carriers; provided, that the party seeking relief under this Section 13.13 shall immediately notify the other party of such cause(s) beyond such partys reasonable control. The party that may invoke this Section 13.13 shall use commercially reasonable efforts to reinstate its ongoing obligations to the other party as soon as practicable. If the cause(s) shall continue unabated for 180 days, then both parties shall meet to discuss and negotiate in good faith what modifications to this Agreement should result from such cause(s).
13.14 Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Any photocopy, facsimile or electronic reproduction of the executed Agreement shall constitute an original.
[Signature page follows]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
IN WITNESS WHEREOF , the Parties have caused their respective duly authorized representatives to execute this Agreement effective as of the Effective Date.
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CATALENT U.K. SWINDON ZYDIS LIMITED |
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/s/ B. Littlejohns |
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Name: |
B. Littlejohns |
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Title: |
President DDS |
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD |
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By: |
/s/ Robert Berman |
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Name: |
Robert Berman, MD |
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Title: |
Chief Medical Officer |
Signature Page to Zydis® Development and License Agreement
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
ATTACHMENT A
DEVELOPMENT PROGRAM
[* * *]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Catalent Pharma Solutions, LLC and Biohaven Pharmaceutical Holding
Company Limited Zydis® Terms and Conditions for Riluzole
A. Expiration . This Quotation is valid for 30 days from the date hereof, and becomes binding if signed and delivered by both parties during that period.
B. Audits . Client may conduct one quality assurance facility audit every [* * *] months at no cost. Additional audits will be invoiced separately at the current rate for such services.
C. Regulatory Inspections . Catalent will promptly notify Client of any regulatory inspections directly relating to the services performed under this Quotation (the Project). Client shall reimburse Catalent for reasonable and documented costs associated with such regulatory inspections.
D. Changes . Catalent may revise the prices provided in this Quotation (i) if Clients requirements or any Client-provided information is materially inaccurate or incomplete; (ii) if Client revises Catalents responsibilities or the Project specifications, instructions, procedures, assumptions, processes, test protocols, test methods or analytical requirements; or (iii) for such other reasons set forth in this Quotation. Any revision to this Quotation shall be set forth in a Quotation Amendment Request (QAR) signed by both Parties in accordance with Section V.
E. Payments . Catalent will invoice Client as set forth in this Quotation. Catalent charges a late payment fee of [* * *]% per month for payments not received by the date specified in this Quotation (or if no date is specified, within 30 days of invoice date). Failure to bill for interest due shall not be a waiver of Catalents right to charge interest.
F. Taxes . All sales, use, gross receipts, compensating, value-added or other taxes, duties, licenses or fees (excluding Catalents net income and franchise taxes) assessed by any tax jurisdiction arising from the Project are the responsibility of Client, whether paid by Catalent or Client.
G. Hazardous Materials . Client warrants to Catalent that no specific safe handling instructions are applicable to any Client-supplied materials, except as disclosed to Catalent in writing by the Client in sufficient time for review and training by Catalent prior to delivery. Where appropriate or required by law, Client will provide a Material Safety Data Sheet for all Client-supplied materials and finished product.
H. Delivery . (i) Catalent shall deliver all products and other materials EXW (Incoterms 2010) Catalents facilities. To the extent not already held by Client, title shall pass to Client upon such tender of delivery. If Catalent provides storage services, title and risk of loss shall pass to client upon transfer to storage.
(ii) In the event Catalent arranges shipping or performs similar loading and/or logistics services for Client at Clients request, such services are performed by
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Catalent at Clients expense and on Clients behalf as a convenience to Client only and does not alter subsection (i) above.
I. Limitations of Liability . CATALENTS TOTAL LIABILITY UNDER THIS QUOTATION SHALL IN NO EVENT EXCEED THE TOTAL FEES PAID UNDER THIS QUOTATION OR QAR, RESPECTIVELY (BUT EXCLUDING FEES AND COSTS FOR PROCURING COMPARATOR DRUG). CATALENT SHALL HAVE NO LIABILITY UNDER THIS QUOTATION OR QAR FOR ANY AND ALL CLAIMS FOR LOST, DAMAGED OR DESTROYED API OR CLIENT-SUPPLIED MATERIALS, WHETHER OR NOT INCORPORATED INTO FINISHED PRODUCT. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE UNDER THIS QUOTATION OR QAR, INCLUDING WITHOUT LIMITATION LOSS OF REVENUES, PROFITS OR DATA, WHETHER IN CONTRACT OR IN TORT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTHING IN THIS QUOTATION SHALL LIMIT THE LIABILITY OF CATALENT FOR DEATH OR PERSONAL INJURY ARISING FROM THE NEGLIGENCE OF CATALENT, THE LIABILITY OF CATALENT FOR FRAUDULENT MISREPRESENTATION OR ANY OTHER MATTER FOR WHICH IT WOULD BE ILLEGAL FOR CATALENT TO EXCLUDE OR ATTEMPT TO EXCLUDE LIABILITY.
J. Confidentiality . All information disclosed by a party in connection with this Quotation shall be confidential information, unless such information is (i) already known to the receiving party, on a non-confidential basis, as evidenced by written records; (ii) independently developed or discovered by the receiving party without the use of the disclosing partys confidential information, as evidenced by written records; (iii) in the public domain, other than through the fault of the receiving party; (iv) disclosed to the receiving party by a third party not in breach of a duty of confidentiality owed to the disclosing party. Neither party shall, without the other partys prior written consent, use the confidential information of the other party or disclose such information except (a) to provide to employees of the receiving party or its affiliated entities who require such information to perform such partys obligations under this Quotation, or (b) as required to be disclosed by law, or court or administrative order, provided that the receiving party first gives prompt written notice thereof to the disclosing party. This undertaking shall survive for [* * *] years following the date of this Quotation. The data and results of the Project (the Project Results) shall be the property of Client and shall be deemed confidential information of Client. Catalent may request permission to use any Project Results which permission will not be unreasonably withheld.
K. Intellectual Property . For purposes hereof, Intellectual Property means all intellectual property (whether or not patented), including without limitation, patents, patent applications, know-how, trade secrets, copyrights, trademarks, designs, concepts, technical information, manuals, standard operating procedures, instructions, specifications, inventions, processes, data, improvements and developments; and Inventions means Intellectual Property characterized, conceived, developed, derived, discovered, generated, identified, first reduced to
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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practice or otherwise made, as the case may be, by employees, servants or agents of Client and/or Catalent in connection with this Project. All rights to and interests in Intellectual Property that is owned by, licensed to or otherwise controlled by a party or its affiliates (A) as of the date of this Quotation or (B) except as provided below in this Section K, at any time following the date of this Quotation, shall remain vested solely in such party and the other party will obtain no right of any kind or license therein by reason of this Quotation, except that Catalent shall have the right to use such Intellectual Property of Client to the extent required in connection with the performance of its obligations hereunder. As between Client and Catalent, all Inventions shall be (A) the property of Client if the Invention specifically relates to Clients compounds [* * *] and formulations thereof, (B) the property of Client if the Invention relates to the application or use of [* * *] (for example, [* * *]), and (c) the property of Catalent in all other circumstances, including Inventions relating specifically to the Zydis Technology, except to the extent that such Invention is specifically related to [* * *]. The party owning such Invention shall have the right, in its sole discretion, to determine the patent strategy for such Invention, which may include not obtaining patent protection in a particular country or any country. The parties shall cooperate to achieve the allocation of rights to Inventions anticipated herein and each party shall be solely responsible for costs associated with the protection of its Intellectual Property. Catalent and its Affiliates have developed and licensed proprietary technology for the manufacture of the patented Zydis® Fast Dissolving Dosage Form (Zydis) for the administration of pharmaceutical drugs (collectively, along with the Zydis Patents and all know-how, data, results and information relating to Zydis and the Zydis Patents (whether produced prior to or after the Effective Date), the Zydis Technology. Zydis Patents mean the valid and issued patents and pending patent applications (until such time as such applications or any of them are denied, abandoned or issued into patents), and any foreign cognates, divisional, continuation, continuation-in-part, reissue, re-examination, extension, patent of addition, provisional applications, confirmation patent, registration patent, pipeline protection or supplementary protection certificate related thereto, that include claims relating to fast dissolving drug delivery systems, that Catalent or its Affiliates own or under which Catalent or its Affiliates are licensed with the right to sublicense. [* * *]. The parties acknowledge that Catalent shall have no right to use [* * *], that Client is not granted any rights to the Zydis Technology, and that any use of [* * *] by Client may require a license from Catalent to make, use, sell or produce any such [* * *].
L. Warranties . Catalent will perform the Project in accordance with the written specifications and Project instructions expressly set forth or referenced in this Quotation and United States current Good Manufacturing Practices. THE WARRANTIES SET FORTH IN THIS ARTICLE ARE THE SOLE AND EXCLUSIVE WARRANTIES MADE BY CATALENT TO CLIENT, AND CATALENT MAKES NO OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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M. Client Obligations . Unless otherwise agreed to by the parties in writing, Client is solely responsible at its cost and expense to (i) provide complete and accurate scientific data regarding the Project; (ii) deliver to Catalent all Client-supplied materials; (iii) prepare all submissions to regulatory authorities and obtain Catalents prior written consent (which will not be unreasonably withheld) before identifying Catalent in such regulatory submissions; (iii) if applicable, review and approve all in-process and finished product test results to ensure conformity of such results with the product specifications, regardless of which party is responsible for finished product release; and (iv) perform such other obligations of Client set forth in this Quotation.
N. Regulatory Compliance . Catalent shall obtain and maintain all permits and licenses with respect to general facility operations in the jurisdiction in which Catalent performs the services. Client shall be responsible at its cost to obtain and maintain all other regulatory approvals, authorizations, certifications and permits relating to Client-supplied materials and Client product, including without limitation those relating to the import, export, use, distribution and sale of Client-supplied materials and Client product. Client shall reimburse Catalent for any payments Catalent is required to make to any regulatory authority resulting directly from Catalents formulation, development, manufacturing, processing, filling, packaging, storing or testing of Clients product or Client-supplied materials (including without limitation any payments or fees Catalent is required to make pursuant to the Generic Drug User Fee Act of 2012). Catalent shall not be obligated to perform any services which would involve any countries that are targeted by the comprehensive sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom or United States.
O. Indemnification . Client will indemnify, defend and hold harmless Catalent, its affiliates and their respective directors, officers, employees and agents against any third-party claim arising directly or indirectly from (i) the manufacture, promotion, marketing, distribution or sale of, or use of or exposure to, the product, API and Client-supplied materials that are the subject of the Project; (ii) the negligence or willful misconduct of Client; (iii) the breach of this Quotation by Client; or (iv) the use of any intellectual property, materials or other information provided by Client to Catalent; in each case, including but not limited to costs associated with responding to subpoenas and giving testimony relating to disputes between Client and third parties. Catalent will indemnify, defend and hold harmless Client, its affiliates and their respective directors, officers, employees and agents from any third-party claim arising directly or indirectly from the negligence or willful misconduct of Catalent or the breach of this Quotation by Catalent.
P. Right to Dispose and Settle . If Catalent requests in writing from Client direction with respect to disposal of products, materials, equipment, samples or other items belonging to Client and is unable to obtain a response from Client within a reasonable time period (but in no event less than [* * *] days) after making reasonable efforts to do so, Catalent may in its sole discretion (i) dispose of all such items and (ii) set-off any and all amounts due to Catalent or any of its affiliates from Client against any credits Client may hold with Catalent or any of its affiliates.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Q. Force Majeure . Neither party will be liable for any failure to perform or for delay in performance resulting from any cause beyond its reasonable control, including without limitation acts of God, fires, floods or weather, strikes or lockouts, factory shutdowns, embargoes, wars, hostilities or riots, or shortages in transportation. If the cause continues unabated for 90 days, then both parties shall meet to discuss and negotiate in good faith what modifications to this Quotation should result from such cause.
R. Use and Disposal . Client represents and warrants to Catalent that Client will hold, use and/or dispose of products and other materials provided by Catalent in accordance with all applicable laws, rules and regulations. Client grants Catalent full authority to use any Client-supplied materials for purposes of the Project.
S. Record Retention . Unless the parties otherwise agree in writing, Catalent will retain batch, laboratory and other technical records for the minimum period required by applicable law.
T. Independent Contractor . The relationship of the parties is that of independent contractors and not of joint venturers, co-partners, employer/employee or principal/agent.
U. Publicity . Neither party will make any press release or other public disclosure regarding this Quotation or the transactions contemplated hereby without the other partys express prior written consent, except as required by applicable law, by any governmental agency or by the rules of any stock exchange on which the securities of the disclosing party are listed, in which case the party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or public disclosure.
V. Amendment & Precedence . These Terms and Conditions constitute a part of the Quotation to which they are attached (collectively, this Quotation); provided, that these Terms and Conditions supersede any conflicting terms and conditions set forth in the Quotation to which they are attached or any other document, including Client purchase order. This Quotation constitutes the entire understanding between the parties, and supersedes any contracts, agreements or understandings (oral or written) of the parties, with respect to the Project. No term of this Quotation may be amended except upon written agreement signed by both parties.
W. Dispute Resolution . If a dispute arises between the parties in connection with this Quotation, the respective presidents or Senior Executives of Catalent and Client shall first attempt to resolve the dispute. If such parties cannot resolve the dispute, such dispute shall be resolved by the International Institute for Conflict Prevention and Resolution (CPR), 575 Lexington Avenue, 21st Floor, New York, NY 10022 in accordance with CPRs then existing commercial arbitration rules. The arbitration proceedings shall be conducted in New York, New York and the exclusive language of the proceedings shall be English.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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X. Survival . Subject to execution, the rights and obligations of Client and Catalent in Articles E, F, I, J, K, O, S, U, W, X and Y of these Terms and Conditions shall survive termination or expiration of this Quotation.
Y. Governing Law . This Quotation shall be governed by and construed under the laws of the State of New Jersey, USA, excluding its conflict of law provisions. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Quotation.
Z. Clinical and Regulatory . Within [* * *] months after the execution of this Quotation, but in any event prior to the delivery by Catalent of any supplies required to be manufactured in accordance with cGMP, including supplies to be used in human clinical trials, the parties shall negotiate in good faith and enter into a Quality Agreement. In the event of a conflict between any of the provisions of this Quotation and the Quality Agreement with respect to quality-related activities, including compliance with cGMP, the provisions of the Quality Agreement shall govern. In the event of a conflict between any of the provisions of this Quotation and the Quality Agreement with respect to any commercial matters, including allocation of risk, liability and financial responsibility, the provisions of this Quotation shall govern. Client shall be responsible for conducting any activities relating to the planning and execution of pre-clinical and clinical studies in animals or humans and for preparing and filing regulatory submissions with respect thereto, including any costs associated therewith. Client shall obtain and maintain all necessary regulatory approvals and to comply with all applicable laws and regulations in this respect, including filing all periodic reports, safety reports, and all other notifications as required by the regulatory authorities. Client shall be responsible for retaining and maintaining all study records, financial information, and reserve samples, as required under applicable laws generated or used in the execution of the pre-clinical and clinical studies in animals or humans performed in connection with this Quotation.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Why Catalent?
Unrivaled experience, deepest expertise, and a track record of market success on a global scale.
We serve 49 of the top 50 pharmaceutical and 36 of the top 50 biotech companies.
We support thousands of innovative prescription, generics, and consumer health companies.
We operate 20+ global sites across 100+ markets.
We create expert solutions from over 1,000 scientists, including key opinion leaders in drug development and delivery.
We support 40% of recent new U.S. drug approvals.
We manufacture or package 100 billion units annually.
We are the industry leader in drug delivery technology.
We use a multi-faceted approach to solve bioavailability and patient adherence challenges.
We provide end-to-end biologics technologies, from gene expression to fill/finish.
We offer fully-integrated medication supply chain solutions.
We have a proven track record in regulatory compliance in all key jurisdictions.
We are fully dedicated to high standards of quality, cGMP leadership, and LEAN operational excellence.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ATTACHMENT B
FORM OF QUALITY AGREEMENT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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This Quality Agreement has been reviewed, approved, and accepted by:
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Quality Agreement
This is a Quality Agreement for the PRODUCT: add product name or list products in Appendix Il (this Quality Agreement). This Quality Agreement defines the duties of Catalent Pharma Solutions, LLC (CATALENT) and (CUSTOMER) for the pharmaceutical manufacturing and packaging of PRODUCT . This Quality Agreement applies to clinical/submission batches prior to product commercialization. A separate Quality Agreement will be executed for commercialization.
This Quality Agreement takes the form of a detailed checklist of all the activities associated with pharmaceutical manufacturing, release testing, and stability testing of Product. Responsibility for each activity is assigned to either CATALENT or CUSTOMER in the appropriate box in the Responsibility Delegation Checklist, which follows. Activities and/or requirements assigned to both Catalent and the Customer means that both parties will be responsible for carrying out the referenced activity or meeting the listed requirement. For example, the following requirement, Is not debarred and does not employ or use the services of any individual who is debarred would apply to both the customer and Catalent and both responsibility boxes would be checked off. If both Customer and Catalent activity/responsibility boxes are checked off but the referenced activity/responsibility does not equally apply to both the Customer and Catalent, the relevant activities/responsibilities applying to the customer and to Catalent shall be denoted in the respective box.
In order to provide better quality assurance, CATALENT will perform the activities defined herein in accordance with Standard Operating Procedures (defined below) to the extent that a Standard Operating Procedure is applicable to such activity. In the event of a conflict between the terms of this Quality Agreement and a Standard Operating Procedure, the Quality Agreement shall control. This Quality Agreement is subject to the terms of a Services Agreement (defined below). In the event of a conflict between the provisions of this Quality Agreement and the Services Agreement with respect to quality-related activities outlined in this Quality Agreement, including responsibility for compliance with cGMP, this Quality Agreement shall control. In the event of a conflict between the Services Agreement and this Quality Agreement relating to allocation of risk, financial responsibility and liability, the provisions of the Services Agreement shall control.
For purposes of this Quality Agreement, the following definitions shall apply:
A. Aberrant/Atypical Data means any data or result that is still within specification, but is unexpected, questionable, irregular, deviant or abnormal.
B. Active Pharmaceutical ingredient (API) shall mean the active pharmaceutical ingredient used in the manufacture of the Product as identified in the Specifications.
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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C. Applicable Laws means, with respect to CUSTOMER, all laws, ordinances, rules and regulations, as amended from time to time, of each jurisdiction in which API or Product is produced, marketed, distributed, used or sold; and with respect to Catalent, all laws, ordinances, rules and regulations, as amended from time to time, of the jurisdiction in which Catalent performs the services.
D. Certificate of Analysis (COA) is a listing of all results for tests conducted on samples of a lot of product compared to the specifications defined by the CUSTOMER and listed in the regulatory applications and application compendia.
E. Certificate of Compliance/Conformance (COC) is a statement that the lot of product was manufactured, packaged and tested in accordance with cGMP, identifies the master batch record documents and lists any incident reports and investigations identified associated with the lot of Product.
F. Controlled Drug Substances (CDS) is any drug, or therapeutic agent, commonly understood to include narcotics with a potential for abuse or addiction, which is held under strict governmental control, as defined by the United States Controlled Substances Act, 21 U.S.C. 802 et seq.
G. Code of Federal Regulations (USA) (CFR) is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government. It is divided into 50 titles that represent broad areas subject to Federal regulation. Each volume of the CFR is updated once each calendar year and is issued on a quarterly basis.
H. Current Good Manufacturing Practice (cGMP) means current Good Manufacturing Practices promulgated by the Regulatory Authorities in the jurisdictions included in Applicable Laws (as applicable to CUSTOMER and Catalent, respectively). In the European Union, this includes Directive 2003/94/EC (as supplemented by Volume 4 of EudraLex published by the European Commission), as amended, if and as implemented in the relevant constituent country, and in the United States, this includes 21 C.F.R. Parts 210 and 211, as amended.
I. Debarred shall mean the penalty imposed by the US FDA pursuant to 21 USC 335a (a) or 335a (b) on persons or companies that have engaged in criminal conduct with respect to the development or approval of new or generic drugs or engaged in certain other types of criminal conduct. A debarred person or company is precluded from submitting or assisting in the submission of an NDA or ANDA and may not provide services in any capacity to a party that has an approved or pending drug application.
Confidential |
CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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J. For Cause Audit shall mean any of a series of inspections conducted for various compelling reasons (questionable data in a final report, tips from informers, etc.).
K. Drug Enforcement Administration (DEA) is the US federal agency responsible for enforcing laws and regulations governing narcotics and controlled substances.
L. Excipients shall mean the inactive ingredients found in a drug product. These include dyes, flavors, binders, emollients, fillers, lubricants, and preservatives.
M. Facilities means the following Catalent facilities located at:
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N. Marketing Authorization Application shall mean any application for marketing authorization, which has not yet been approved by the FDA or other Regulatory Authority, including without limitation, FDA New Drug Application (NDA), FDA Abbreviated New Drug Application (ANDA) and similar marketing applications promulgated by Regulatory Authorities.
O. Marketing Authorizations shall mean any approved application for marketing authorization, including without limitation, FDA New Drug Application (NDA), FDA Abbreviated New Drug Application (ANDA) and similar marketing authorizations promulgated by Regulatory Authorities.
P. Out of Specification (OOS) shall mean a result that falls outside of the tests acceptance criteria (e.g. criteria established in filed applications, approved marketing submissions, official compendia, or by the manufacturer or the customer).
Q. Out of Tolerance shall mean a calibration result that is outside of the instruments specified performance limits.
R. Out of Trend shall mean a result that is not in trend with previously acquired results. This will typically apply to either stability projects when comparisons
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
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are made with previous intervals or to release testing when a substantial testing history has been generated.
S. Packaging Materials shall mean collectively all packaging components and ingredients (including labels, product inserts, and other labeling for Products) required to package the Products in accordance with the specifications.
T. Process or Processing shall mean the compounding, filling, producing and/or packaging of the Raw Materials into Product in accordance with the Specifications. Such activities include the requisite in-process analytical testing and inspections.
U. Product shall mean such drug product being manufactured and/or packaged by Catalent pursuant to a Services Agreement. The term Product shall comprise both Bulk Product and Finished Product where Bulk Product means such Product which has completed all parts of the Process up to but not including final packaging and where Finished Product shall mean Product which has undergone all stages of the Process including packaging in its final container.
V. Raw Materials shall mean all raw materials, supplies, components and packaging materials, not including the API, necessary to process, bulk package and ship the Product in accordance with specifications.
W. Regulatory Authority shall mean the FDA and any other regulatory authority within a Territory involved in regulating any aspect of the development, manufacture, market approval, sale, distribution, packaging or use of the Product.
X. Reprocessing shall mean the duplication of a step or steps currently in the manufacturing formula in order to bring the batch into conformance with specifications, and which will not alter the safety, identity, strength, quality or purity of the drug product beyond the established requirements.
Y. Rework shall mean any additional steps that are not part of the manufacturing formula, taken to process a batch to bring the batch into conformance with the specifications and which will not alter the safety, identity, strength, quality or purity of the drug product beyond the established requirements.
Z. Services Agreement shall mean the agreement entered into between Catalent and Customer which sets forth the terms and conditions agreed between the parties governing the provision of services by Catalent on behalf of Customer, including but not limited to supply agreements, standard or negotiated terms and conditions, master clinical or commercial services
Confidential |
CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
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agreements, development and manufacturing agreements (collectively referred to herein as Services Agreement).
AA. Specifications shall mean the written specifications for the Product set forth in the Services Agreement and attached hereto as an Exhibit.
BB. Standard Operating Procedures (SOP) shall mean the standard operating procedures in effect at Catalent which have been approved by Catalent Quality Assurance department and which are applicable to the Processing. The Standard Operating Procedures shall be in compliance with cGMP.
CC. Territories shall mean the United States of America [and the European Union] and any other country, which the parties agree in writing to add to this Quality Agreement and the Services Agreement from time to time.
DD. US Food and Drug Administration (FDA) is an agency of the United States Department of Health and Human Services responsible for protecting public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, foods, cosmetics, and products that emit radiation.
Confidential |
CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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RESPONSIBILITY DELEGATION CHECKLIST
RESPONSIBILITIES |
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Regulatory Authorizations & GMP Compliance |
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Confidential |
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
APPENDIX I
KEY CONTACT INFORMATION
CATALENT
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Title: Director, QA |
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Title: Testing Labs |
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Title: Project Manager |
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Title: Technical Services |
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CUSTOMER
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Confidential |
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
APPENDIX II
Products Covered By Quality Agreement
This Quality Agreement covers the following products:
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QUALITY AGREEMENT REVISION HISTORY
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0.0 |
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Jun 2013 |
Confidential |
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CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
ATTACHMENT C
COMMERCIAL SUPPLY TERMS
THIS ATTACHMENT C INCLUDES CERTAIN TERMS TO BE INCLUDED IN A SUPPLY AGREEMENT BETWEEN CLIENT AND CATALENT. THE TERMS INCLUDED ARE NOT INTENDED TO BE EXHAUSTIVE. CATALENT OR ITS COUNSEL WILL PREPARE THE INITIAL DRAFT OF THE SUPPLY AGREEMENT. ANY AGREEMENT RELATING TO THE SUBJECT MATTER HEREOF SHALL BE SUBJECT AMONG OTHER THINGS TO THE NEGOTIATION AND EXECUTION OF A DEFINITIVE SUPPLY AGREEMENT BETWEEN CLIENT AND CATALENT.
· If Catalent refuses or are unable to manufacture any of the Products for whatever reason, other than force majeure, Client may seek alternate manufacturers, subject to Client obtaining the necessary license for the additional rights to make or have made the Product, which shall be negotiated in good faith by the Parties.
· Catalent will, at Clients request and expense, fully transfer, qualify, and validate all manufacturing and testing of each Product to a second Catalent facility, or at Catalents discretion, a third party facility acceptable to Client, within [* * *] months of the first regulatory approval in the Territory.
· In addition, Catalent shall put a description of its Zydis Technology reasonably sufficient for a third party to manufacture the Products in a technology escrow to be released to a third party only in the event that Catalent is unable or unwilling to manufacture the Products for Client at a Catalent facility or a qualified third-party facility.
· Product per tablet cost to Client from Catalent shall be between $[* * *] and $[* * *] including COG, costs of manufacturing and primary unit dose packaging, but excluding the cost of Drug.
· For any Products sold or supplied by Catalent, Catalent will represent and warrant to Client that the Products shall be manufactured in accordance with Applicable Laws and cGMP, shall comply with the applicable specifications, and shall not be adulterated, misbranded or mislabeled within the meaning of Applicable Laws and cGMP; provided, that Catalent shall not be liable for defects attributable to Client-supplied materials (including artwork, advertising and labeling), provided further, that Catalent shall not utilize any debarred person in the supply, manufacture, packaging or labeling of any Product for Client.
· Catalent agrees to properly pack, label and deliver Products Ex Works (Incoterms 2010) in accordance with Applicable Laws and Catalents standard procedures.
· Client shall be granted access upon at least [* * *] business days prior notice, at reasonable times during regular business hours, to inspect the portion of
Confidential |
|
CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Catalents facility where Catalent processes the Products and to the relevant personnel performing services for Client. Client may not conduct such an inspection audit more than [* * *] during any 12-month period; provided, that additional inspections may be conducted in the event there is a material quality or compliance issue concerning the Products.
Confidential |
|
CPS-QP-1125 F01 Version 1.0 |
CUSTOMER & Catalent Pharma Solutions Quality Agreement
Month/Year
Page x of xx
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Exhibit 10.6
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
THE GENERAL HOSPITAL CORPORATION
EXCLUSIVE PATENT LICENSE AGREEMENT
MGH Agreement No: 221771
MGII Case No: 21125
This License Agreement (Agreement) is made as of the 13 day of September, 2014 (Effective Date), by and between BioHaven Pharmaceutical Holding Company, a British Virgin Island corporation, having a principal place of business at Suite 304 / 234 Church Street / New Haven CT 06510 (Company) and The General Hospital Corporation, d/b/a Massachusetts General Hospital, a not-for-profit Massachusetts corporation, with a principal place of business at 55 Fruit Street, Boston, Massachusetts 02114 (Hospital), each referred to herein individually as a Party and collectively as the Parties.
RECITALS
Hospital, as a center for patient care, research and education, is the owner of certain Patent Rights (defined below) and desires to grant a license of those Patent Rights to Company in order to benefit the public by disseminating the results of its research via the commercial development, manufacture, distribution and use of Products and Processes (defined below).
Company has the capability to commercially develop, manufacture, distribute and use Products and Processes for public use and benefit and desires to license such Patent Rights.
For good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings, unless the context requires otherwise.
1.1 Affiliate with respect to either Party shall mean any corporation or other legal entity other than that Party in whatever country organized, controlling, controlled by or under common control with that Party. The term control shall mean (i) in the ease of Company, direct or indirect ownership of fifty percent (50%) or more of the voting securities having the right to elect directors, and (ii) in the case of Hospital, the power, direct or indirect, to elect or appoint fifty percent (50%) or more of the directors or trustees, or to cause direction of management and policies, whether through the ownership of voting securities, by contract or otherwise.
1.2 Claim shall mean any pending or issued claim of any Patent Right that has not been permanently revoked, nor held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction that is unappealable or unappealed in the time allowed for appeal.
Change of Control shall mean (a) a merger or consolidation of the Company with or into any other entity or (b) the sale, conveyance or other disposition of all or substantially all of the Companys assets.
1.3 Distributor shall mean any third party entity to whom Company, a Company Affiliate or a Sublicensee has granted, express or implied, the right to distribute any Product or Process pursuant to Section 2.1(b)(ii).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.4 First Commercial Sale shall mean the initial Sale anywhere in the applicable License Territory of a Product or Process.
1.5 License Field shall mean therapeutics for any INDICATION of the central nervous system in humans.
1.6 INDICATION(S) shall mean any indication bearing a distinct reference number under the list of diseases officially published by the World Health Organization (WIN)) or list of disorders published in the American Psychiatric Associations Diagnostic and Statistical Manual of Mental Disorders (DSM 5, or above) or such successor organizations that are in effect at the relevant time during the term of this Agreement.
1.7 License Territory shall mean worldwide.
1.8 Net Sales shall be calculated as set forth in this Section 1.7.
(a) Subject to the conditions set forth below, Net Sales shall mean:
(i) the gross amount billed or invoiced, or if no such bill or invoice is issued the amount received, whichever is greatest, by Company and its Affiliates and Sublicensees for or on account of Sales of Products and Processes;
(ii) less the following amounts:
(A) to the extent separately stated on the bill or invoice, [* * *]:
1. amounts repaid or credited [* * *];
2. reasonable and customary [* * *] rebates or discounts [* * *];
3. amounts for outbound transportation, insurance, handling and shipping, [* * *]; and
4. taxes, customs duties and other governmental charges [* * *].
5. unpaid accounts or bad debt [* * *]
(B) [* * *].
(b) Specifically excluded from the definition of Net Sales are amounts attributable to any Sale of any Product or Process between or among Company and any Company Affiliate and/or Sublicensee, unless the transferee is the end purchaser, user or consumer of such Product or Process.
(c) No deductions shall be made for any commissions paid to any individuals or for any costs or expenses of collections.
(d) Net Sales shall be deemed to have occurred and the applicable Product or Process Sold on the earliest of the date of billing, invoicing, delivery or payment or the due date for payment.
(e) If any Product or Process is Sold at a discounted price that is lower than the customary price charged, or for non-cash consideration (whether or not at a discount), Net Sales shall be
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
calculated based on [* * *]. Non-cash consideration that could affect any payment due to Hospital hereunder shall not be accepted without the prior written consent of Hospital.
1.9 Patent Rights shall mean, inclusively, the U.S. Patent Application number Hospitals rights in the U.S. provisional patent application number [* * *], filed on [* * *] and PCT Patent Application number [* * *], filed on [* * *] and/or the equivalent of such application including any division, continuation (but not including continuation-in-part), foreign patent application, Letters Patent, and/or the equivalent thereof issuing thereon, and/or reissue, reexamination or extension thereof, as may be further described in Appendix A .
1.10 Process shall mean any process, method or service the use or performance of which, in whole or in part:
(a) absent the license granted hereunder would infringe, or is covered by, one or more Claims of Patent Rights; or
(b) employs, is based upon or is derived from Technological Information.
1.11 Product shall mean any article, device or composition, the manufacture, use, or sale of which, in whole or in part:
(a) absent the license granted hereunder would infringe, or is covered by, one or more Claims of Patent Rights; or
(b) employs, is based upon or is derived from Technological Information.
1.12 Reporting Period shall mean each three month period ending March 31, June 30, September 30 and December 31.
1.13 Sell (and Sale and Sold as the case may be) shall mean to sell or have sold, to lease or have leased, to import or have imported or otherwise to transfer or have transferred a Product or Process for valuable consideration (in the form of cash or otherwise), and further in the case of a Process to use or perform such Process for the benefit of a third party.
1.14 Sublicense Income shall mean consideration in any form received by Company and/or Companys Affiliate(s) in connection with or otherwise attributable to a grant of a sublicense or any other right, license, privilege or immunity (regardless of whether such grantee is a Sublicensee as defined in this Agreement) to make, have made, use, have used, Sell or have Sold Products or Processes, but excluding consideration included within Net Sales. Sublicense Income shall include without limitation any license signing fee, license maintenance fee, unearned portion of any minimum royalty payment, distribution or joint marketing fee, research and development funding in excess of the cost of performing such research and development, and any consideration received for an equity interest in, extension of credit to or other investment in Company or Companys Affiliates to the extent such consideration exceeds the fair market value of the equity or other interest received as determined by agreement of the Parties or by an independent appraiser mutually agreeable to the Parties.
1.15 Sublicensee shall mean any sublicensee of rights granted in accordance with Section 2.1(a)(ii). For purpose of this Agreement, a Distributor of a Product or Process shall not be included in the definition of Sublicensee unless such Distributor (i) is granted any right to make, have made, use or have used Products or Processes in accordance with Section 2,1(a)(ii), or (ii) has agreed to pay to Company or its Affiliate(s) royalties on such Distributors sales of Products or Processes, in which case such Distributor shall be a Sublicensee for all purposes of this Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
1.16 Technological Information shall mean research data, designs, formulae, process information and other information pertaining to the invention(s) claimed in the Patent Rights which is created by Dr. Fava and Dr. Petryshen and owned by Hospital and is not confidential information of or otherwise obligated to any third party and which Dr. Fava and Dr. Petryshen knows as of the Effective Date and reasonably believes is necessary in order for Company to utilize the licenses granted hereunder, as further described in Appendix B . Company agrees to treat all Technological Information in accordance with the provisions of Appendix E .
2. LICENSE
2.1 Grant of License.
(a) Subject to the terms of this Agreement and Hospitals rights in Patent Rights, Hospital hereby grants to Company in the License Field in the License Territory:
(i) an exclusive, royalty-bearing license under its rights in Patent Rights to make, have made, use, have used, Sell and have Sold Products and Processes;
(ii) the right to grant sublicenses under the rights granted in Section 2.1(a)(i) to Sublicensees, provided that in each case Company shall be responsible for the performance of any obligations of Sublicensees relevant to this Agreement as if such performance were carried out by Company itself, including, without limitation, the payment of any royalties or other payments provided for hereunder, regardless of whether the terms of any sublicense provide for such amounts to be paid by the Sublicensee directly to Hospital; and
(iii) the nonexclusive right to use Technological Information disclosed by Hospital to Company hereunder in accordance with this Agreement.
(b) The license granted in Section 2.1(a) above includes:
(i) the right to grant to the final purchaser, user or consumer of Products the right to use such purchased Products in a method coming within the scope of Patent Rights within the License Field and License Territory; and
(ii) the right to grant a Distributor the right to Sell (but not to make, have made, use or have used) such Products and/or Processes for or on behalf of Company, its Affiliates and Sublicensees in a manner consistent with this Agreement.
(c) The foregoing license grant shall include the grant of such license to any Affiliate of Company, provided that such Affiliate shall assume the same obligations as those of Company and be subject to the same terms and conditions hereunder; and further provided that Company shall be responsible for the performance of all of such obligations and for compliance with all of such terms and conditions by Affiliate. Company shall provide to Hospital a fully signed, non-redacted copy of each agreement with each Affiliate that assumes the aforesaid obligations, including all exhibits, attachments and related documents and any amendments, within thirty (30) days of request by Hospital.
2.2 Sublicenses . Each sublicense granted hereunder shall be consistent with and comply with all terms of this Agreement, shall incorporate terms and conditions sufficient to enable Company to comply with this Agreement, shall prohibit any further sublicense or assignment by a Sublicensee without Hospital consent and shall provide that Hospital is a third party beneficiary thereof Any sublicense granted by Company shall be subject to the prior written approval of Hospital, which approval shall not be unreasonably withheld. Company
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
shall provide to Hospital a fully signed non-redacted copy of all sublicense agreements and amendments thereto, including all exhibits, attachments and related documents, within thirty (30) days of executing the same. Upon termination of this Agreement or any license granted hereunder for any reason, any sublicenses shall be addressed in accordance with Section 10.7. Any sublicense which is not in accordance with the forgoing provisions shall be null and void.
2.3 Retained Rights; Requirements . Any and all licenses granted hereunder are subject to:
(a) the right of Hospital and Hospitals Affiliates and academic, government and not-for-profit institutions to make and to use the subject matter described and/or claimed in the Patent Rights; and
(b) for Patent Rights supported by federal funding, the rights, conditions and limitations imposed by U.S. law (see 35 U.S.C. § 202 et seq. and regulations pertaining thereto), including without limitation:
(i) the royalty-free non-exclusive license granted to the U.S. government; and
(ii) the requirement that any Products used or sold in the United States shall be manufactured substantially in the United States.
2.4 No Additional Rights . It is understood that nothing in this Agreement shall be construed to grant Company or any of its Affiliates a license, express or implied, under any patent owned solely or jointly by Hospital other than the Patent Rights expressly licensed hereunder. Hospital shall have the right to license any Patent Rights to any other party for any purpose outside of the License Field or the License Territory.
2.5 Disclosure of Technological Information . At Companys request prior to execution of this Agreement, Hospital (through Dr. Fava or Dr. Petryshen shall use reasonable efforts to disclose in confidence within thirty (30) days after execution of this Agreement the Technological Information licensed hereunder.
3. DUE DILIGENCE OBLIGATIONS
3.1 Diligence Requirements . Company shall use, and shall cause its Affiliates and Sublicensees, as applicable, to use, best efforts to develop and make available to the public Products and Processes throughout the License Territory in the License Field. Such efforts shall include achieving the following objectives within the time periods designated below following the Effective Date:
(a) Pre-Sales Requirements .
1. Within [* * *] of the Effective Date, Company shall raise at least $[* * *] to support development efforts of Products and Processes
2. Within [* * *] of the Effective Date, Company shall [* * *];
3. Within [* * *] of the Effective Date, Company shall [* * *];
4. Within [* * *] of the Effective Date, Company shall [* * *];
5. Within [* * *] of the Effective Date, Company shall [* * *];
6. Within [* * *] of the Effective Date, Company shall [* * *]; and
7. Within [* * *] of the Effective Date, Company shall [* * *].
(b) Post-Sales Requirements .
(i) Following the First Commercial Sale in any country in the License Territory, Company shall itself or through its Affiliates and/or Sublicensees make continuing
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Sales in such country without any elapsed time period of [* * *] or more in which such Sales do not occur.
(ii) Company shall itself or through an Affiliate or Sublicensee make such First Commercial Sale within the following countries and regions in the License Territory within [* * *] after the Effective Date of this Agreement: [* * *].
Achievement of the foregoing objectives shall be deemed to satisfy Companys obligations to use best efforts under this Section 3.1.
3.2 Diligence Failures . If Hospital determines that Company has failed to fulfill any of its obligations under Section 3.1, then Hospital may treat such failure as a default and may terminate this Agreement and/or any license granted hereunder in accordance with Section 10.4 provided, however, that Company may elect to extend any of the Diligence Requirements in accordance with Section 3.3 below.
3.3 Diligence Extension . Company may elect to extend any of the Diligence Requirement in the article 3.1(a) by a maximum of [* * *] (Diligence Extension) upon payment to Hospital of:
(i) [* * *] dollars ($[* * *]) if such an extension is for [* * *]; or;
(ii) [* * *] dollars ($[* * *]) if such an extension is for [* * *];
(iii) [* * *] dollars ($[* * *]) if such an extension is for [* * *];
A Diligence Extension shall apply to the elected Diligence Requirement and all subsequent Diligence Requirements. Company may elect no more than [* * *] Diligence Extensions total and any Diligence Extension must be requested at least [* * *] prior to the date of the specific diligence Requirement for which a Diligence Extension is being requested by Company. The Diligence Extension shall take effect only if payment is made to Hospital by the date of the specific Diligence Requirement for which a Diligence Extension has been requested.
3.4 Diligence Reports. Company shall provide all reports with respect to its obligations under Section 3.1 as set forth in Section 5.
4. PAYMENTS AND ROYALTIES
4.1 License Issue Fee . Company shall pay Hospital a non-refundable license issue fee in the amount of twenty thousand dollars ($20,000) upon execution of this Agreement.
4.2 Patent Cost Reimbursement . Company shall reimburse Hospital for all costs associated with the preparation; filing, prosecution and maintenance of all Patent Rights (Patent Costs). As of the Effective Date, Hospital has incurred approximately thirteen thousand dollars ($13,000) in Patent Costs, which amount Company shall pay to Hospital within one year of the Effective Date. Company shall pay to Hospital, or at Hospitals request directly to patent counsel, all other Patent Costs within [* * *] days of Companys receipt of an invoice for such Patent Costs either from Hospital or Hospitals patent counsel. Company agrees to indemnify, defend and hold Hospital harmless from and against any and all liabilities, damages, costs and expenses arising from the failure of Company to timely pay such invoices and Patent Costs. Hospital shall instruct patent counsel to provide copies to Hospital for hospitals administrative files of all invoices detailing Patent Costs which are sent directly to Company. If Company pays any Patent Costs directly, Company shall advise patent counsel that Hospital is and shall remain patent counsels client.
4.3 Annual License Fee :
(a) Company shall pay to Hospital the following non-refundable amounts as an annual license fee within [* * *] days after each of the following anniversaries of the Effective Date:
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
(i) the [* * *] anniversary of the Effective Date: [* * *] dollars ($[* * *]);
(ii) the [* * *] anniversary of the Effective Date: [* * *] dollars ($[* * *]);
(iii) the [* * *] anniversary and on each subsequent anniversary of the Effective Date thereafter: [* * *] dollars ($[* * *]).
4.4 Milestone Pay ments. In addition to the payments set forth in Sections 4.1 through 4.3 above, Company shall pay Hospital milestone payments as follows:
(a) [* * *] dollars ($[* * *]) within [* * *] days of [* * *]; and
(b) [* * *] dollars ($[* * *]) within [* * *] days of [* * *]; and
(c) [* * *] dollars ($[* * *]) at the later of (i) [* * *]; or (ii) [* * *]; provided however that in any case this milestone payment 4.4 (c) shall be paid within [* * *] of [* * *] if it has not been paid before. For the avoidance of any doubt, this milestone 4.4 (c) shall be due in addition to any payment made under 4.4 (e) or 4.5; and
(d) [* * *] dollars ($[* * *]) within [* * *] days of [* * *]; and
(e) [* * *] dollars ($[* * *]) within [* * *] days of [* * *]; and
(f) [* * *] dollars ($[* * *]) within [* * *] days of [* * *]; and
(g) [* * *] dollars ($[* * *]) [* * *].
4.5 Royalties and Sublicense Income .
(a) Beginning with the First Commercial Sale in any country in the License Territory, Company shall pay Hospital:
(i) during the term of any license granted under Section 2.1(a)(i), a royalty of [* * *] percent ([* * *]%) of the Net Sales of all Products and Processes;
(ii) Necessary License. If Company enters into a license or otherwise acquires the use of any intellectual property on technology from a third party that is legally required to practice Patent Rights (a Necessary License), royalties payable to Hospital are subject to an offset of [* * *] percent ([* * *]%) of the amounts paid for royalties to such third parties under any Necessary License(s) provided however that in no event shall Company pay Hospital less than [* * *] percent ([* * *]%) of the Net Sales of all Products and Processes (Minimum Royalty).
(b) Company shall pay Hospital [* * *] percent ([* * *]%) of any and all Sublicense Income before [* * *].
(c) Company shall pay Hospital [* * *] percent ([* * *]%) of any and all Sublicense Income after [* * *].
(d) All payments due to Hospital under this Section 4.5 shall be due and payable by Company within [* * *] days after the end of each Reporting Period, and shall be accompanied by a report as set forth in Sections 5.3 and 5.4.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
4.6 Form of Payment . All payments due under this Agreement shall be drawn on a United States bank and shall be payable in United States dollars. Each payment shall reference this Agreement and its Agreement Number and identify the obligation under this Agreement that the payment satisfies. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States, as reported in The Wall Street Journal, on the last working day of the applicable Reporting Period. Such payments shall be without deduction of exchange, collection or other charges, and, specifically, without deduction of withholding or similar takes or other government imposed fees or taxes, except as permitted in the definition of Net Sales.
Checks for all payments due to the Hospital under this Agreement shall be made payable to the Hospital and addressed as set forth below:
Massachusetts General Hospital
BOA-Lockbox Services
PCSR Lockbox 11415007
MA5-527-02-07
2 Morrissey Blvd
Dorchester, MA 02125
Reference Agreement #: A221771
Payments via wire transfer should be made as follows:
ACH Credit: [* * *]
Federal Reserve Wire: [* * *]
SWIFT Code: [* * *]
Account [* * *]
Massachusetts General Hospital
Bank of America
100 Federal Street
Boston, MA 02110
Reference Agreement #: [* * *]
4.7 Overdue Payments . The payments due under this Agreement shall, if overdue, bear interest beginning on the first day following the Reporting Period to which such payment was incurred and until payment thereof at a per annum rate equal to [* * *], such interest rate being compounded on the last day of each Reporting Period, not to exceed the maximum permitted by law. Any such overdue payments when made shall be accompanied by all interest so accrued. Said interest and the payment and acceptance thereof shall not preclude Hospital from exercising any other rights it may have as a consequence of the lateness of any payment.
5. REPORTS AND RECORDS
5.1 Diligence Reports . Within [* * *] days after the end of each calendar year, Company shall report in writing to Hospital on progress made toward the objectives set forth in Section 3.1 during such preceding 12 month period, including, without limitation, progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing and the number of sublicenses entered into and marketing.
5.2 Milestone Achievement Notification . Company shall report to Hospital the dates on which it achieves the milestones set forth in Section 4.4 within [* * *] days of each such occurrence.
5.3 Sales Reports . Company shall report to Hospital the date of the First Commercial Sale in each country of the License Territory within [* * *] days of each such occurrence. Following the First Commercial Sale, Company shall deliver reports to Hospital within [* * *] days after the end of each Reporting Period. Each
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
report under this Section 5.4 shall have substantially the format outlined in Appendix C , shall be certified as correct by an officer of Company and shall contain at least the following information as may be pertinent to a royalty accounting hereunder for the immediately preceding Reporting Period:
(a) the number of Products and Processes Sold by Company, its Affiliates and Sublicensees in each country;
(b) the amounts billed, invoiced and received by Company, its Affiliates and Sublicensees for each Product and Process, in each country, and total billings or payments due or made for all Products and Processes;
(c) calculation of Net Sales for the applicable Reporting Period in each country, including an itemized listing of permitted offsets and deductions;
(d) total royalties payable on Net Sales in U.S. dollars, together with the exchange rates used for conversion; and
(e) any other payments due to Hospital under this Agreement.
If no amounts are due to Hospital for any Reporting Period, the report shall so state.
5.4 Sublicense Income Reports . Company shall, along with delivering payment as set forth in Section 4.6, report to Hospital within [* * *] days of receipt the amount of all Sublicense Income received by Company, and Companys calculation of the amount due and paid to Hospital from such income, including an itemized listing of the source of income comprising such consideration, and the name and address of each entity making such payments in substantially the format outlined in Appendix D .
5.5 Audit Rights . Company shall maintain, and shall cause each of its Affiliates and Sublicensees to maintain, complete and accurate records relating to the rights and obligations under this Agreement and any amounts payable to Hospital in relation to this Agreement, which records shall contain sufficient information to permit Hospital and its representatives to confirm the accuracy of any payments and reports delivered to Hospital and compliance in all other respects with this Agreement. Company shall retain and make available, and shall cause each of its Affiliates and Sublicensees to retain and make available, such records for at least [* * *] years following the end of the calendar year to which they pertain, to Hospital and/or its representatives and upon at least [* * *] days advance written notice, for inspection during normal business hours, to verify any reports and payments made and/or compliance in other respects under this Agreement. If any examination conducted by Hospital or its representatives pursuant to the provisions of this Section show an underreporting or underpayment of [* * *] percent ([* * *]%) or more in any payment due to Hospital hereunder, Company shall bear the full cost of such audit and shall remit any amounts due to Hospital (including interest due in accordance with Section 4.7) within [* * *] days of receiving notice thereof from Hospital.
6. PATENT PROSECUTION AND MAINTENANCE
6.1 Prosecution . Hospital shall be responsible for the preparation, filing, prosecution and maintenance of all patent applications and patents included in Patent Rights. Company shall reimburse Hospital for Patent Costs incurred by Hospital relating thereto in accordance with Section 4.2.
6.2 Copies of Documents . With respect to any Patent Right licensed hereunder, Hospital shall instruct the patent counsel prosecuting such Patent Right to (i) copy Company on patent prosecution documents that are received from or filed with the United States Patent and Trademark Office and foreign equivalent, as applicable; (ii) if requested by Company, provide Company with copies of draft submissions to the USPTO prior to filing; and (iii) give consideration to the comments and requests of Company or its patent counsel.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
6.3 Companys Election Not to Proceed . Company may elect to surrender any patent or patent application in Patent Rights in any country upon [* * *] days advance written notice to Hospital. Such notice shall relieve Company from the obligation to pay for future Patent Costs but shall not relieve Company from responsibility to pay Patent Costs incurred prior to the expiration of the [* * *] day notice period. Such U.S. or foreign patent application or patent shall thereupon cease to be a Patent Right hereunder, Company shall have no further rights therein and Hospital shall be free to license its rights to that particular U.S. or foreign patent application or patent to any other party on any terms.
6.4 Confidentiality of Prosecution and Maintenance Information . Company agrees to treat all information related to prosecution and maintenance of Patent Rights as Confidential Information in accordance with the provisions of Appendix E .
7. THIRD PARTY INFRINGEMENT AND LEGAL ACTIONS
7.1 Hospital Right to Prosecute . Hospital will protect its Patent Rights from infringement and prosecute infringers when, in its sole judgment, such action may be reasonably necessary, proper and justified. If Company shall have supplied Hospital with written evidence demonstrating to Hospitals reasonable satisfaction prima facie infringement of a claim of a Patent Right in the License Field in the License Territory by a third party which poses a material threat to Companys rights under this Agreement, Company may by notice request Hospital to take steps to protect such Patent Right. Hospital shall notify Company within [* * *] of the receipt of such notice whether Hospital intends to prosecute the alleged infringement. If Hospital notifies Company that it intends to so prosecute, Hospital shall, within [* * *] months of its notice to Company either (i) cause such infringement to terminate, or (ii) initiate legal proceedings against the infringer.
7.2 Company Right to Prosecute . In the event Hospital notifies Company that Hospital does not intend to prosecute infringement identified under Section 7.1, Company may, upon notice to Hospital, initiate legal proceedings against the infringer at Companys expense with respect to a claim of a Patent Right in the License Field in the License Territory. Before commencing such action, Company and, as applicable, any Affiliate, shall consult with Hospital, concerning, among other things, Companys standing to bring suit, the advisability of bringing suit, the selection of counsel and the jurisdiction for such action (provided Company must have Hospitals prior written consent with respect to selection of jurisdiction for any action in which Hospital may be joined as a party-plaintiff) and shall use reasonable efforts to accommodate the views of Hospital regarding the proposed action, including without limitation with respect to potential effects on the public interest. Company shall be responsible for all costs, expenses and liabilities in connection with any such action and shall indemnify and hold Hospital harmless therefrom, regardless of whether Hospital is a party-plaintiff, except for the expense of any independent counsel retained by Hospital in accordance with Section 7.5 below.
7.3 Hospital Joined as Party-Plaintiff . If Company elects to commence an action as described in Section 7.2 above, Hospital shall have, in its sole discretion, the option to join such action as a party-plaintiff. If Hospital is required by law to join such action as a party-plaintiff, Hospital may either, in its sole discretion, permit itself to be joined as a party-plaintiff at the sole expense of Company, or assign to Company all of Hospitals right, title and interest in and to the Patent Right which is the subject of such action (subject to all of Hospitals obligations to the government under law and any other rights that others may have in such Patent Right). If Hospital makes such an assignment, such action by Company shall thereafter be brought or continued without Hospital as a party; provided, however, that Hospital shall continue to have all rights of prosecution and maintenance with respect to Patent Rights and Company shall continue to meet all of its obligations under this Agreement as if the assigned Patent Right were still licensed to Company hereunder.
7.4 Notice of Actions; Settlement . Company shall promptly inform Hospital of any action or suit relating to Patent Rights and shall not enter into any settlement, consent judgment or other voluntary final disposition
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
of any action relating to Patent Rights, including but not limited to appeals, without the prior written consent of Hospital.
7.5 Cooperation . Each Party agrees to cooperate reasonably in any action under Section 7 which is controlled by the other Party, provided that the controlling party reimburses the cooperating party for any costs and expenses incurred by the cooperating party in connection with providing such assistance, except for the expense of any independent counsel retained by the cooperating party in accordance with this Section 7.5. Such controlling party shall keep the cooperating party informed of the progress of such proceedings and shall make its counsel available to the cooperating party. The cooperating party shall also be entitled to independent counsel in such proceedings but at its own expense, said expense to be offset against any damages received by the Party bringing suit in accordance with Section 7.6.
7.6 Recovery . Any award paid by third parties as the result of such proceedings (whether by way of settlement or otherwise) shall first be applied to reimbursement of any legal fees and expenses incurred by either Party and then the remainder shall be divided between the Parties as follows:
(a) (i) Company shall receive an amount equal to its lost profits or a reasonable royalty on the infringing sales, or whichever measure of damages the court shall have applied; and
(ii) Hospital shall receive an amount equal to the royalties and other amounts that Company would have paid to Hospital if Company had Sold the infringing Products and Services rather than the in flinger; and
(b) the balance, if any, remaining after Company and Hospital have been compensated under Section 7,6(a) shall be shall be shared equally by the Parties.
8. INDEMNIFICATION AND INSURANCE
8.1 Indemnification .
(a) Company shall indemnify, defend and hold harmless Hospital and its Affiliates and their respective trustees, directors, officers, medical and professional staff, employees, and agents and their respective successors, heirs and assigns (the Indemnitees), against any liability, damage, loss or expense (including reasonable attorneys fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one of them in connection with any claims, suits, actions, demands or judgments arising out of any theory of product liability (including, but not limited to, actions in the form of contract, tort, warranty, or strict liability) concerning any product, process or service made, used, or sold or performed pursuant to any right or license granted under this Agreement.
(b) Company agrees, at its own expense, to provide attorneys reasonably acceptable to the Hospital to defend against any actions brought or filed against any party indemnified hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought; provided, however, that any Indemnitee shall have the right to retain its own counsel, at the expense of Company, if representation of such Indemnitee by counsel retained by Company would be inappropriate because of conflict of interests of such Indemnitee and any other party represented by such counsel. Company agrees to keep Hospital informed of the progress in the defense and disposition of such claim and to consult with Hospital prior to any proposed settlement.
(c) This section 8.1 shall survive expiration or termination of this Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
8.2 Insurance .
(a) Beginning at such time as any such product, process or service is being commercially distributed, sold, leased or otherwise transferred, or performed or used (other than for the purpose of obtaining regulatory approvals), by Company, an Affiliate or Sublicensee, Company shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $[* * *] per incident and $[* * *] annual aggregate and naming the indemnitees as additional insureds. Such commercial general liability insurance shall provide (i) product liability coverage and (ii) broad form contractual liability coverage for Companys indemnification under Section 8.1 of this Agreement. If Company elects to self-insure all or part of the limits described above (including deductibles or retentions which are in excess of $[* * *] annual aggregate) such self-insurance program must be acceptable to the Hospital and the Risk Management Foundation. The minimum amounts of insurance coverage required under this Section 8.2 shall not be construed to create a limit of Companys liability with respect to its indemnification under Section 8,1 of this Agreement.
(b) Company shall provide Hospital with written evidence of such insurance upon request of Hospital. Company shall provide Hospital with written notice at least [* * *] days prior to the cancellation, non-renewal or material change in such insurance; if Company does not obtain replacement insurance providing comparable coverage prior to the expiration of such [* * *] day period, Hospital shall have the right to terminate this Agreement effective at the end of such [* * *] day period without notice or any additional waiting periods.
(c) Company shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during (i) the period that any such product, process, or service is being commercially distributed, sold, leased or otherwise transferred, or performed or used (other than for the purpose of obtaining regulatory approvals), by Company or by a licensee, affiliate or agent of Company and (ii) a reasonable period after the period referred to in (c) (i) above which in no event shall be less than [* * *] years.
(d) This section 8.2 shall survive expiration or termination of this Agreement.
9. DISCLAIMER OF WARRANTIES; LIMITATION OF LIABILITY
9.1 Title to Patent Rights . To the best knowledge of Hospitals Office of Innovation, Hospital is the owner by assignment from Dr.Fava and Dr.Petryshen of the Patent Rights and has the authority to enter into this Agreement and license the Patent Rights to Company hereunder.
9.2 No Warranties . HOSPITAL MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, CONCERNING THE PATENT RIGHTS AND THE RIGHTS GRANTED HEREUNDER, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AND HEREBY DISCLAIMS THE SAME. SPECIFICALLY, AND NOT TO LIMIT THE FOREGOING, HOSPITAL MAKES NO WARRANTY OR REPRESENTATION (i) REGARDING THE VALIDITY OR SCOPE OF ANY OF THE CLAIM(S), WHETHER ISSUED OR PENDING, OF ANY OF THE PATENT RIGHTS, AND (ii) THAT THE EXPLOITATION OF THE PATENT RIGHTS OR ANY PRODUCT WILL NOT INFRINGE ANY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF HOSPITAL OR OF ANY THIRD PARTY.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
9.3 Limitation of Liability . IN NO EVENT SHALL HOSPITAL OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE TRUSTEES, DIRECTORS, OFFICERS, MEDICAL OR PROFESSIONAL STAFF, EMPLOYEES AND AGENTS BE LIABLE TO LICENSEE OR ANY OF ITS AFFILIATES, SUBLICENSEES OR DISTRIBUTORS FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE LICENSE OR RIGHTS GRANTED HEREUNDER, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, INCLUDING WITHOUT LIMITATION ECONOMIC DAMAGES OR INJURY TO PROPERTY OR LOST PROFITS, REGARDLESS OF WHETHER HOSPITAL SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.
10. TERM AND TERMINATION
10.1 Term . The term of this Agreement shall commence on the Effective Date and shall remain in effect the date on which all issued patents and filed patent applications within the Patent Rights have expired or been abandoned unless this Agreement is terminated earlier in accordance with any of the other provisions of Section 10.
10.2 Termination for Failure to Pay . If Company fails to make any payment due hereunder, Hospital shall have the right to terminate this Agreement upon [* * *] business days written notice, unless Company makes such payments plus any interest due, as set forth in Section 4.7, within said [* * *] day notice period. If payments are not made, Hospital may immediately terminate this Agreement at the end of said [* * *] day period. Company shall be entitled to only [* * *] such cure periods in a calendar year; for a [* * *] failure to make payment on time, Hospital shall have the right to terminate this Agreement immediately upon written notice.
10.3 Termination for Insurance and Insolvency .
(a) Insurance . Hospital shall have the right to terminate this Agreement in accordance with Section 8.2(b) if Company fails to maintain the insurance required by Section 8.2.
(b) Insolvency and other Bankruptcy Related Events . Hospital shall have the right to terminate this Agreement immediately upon written notice to Company with no further notice obligation or opportunity to cure if Company: (i) shall become insolvent; (ii) shall make an assignment for the benefit of creditors; or (iii) or shall have a petition in bankruptcy filed for or against it.
10.4 Termination for Non-Financial Default . If Company, any of its Affiliates or any Sublicensee shall default in the performance of any of its other obligations under this Agreement not otherwise covered by the provisions of Section 10.2 and 10.3, and if such default has not been cured within [* * *] days after notice by Hospital in writing of such default, Hospital may immediately terminate this Agreement, and/or any license granted hereunder with respect to the country or countries in which such default has occurred, at the end of said [* * *] day cure period. Hospital shall also have the right to terminate this Agreement and/or any such license immediately, upon written notice, in the event of repeated defaults even if cured within such [* * *] day periods.
10.5 Challenging Validity . During the term of this Agreement, Company shall not challenge, and shall restrict Company Affiliates and Sublicensees from challenging, the validity of the Patent Rights and in the event of any breach of this provision Hospital shall have the right to terminate this Agreement and any license granted hereunder immediately. In addition, if the Patent Rights are upheld Company shall reimburse Hospital for its legal costs and expenses incurred in defending any such challenge.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
10.6 Termination by Company . Company shall have the right to terminate this Agreement by giving sixty (60) days advance written notice to Hospital and upon such termination shall immediately cease all use and Sales of Products and Processes, subject to Section 10.9.
10.7 Effect of Termination on Sublicenses . Any sublicenses granted by Company under this Agreement shall provide for termination or assignment to Hospital of Companys interest therein, at the option of Hospital, upon termination of this Agreement or upon termination of any license hereunder under which such sublicense has been granted.
10.8 Effects of Termination of Agreement . Upon termination of this Agreement or any of the licenses hereunder for any reason, final reports in accordance with Section 5 shall be submitted to Hospital and all royalties and other payments, including without limitation-any unreimbursed Patent Costs, accrued or due to Hospital as of the termination date shall become immediately payable. Company shall cease, and shall cause its Affiliates and Sublicensees to cease under any sublicense granted by Company, all Sales and uses of Products and Processes upon such termination, subject to Section 10.9. The termination or expiration of this Agreement or any license granted hereunder shall not relieve Company, its Affiliates or Sublicensees of obligations arising before such termination or expiration.
10.9 Inventory . Upon early termination of this Agreement other than for Company default, Company, Company Affiliates and Sublicensees may complete and sell any work-in-progress and inventory of Products that exist as of the effective date of termination provided that (i) Company pays Hospital the applicable running royalty or other amounts due on such Net Sales in accordance with the terms and conditions of this Agreement, and (ii) Company, Company Affiliates and Sublicensees shall complete and sell all Work-in-progress and inventory of Products within [* * *] after the effective date of termination. Upon expiration of this Agreement, Company shall pay to Hospital the royalties set forth in Section 4.5(a) for Sales of any Product that was in inventory or was a work-in-progress on the date of expiration of the Agreement.
11. COMPLIANCE WITH LAW
11.1 Compliance . Company shall have the sole obligation for compliance with, and shall ensure that any Affiliates and Sublicensees comply with, all government statutes and regulations that relate to Products and Processes, including, but not limited to, those of the Food and Drug Administration and the Export Administration, as amended, and any applicable laws and regulations of any other country in the License Territory. Company agrees that it shall be solely responsible for obtaining any necessary licenses to export, re-export, or import Products or Processes covered by Patent Rights and/or Confidential Information. Company shall indemnify and hold harmless Hospital for any breach of Companys obligations under this Section 11.1.
11.2 Patent Numbers . Company shall cause all Products sold in the United States to be marked with all applicable U.S. Patent Numbers, to the full extent required by United States law. Company shall similarly cause all Products shipped to or sold in any other country to be marked in such a manner as to conform with the patent laws and practices of such country.
12. MISCELLANEOUS
12.1 Entire Agreement . This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof.
12.2 Notices . Any notices, reports, waivers, correspondences or other communications required under or pertaining to this Agreement shall be in writing and shall be delivered by hand, or sent by a reputable overnight mail service (e.g.; Federal Express), or by first class mail (certified or registered), or by facsimile confirmed by one of the foregoing methods, to the other party. Notices will be deemed effective (a) three (3) working days after deposit, postage prepaid, if mailed, (b) the next day if sent by overnight mail, or (c) the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
same day if sent by facsimile and confirmed as set forth above or delivered by hand. Unless changed in writing in accordance with this Section, the notice address for Hospital shall be as follows:
Executive Director, Partners Innovation
Massachusetts General Hospital
101 Huntington Avenue, 4 th Floor
Boston, MA 02199
Fax No. (617) 954-9361
the notice address for Company shall be as follows:
Biohaven Pharmaceutical Holding Company LTD
Suite 304
234 Church Street
New Haven, CT 06510
Signatory: Robert Berman, M.D. (Title: Chief Medical Officer)
Fax: 203-244-4239
12.3 Amendment; Waiver . This Agreement may be amended and any of its terms or conditions may be waived only by a written instrument executed by an authorized signatory of the Parties or, in the case of a waiver, by the Party waiving compliance. The failure of either Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either Party of any condition or term shall be deemed as a further or continuing waiver of such condition or term or of any other condition or term.
12.4 Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties hereto and their respective permitted successors and assigns.
12.5 Assignment . Company shall not assign this Agreement or any of its rights or obligations under this Agreement without the prior written consent of Hospital; provided, however, that if Company has fulfilled its diligence obligations as set forth in Section 3, no such consent will be required to assign this Agreement to a successor of the Companys business to which this Agreement pertains or to a purchaser of substantially all of the Companys assets related to this Agreement, so long as such successor or purchaser shall agree in writing to be bound by all of the terms and conditions hereof prior to such assignment. Company shall notify Hospital in writing of any such assignment and provide a copy of all assignment documents and related agreements to Hospital within thirty (30) days of such assignment. Failure of an assignee to agree to be bound by the terms hereof or failure of Company to notify hospital and provide copies of assignment documentation shall be grounds for termination of this Agreement for default. Further, neither any rights granted under this Agreement nor any sublicense may be assigned by any Sublicensee without the prior written consent of Hospital.
12.6 Force Majeure . Neither Party shall be responsible for delays resulting from causes beyond the reasonable control of such Party, including without limitation fire, explosion, flood, war, sabotage, strike or riot, provided that the nonperforming Party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.
12.7 Use of Name . Neither Party shall use the name of the other Party or of any trustee, director, officer, staff member, employee, student or agent of the other Party or any adaptation thereof in any advertising, promotional or sales literature, publicity or in any document employed to obtain funds or financing without the prior written approval of the Party or individual whose name is to be used. For Hospital, such approval shall be obtained from Hospitals VP of Public Affairs.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
12.8 Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts, excluding with respect to conflict of laws, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted. Each Party agrees to submit to the exclusive jurisdiction of the Superior Court for Suffolk County, Massachusetts, and the United States District Court for the District of Massachusetts with respect to any claim, suit or action in law or equity arising in any way out of this Agreement or the subject matter hereof.
12.9 Hospital Policies . Company acknowledges that Hospitals employees and medical and professional staff members and the employees and staff members of Hospitals Affiliates are subject to the applicable policies of Hospital and such Affiliates, including, without limitation, policies regarding conflicts of interest, intellectual property and other matters. Company shall provide Hospital with any agreement it proposes to enter into with any employee or staff member of Hospital or any of Hospitals Affiliates for Hospitals prior review and shall not enter into any oral or written agreement with such employee or staff member which conflicts with any such policy. Hospital shall provide Company, at Companys request, with copies of any such policies applicable to any such employee or staff member.
12.10 Severability . If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction or are deemed unenforceable under then current applicable law from time to time in effect during the term hereof, it is the intention of the parties that the remainder of this Agreement shall not be effected thereby. It is further the intention of the parties that in lieu of each such provision which is invalid, illegal or unenforceable, there be substituted or added as part of this Agreement a provision which shall be as similar as possible in economic and business objectives as intended by the parties to such invalid, illegal or enforceable provision, but shall be valid, legal and enforceable.
12.11 Survival . In addition to any specific survival references in this Agreement, Sections 1, 2.4, 4.2, 4.6, 4.7, 5.3, 54, 5.5, 6.4, 8.1, 8.2, 9.2, 9.3, 10.7, 10.8, 10.9, 12.1, 12.2, 12.3, 12.4, 12.7, 12.8, 12.9, 12.10, 12.11, 12.12 and 12.13 shall survive termination or expiration of this Agreement. Any other rights, responsibilities, obligations, covenants and warranties which by their nature should survive this Agreement shall similarly survive and remain in effect.
12.12 Interpretation . The parties hereto are sophisticated, have had the, opportunity to consult legal counsel with respect to this transaction and hereby waive any presumptions of any statutory or common law rule relating to the interpretation of contracts against the drafter.
12.13 Headings . All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date first written above.
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD. |
THE GENERAL HOSPITAL CORPORATION |
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/s/ Rob Berman |
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By: |
/s/ Kim Betres |
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Name: Rob Berman |
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Name: Kim Betres |
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Title: |
CMO |
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Title: |
Associate Director, Research & Licensing |
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Date: |
20-Sep-2014 |
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Date: |
Sept 22 2014 |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Appendix A
DESCRIPTION OF PATENT RIGHTS
[* * *]
TO BE INCLUDED BY-AMENDMENT
[* * *]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Appendix B
DESCRIPTION OF TECHNOLOGICAL INFORMATION
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Appendix C
SALES REPORTS
AGREEMENT INCOME REPORT |
Royalty Income |
[MGH][BWH] Agreement #- |
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Licensee - |
Sub-Licensee -
Separate reports must be filed for:
1. Each Product sold.
2. Each country of sale, if different deductions or royalty rates apply.
Product Name:
Report Time Period:
From mm/dd/yyyy
To mm/dd/yyyy
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Exchange Rate |
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Deductions (itemize)
Please list each deduction separately. Use same definition as appears in Agreement and include the contract paragraph as a reference (Std Section 1.17(a)(ii) line item deductions listed below).
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Total Deductions |
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Royalties Due |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
PLEASE ATTACH DETAIL SALES REPORTS AS REQUIRED
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
Appendix D
AGREEMENT INCOME REPORT |
Sublicense Income |
[MGH][BWH] Agreement #- |
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Licensee - |
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Sub-Licensee -
Separate reports must be filed for Payments associated with each Product:
Product Name:
Report Time Period:
From mm/dd/yyyy
To mm/dd/yyyy
Detailed Explanation of Payment
Required for Other Payment
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Other Payment |
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TOTAL |
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PLEASE ATTACH DETAIL AS REQUIRED
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.7
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(B)(4) and 230.406
EXCLUSIVE LICENSE AGREEMENT
between
Biohaven Pharmaceutical Holding Co. Ltd
and
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
Concerning Rutgers Case Number: Numerous dockets concerning methods of treating cancer
Docket Number (s): [* * *]
Primary Inventor (s): Drs Chen, Goydos, Khan
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
TABLE OF CONTENTS
1. |
DEFINITIONS |
1 |
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2. |
GRANT |
3 |
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3. |
SUBLICENSES |
3 |
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4. |
LICENSE ISSUE FEE, MILESTONE AND OTHER PAYMENTS AND EQUITY |
4 |
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5. |
RUNNING ROYALTIES |
5 |
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6. |
PATENT PROSECUTHON AND MAINTENANCE |
7 |
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7. |
DILIGENCE |
9 |
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8. |
PROGRESS AND PAYMENT REPORTS |
9 |
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9. |
BOOKS AND RECORDS |
10 |
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10. |
TERM OF THE AGREEMENT |
11 |
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11. |
TERMINATION FOR CAUSE BY EITHER PARTY |
12 |
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12. |
VOLUNTARY TERMINATION BY LICENSEE |
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13. |
DISPOSITION OF LICENSED PRODUCTS AND INFORMATION ON HAND UPON TERMINATION OR EXPIRATION |
12 |
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14. |
USE OF NAMES AND TRADEMARKS |
13 |
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15. |
LIMITED WARRANTY AND DISCLAIMERS AND LICENSEE REPRESENTATIONS |
13 |
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16. |
INFRINGEMENT AND PATENT MARKING |
14 |
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17. |
INDEMNIFICATION AND INSURANCE |
14 |
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18. |
NOTICES |
15 |
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19. |
ASSIGNABILITY |
16 |
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20. |
LATE PAYMENTS |
16 |
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21. |
WAIVER |
16 |
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22. |
GOVERNING LAWS AND DISPUTE RESOLUTION |
16 |
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23. |
FOREIGN GOVERNMENT APPROVAL OR REGISTRATION |
17 |
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24. |
EXPORT CONTROL LAWS |
17 |
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25. |
CONFIDENTIALITY |
17 |
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26. |
MISCELLANEOUS |
17 |
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27. |
INFRINGEMENT UNDER DRUG PRICE COMPETITION ACT |
18 |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXCLUSIVE LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the Agreement) is made and is effective as of June 15, 2016, (the Effective Date) between Rutgers, The State University of New Jersey, having its statewide Office of Research Commercialization at 33 Knightsbridge Road, Piscataway, NJ 08854, (hereinafter Rutgers), and Biohaven Pharmaceutical Holding Co. Ltd, a corporation having a principal place of business at an address of c/o Maples Corporate Services (BVI) Limited, P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands (hereinafter Licensee, and together with Rutgers the Parties, and each individually a Party).
RECITALS
WHEREAS, Certain invention(s) disclosed under Rutgers Docket Nos. [* * *], generally characterized as or related to Methods and compositions for treating cancer, hereinafter the Invention, that were made or discovered in the course of research at Rutgers by the following employees and/or students: Drs Chen, Goydos and Khan (hereinafter, the Inventor(s)); and
WHEREAS, Licensee wishes to obtain certain rights from Rutgers for the commercial development, manufacture, use, and sale of the Invention, and Rutgers is willing to grant such rights on the terms and conditions set forth in this Agreement; and
WHEREAS, Rutgers wants the Invention to be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public; and
WHEREAS, Licensee represents that it possesses the relevant experience, resources, and desire to vigorously and diligently commercialize the Invention in the Territory.
NOW THEREFORE, the Parties agree as follows:
1. DEFINITIONS
1.1 Affiliate means, with respect to Licensee, any Entity (defined below) that controls, is controlled by, or is under common control with Licensee. The term control means possession, direct or otherwise, of the power to direct or cause the direction of the management and policies of an Entity, whether through the ownership of voting securities, by contract or otherwise.
1.2 Entity means any corporation, partnership, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity (or any department, agency, or political subdivision thereof) or any other legal enterprise.
1.3 Confidential Information means (i) all data, information, and/or tangible material, developments, discoveries, trade secrets and physical objects owned or controlled by Rutgers, that is acquired by Licensee, its Affiliates or its sublicensees directly or indirectly from or through Rutgers, its units, its employees, the Inventor(s), or its consultants, relating to the Invention, Licensed Products, or this Agreement to the extent identified as confidential or proprietary at the time delivered to Licensee, (ii) all Rutgers Technology, and (iii) all patent prosecution documents related to the Invention.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.4 Fair Market Value means the cash consideration that would have been received by Licensee, an Affiliate or sublicensee from an unaffiliated and unrelated buyer in an arms length sale of a substantially equivalent Licensed Product.
1.5 First Commercial Sale means the first sale of any Licensed Product hereunder to a non-affiliated third party in exchange for cash or some equivalent to which a value can be assigned.
1.6 Licensed Field means therapy for the treatment of a condition or disease covered by a valid claim of the licensed intellectual property.
1.7 Licensed Product(s) means any material, compound, product, or kit, or any service, process, or procedure that either (i) is covered in whole or in part by at least one Valid Claim within Rutgers Patent Rights or (ii) is discovered, developed, made, sold, registered, or practiced using Rutgers Technology.
1.8 Net Sales means the total of the gross consideration charged for Licensed Products made, used, leased, transferred, distributed, sold, or otherwise disposed of by Licensee, its Affiliates, and its sublicensees, less the sum of the following actual and customary deductions (net of rebates or allowances of such deductions received) included on the invoice and actually paid: [* * *]. In the event Licensee or any of its Affiliates or sublicensees makes a sale or transfer of a Licensed Product to a third party (i) for other than cash or (ii) where there are sales or transfers of Licensed Products as well as other products and/or services to the third party, such sales or transfers shall be considered a sale to be calculated at Fair Market Value for accounting and royalty purposes. Furthermore if Licensee, its Affiliates or sublicensees use Licensed Product for a commercial purpose with no expectation of subsequent royalty bearing transfer of such Licensed Product to an unaffiliated third party, such commercial use shall be considered a sale to be calculated at a Fair Market Value for royalty and accounting purposes.
A Licensed Product shall be deemed sold at the earliest date of billing, invoicing, shipping, or receipt of payment.
1.9 Running Royalties is defined in Section 5.1 of this Agreement.
1.10 Rutgers Patent Rights means (i) all patent applications and issued patents listed in Exhibit A, (ii) all foreign patent application filings selected by Licensee and (iii) any and all patent(s) issuing thereon corresponding to all of the foregoing that are owned by Rutgers, including any reissues, extensions (including governmental equivalents thereto), substitutions, and continuations, but excluding continuations-in-part.
1.11 Rutgers Technology means all information, know-how, trade secrets, intellectual property and physical objects to the extent reasonably necessary or useful to practice the Invention in the Licensed Field, (i) owned by Rutgers, (ii) which Rutgers has the right to disclose and license to third parties without incurring obligations, (iii) and which was created and/or discovered by one or more of the Inventors or under the direction of one or more of the Inventors prior to the Effective Date of this Agreement.
1.12 Territory means worldwide.
1.13 Valid Claim means (i) a claim of an issued and unexpired patent included within Rutgers Patent Rights that has not been held permanently revoked, invalid or unenforceable by a decision of a court or other governmental agency of competent jurisdiction, which decision is unappealable or unappealed within the time allowed for appeal; or (ii) a claim of a pending patent application within the Patent Rights that was filed in good faith, has been pending no more than [* * *] years from the earliest priority date, and which has not been
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
abandoned or finally disallowed without the possibility of appeal or refiling of such application. If a claim that is not a Valid Claim later issues, it then becomes a Valid Claim.
2. GRANT
2.1 Subject to the limitations set forth in this Agreement, Rutgers hereby grants to Licensee an exclusive license under the Rutgers Patent Rights and a non-exclusive license to use the Rutgers Technology in the Licensed Field to make, have made, use, import, put into use, distribute, sell and have sold Licensed Products in the Territory during the term of this Agreement. Licensee may delegate performance of duties and obligations under this Agreement to its Affiliates, but Licensee shall at all times have primary responsibility and liability for the performance of all Licensee duties and obligations arising under this Agreement, whether or not so delegated.
2.2 Should Licensee, an Affiliate or sublicensee bring an action seeking to invalidate any of the Rutgers Patent Rights during the term of this Agreement, Licensee shall reimburse Rutgers for [* * *] percent ([* * *]%) of Rutgers out-of-pocket legal and related costs and expenses to defend such action. All payments shall be made to Rutgers within [* * *] days of submission of each third party invoice to Licensee. Furthermore, (i) neither Licensee or its Affiliates shall have any right to recoup any Running Royalties or other payments paid before or payable during the pendency of the aforementioned action with respect to any payments due to Rutgers under the terms of this Agreement, (ii) any dispute initiated by Licensee or an Affiliate regarding the validity of any Rutgers Patent Rights shall be litigated in the courts located in Newark, New Jersey, and the Parties agree not to challenge personal jurisdiction in that forum, and (iii) Licensee shall pay all such Running Royalties and other payments to Rutgers in a timely manner during the pendency of the action.
2.3 If the Invention was funded by the U.S. Government, the license granted hereunder shall be subject to the overriding obligations to the U.S. Government set forth in 35 U.S.C. §§200-212 and any future amendments thereto, applicable governmental implementing regulations, as well as any other applicable governmental restrictions, including, without limitation (i) to the obligation to manufacture Licensed Product in the U.S. intended for consumption in the U.S. unless a waiver is obtained, and (ii) the royalty-free non-exclusive license thereunder to which the U.S. Government is entitled.
2.4 Rutgers expressly reserves the right (i) to use by itself or with third party collaborators the Invention and associated intellectual property rights exclusively licensed hereunder, provided that such use is for educational, non-commercial research or other non-commercial purposes (ii) and to publish the results thereof. Nothing in this Agreement shall be interpreted to limit in any way the right of Rutgers and its faculty or employees to practice and use such Invention and practice the Rutgers Patent Rights for any purpose outside the Licensed Field or to license or permit such use outside the Licensed Field by third parties.
2.5 All rights not specifically granted herein are reserved to Rutgers. Except as expressly provided under this Article 2, no right or license is granted (expressly or by implication or estoppel) by Rutgers to Licensee, its Affiliates or sublicensees under any tangible or intellectual property, materials, patent, patent application, trademark, copyright, trade secret, know-how, technical information, data or other proprietary right.
3. SUBLICENSES
3.1 Rutgers grants to Licensee the right to grant sublicenses to third parties under any or all of the licenses granted in Article 2, provided Licensee has current exclusive rights thereto under this Agreement at the time it exercises a right of sublicense. To the extent applicable, such sublicense shall include all of the rights of and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
obligations due to Rutgers (and to the U.S. Government) that are contained in this Agreement. In addition, any sublicense must include the following provisions which will be effective in the event a sublicensee brings an action seeking to invalidate any Rutgers Patent Rights: (i) sublicensee will have no right to recoup any Running Royalties or other payments paid before or payable during the pendency of the aforementioned action, (ii) any dispute regarding the validity of any Rutgers Patent Rights shall be litigated in the courts located in Newark, New Jersey, and sublicensee agrees not to challenge personal jurisdiction in that forum, and (iii) sublicensee shall pay all such Running Royalties or other payments in a timely manner to Licensee during the pendency of the action.
3.2 In each such sublicense, the sublicensee shall be prohibited from further sublicensing without the prior written consent of Rutgers, which consent shall not be unreasonably withheld, and shall further be subject to the applicable terms and conditions of the license granted to Licensee under this Agreement.
3.3 Licensee shall provide Rutgers with a copy of each sublicense at least seven (7) business days prior to execution for review by Rutgers, but Rutgers receipt and review of such document shall not constitute an approval of such sublicense or a waiver of any of Rutgers rights or Licensees obligations hereunder. Licensee shall thereafter collect and guarantee payment of all Running Royalties and other obligations and consideration due Rutgers relating to the sublicenses and deliver all reports due Rutgers relating to the sublicenses.
3.4 Licensee shall forward to Rutgers, within thirty (30) days of execution, a complete and accurate copy of each sublicense granted hereunder. Rutgers receipt of such sublicense shall not constitute an approval of such sublicense or a waiver of any of Rutgers rights or Licensees obligations hereunder. The legally controlling language of any sublicense shall be English.
3.5 Upon termination of this Agreement for any reason, Rutgers, at its sole discretion, shall determine whether any or all sublicenses shall be terminated, canceled, or assigned to Rutgers.
3.6 Notwithstanding any such sublicense, Licensee shall remain liable to Rutgers for all of Licensees duties and obligations contained in this Agreement, and any act or omission of a sublicensee that would be a breach of this Agreement if performed by Licensee shall be deemed to be a breach by Licensee of this Agreement.
4. LICENSE ISSUE FEE, MILESTONE AND OTHER PAYMENTS AND EQUITY
4.1 Licensee does not have a license issue fee.
4.2 Licensee agrees to pay to Rutgers a license maintenance fee of five thousand dollars ($5,000), with the initial payment due on the [* * *] anniversary of the Effective Date, [* * *] dollars ($[* * *]) due on the [* * *] anniversary of the Effective Date, [* * *] dollars ($[* * *]) due on the [* * *] anniversary of the Effective Date, [* * *] dollars ($[* * *]) due on the [* * *] anniversary of the Effective Date, and [* * *] dollars ($[* * *]) due annually on each anniversary date thereafter until the date of the First Commercial Sale. The license maintenance fee shall cease after the instatement of the Minimum Annual Royalty (MAR) obligation pursuant to Section 5.4. (i.e., Licensee will not pay both a license maintenance fee and a MAR in the same year.)
4.3 Licensee shall pay to Rutgers milestone payment fees in accordance with the following schedule, and within [* * *] days of the Milestone Event:
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Milestone Event |
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[* * *] |
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Milestone payment fees are non-refundable nor creditable against any other payments due Rutgers hereunder.
4.4 Licensee shall pay to Rutgers [* * *] percent ([* * *]%) of all non-Running Royalty consideration received by Licensee from sublicensing or transferring the rights licensed to Licensee hereunder if the sublicense or transfer occurs [* * *], [* * *] ([* * *]%) of all non-Running Royalty considerations received by Licensee from sublicenses in consideration for the sublicensing of Patent Rights to sublicensees by Licensee (including options to sublicense and like rights) if the sublicense is entered into [* * *], and [* * *] ([* * *]%) of all non-Running Royalty considerations received by Licensee from sublicenses in consideration for the sublicensing of Patent Rights to sublicensees by Licensee (including options to sublicense and like rights) if the sublicense is entered into [* * *]. If such consideration is received in other-than cash, Rutgers share shall be converted to the fair cash market value of the non-cash consideration at the time of receipt by Licensee as that value is mutually agreed upon by the Parties. In the event the Parties cannot agree on fair market value, that value shall be determined by a reputable appraisal service.
4.5 In the event that more than [* * *] percent ([* * *]%) of Licensees shares existing at the Effective Date of this Agreement, or substantially all of its assets, are sold or transferred to a Third Party prior to initiation of a Phase III clinical trial, and such sale or transfer results in a full liquidation of Licensee, Licensee will pay Rutgers upon closing of such transaction a change of control fee equal to zero point three percent (0.3%) of the total value of the above transaction but not less than one hundred thousand dollars ($100,000). For purposes of avoiding ambiguity, Licensees Sublicense of its rights and obligations hereunder shall not be considered change of control.
5. RUNNING ROYALTIES
5.1 Licensee shall pay to Rutgers a running royalty of [* * *]% of Net Sales for the cumulative Net Sales less than [* * *] dollars ($[* * *]), [* * *]% of Net Sales for the cumulative Net Sales between $[* * *]-$[* * *] and [* * *]% over $[* * *] of Net Sales (hereinafter the Running Royalties) during the term of this Agreement. Sales or other transfers among Licensee, its Affiliates and sublicensees which would otherwise be subject to payment of Running Royalties under this Agreement shall be disregarded for purposes of computing Running Royalties, to the extent that Licensed Products subject to such sale or transfer are subsequently sold or transferred to a third party where a payment of Running Royalties by such third party with respect to such sale or transfer will be required. The Parties acknowledge that the foregoing percentage rate of Running Royalties rate reflects a blending of royalty rates for the grant of license rights to both the Rutgers Patent Rights and the Rutgers Technology and takes into consideration that certain Net Sales of Licensed Products may not involve the practice of the Rutgers Patent Rights, but only the use of Rutgers Technology.
5.2 Licensee agrees that it shall not solicit or accept any consideration for the sale of any Licensed Product except as will be accurately reflected in Net Sales. Furthermore, Licensee agrees that it shall not enter into any transaction with an Affiliate that would circumvent its monetary or other obligations under this Agreement.
5.3 Running Royalties payable to Rutgers shall be paid quarterly within [* * *] days of the end of each quarter of any given year, i.e., March 31, June 30, September 30, and December 31. Each such payment will be for unpaid Running Royalties that accrued within Licensees most recently completed calendar quarter plus any other unpaid Running Royalties due but not previously paid for any reason.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5.4 Licensee shall pay to Rutgers a Minimum Annual Royalty (MAR) payment equal to the amount set forth on the following schedule:
Year of Commercial Sale |
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Year 1(Date of First Commercial Sale to December 31 of the calendar year) |
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$ |
[* * *] |
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Year 2,3, (January 1 to December 31 of the 2nd 3rd calendar year) |
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$ |
[* * *] |
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Year 4 and annually thereafter (January 1 to December 31 of the 4th calendar year) |
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$ |
[* * *] |
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The MAR payment shall start accruing beginning with the date of the First Commercial Sale of a Licensed Product. The MAR payment shall be payable to Rutgers by each January 31 of each year following the calendar year for which the MAR is due, and shall be credited against the earned Running Royalties owed for the applicable calendar year. As the First Commercial Sale of a Licensed Product may occur at any point during the calendar year, the first year MAR due may accordingly be pro-rated by the fractional number of full months remaining in that calendar year after the First Commercial Sale of a Licensed Product.
In the event the maintenance fee was paid during a calendar year prior to first Commercial Sales, the amount of the paid maintenance fee shall be credited against the MAR owed for that year. Any remaining balance would be credited towards the following years MAR.
For the purpose of clarity: the pro-rated MAR shall be calculated by multiplying the number of months remaining in the calendar year by the MAR monthly value.
As an example only:
· [* * *]
· [* * *]
· [* * *]
5.5 All amounts due to Rutgers shall be payable in U.S. dollars. When Licensed Products are sold for monies other than U.S. dollars, the Running Royalties will first be determined in the foreign currency of the country in which such Licensed Products were sold and then converted into equivalent U.S. dollars. The exchange rate for all payments due to Rutgers will be the U.S. dollar buying rate quoted in the Wall Street Journal on the last day of the reporting period.
5.6 Licensee shall be responsible for any and all taxes, fees, or other charges imposed by the government of any country outside the U.S. on any remittance due to Rutgers incurred in any such country. Licensee shall also be responsible for all bank transfer charges.
5.7 If at any time legal restrictions prevent the acquisition or prompt remittance of U.S. dollars by Licensee with respect to any country where a Licensed Product is sold, Licensee shall pay Running Royalties due to Rutgers from Licensees other sources of U.S. dollars.
5.8 Net Sales of any Licensed Product shall not be subject to more than one assessment of the scheduled Running Royalties, and such assessment shall be that which yields the highest royalty payment to Rutgers.
5.9 In the event that any patent or any claim thereof included within the Rutgers Patent Rights shall be held invalid in a final decision by a court of competent jurisdiction and last resort in any country and from which no appeal has or can be taken, all obligation to pay Running Royalties based on such patent or claim or any claim patentably indistinct therefrom shall cease as of the date of such final decision with respect to such
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
country. Licensee shall not, however, be relieved from paying any Running Royalties that accrued before such decision or that are based on another patent or claim not involved in such decision or that are based on Rutgers Technology.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6. PATENT PROSECUTHON AND MAINTENANCE
6.1 As of the License Effective Date, unless otherwise agreed in writing, Licensee shall assume responsibility to diligently prosecute and maintain the patent applications and patents included in the Rutgers Patent Rights using patent counsel now appointed unless otherwise agreed upon by the Parties. Such counsel shall take instructions from Licensee on matters relating to the prosecution and maintenance of such patent applications and patents within Rutgers Patent Rights. Rutgers shall remain the client of record for such patent counsel. Rutgers and Licensee agree to have the Client and Billing Agreement attached hereto as Exhibit C of the Agreement fully executed by the appropriate parties upon the execution of this Amendment. Licensee shall keep Rutgers fully informed and appraised of the continuing prosecution and maintenance of all patent applications and patents within Rutgers Patent Rights and all matters related thereto in a timely manner. Licensee and Rutgers agree to keep confidential all documentation relating to the prosecution and maintenance of the Rutgers Patent Rights. Licensee shall supply Rutgers with a copy of all patent filings and provide Rutgers with a reasonable opportunity to comment and advise on all communications received from and all submissions to any government patent office with respect to any patent application or patent within Rutgers Patent Rights and Licensee will give all due consideration to such comments and advice received from Rutgers.
6.2 Licensee shall amend any patent application within Rutgers Patent Rights to include claims reasonably requested by Rutgers.
6.3 As of the License Effective Date, all costs of preparing, filing, prosecuting, defending and maintaining all U.S. patent applications and/or patents within Rutgers Patent Rights, including, but not limited to, declaratory judgments, interferences, oppositions, reexaminations, reissues, as well as all corresponding foreign patent applications and patents covered by Rutgers Patent Rights in the Territory and included in the Rutgers Patent Rights during the term of the Agreement shall be borne by Licensee. Furthermore, Licensee agrees to reimburse Rutgers for all past patent-related costs estimated to be seventy one thousand eight hundred fifty five dollars ($71,855) which shall be due within thirty (30) days of the Effective Date.
6.4 Licensee shall, file, prosecute, and maintain all patent applications and patents covered by Rutgers Patent Rights in the U.S. and foreign countries of the Territory so as to fully protect the Rutgers Patent Rights. Subject to Section 6.5, Licensee consents to and accepts the filing of all PCT and foreign patent applications that have already been filed as of the Effective Date. Licensee shall notify Rutgers at least three (3) months before foreign filings are due based on the filing of the corresponding U.S. application of its decision as to which foreign patents, if any, it elects to file. This notice shall be in writing and shall identify the countries selected for filing. The absence of such a notice from Licensee shall be considered by Rutgers to be an election not to request the applicable foreign rights. Licensee shall so notify Rutgers immediately upon making the decision not to file or to continue the prosecution or maintenance of any patent application or patent within Rutgers Patent Rights so that Rutgers has the opportunity to continue prosecution or maintenance of such patent application or patent within Rutgers Patent Rights at Rutgers cost and expense.
6.5 Licensees obligation to underwrite and to pay patent costs shall continue for so long as this Agreement remains in effect, provided, however, that Licensee may terminate its obligations with respect to any given patent application or patent, including terminating its obligations on a country-by-country basis, upon three (3) months prior written notice to Rutgers. Licensee shall continue to pay all patent costs during the three (3) month notice period. Commencing on the effective date of such notice, Rutgers may continue prosecution and/or maintenance of such application(s) or patent(s) at its sole discretion and expense, and Licensee shall have no further right or licenses thereunder. Licensee shall promptly provide Rutgers with all documents and files in its possession which would be reasonably necessary to allow Rutgers to continue prosecution and/or maintenance of such application(s) or patent(s).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6.6 Rutgers shall have the right to file patent applications and maintain patents at its own expense in any country or countries in which Licensee has not elected to secure patent rights or has terminated its patent obligations, and such applications and patents shall not be subject to this Agreement and may be freely licensed by Rutgers to third parties.
6.7 The failure of Licensee to timely perform all activities relating to the filing, prosecution and maintenance of patent applications and patents under the Rutgers Patent Rights, unless curable, and the timely payment of invoices to the patent counsel of record shall be considered a material breach of this Agreement.
6.8 Rutgers shall cooperate with Licensee in applying for an extension of the term of any patent included within Rutgers Patent Rights if appropriate under the Drug Price Competition and Patent Term Restoration Act of 1984 as amended. Licensee shall prepare all such documents, and Rutgers agrees to execute such documents and to take such additional action as Licensee may reasonably request in connections therewith at no out-of-pocket expense.
7. DILIGENCE
7.1 License shall use its best efforts to develop and obtain any required governmental approvals required to test, register, manufacture, market and sell Licensed Products in all countries of the Territory in the Licensed Field within a reasonable time after the Effective Date and in quantities sufficient to meet market demand.
7.2 Licensee shall be entitled to exercise prudent and reasonable business judgment in meeting its diligence obligations stipulated in this Agreement.
7.3 In addition to the general diligence requirements set forth herein, Licensee shall complete the following diligence milestones within the time specified for each milestone:
Milestone |
|
Completion Date |
[* * *] |
|
[* * *] |
[* * *] |
|
[* * *] |
|
|
|
[* * *] |
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[* * *] |
|
|
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[* * *] |
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[* * *] |
7.4 Licensee shall provide its written business plan or a development plan if an existing company, for commercialization of Licensed Products to Rutgers no later than [* * *] days after the Effective Date. The plan shall include, without limitation, a detailed explanation of specific actions to be taken by Licensee in order to meet the diligence milestones included herein as well as such other items as may be reasonably requested by Rutgers.
8. PROGRESS AND PAYMENT REPORTS
8.1 Beginning [* * *] months after the Effective Date, and annually thereafter, Licensee shall submit to Rutgers a progress report covering Licensees activities related to the research, development, marketing introduction and testing of all Licensed Products and the obtaining of governmental approvals necessary for
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
marketing, where applicable. These progress reports shall be made for each Licensed Product in each applicable country of the Territory.
8.2 The progress reports submitted shall include sufficient information to enable Rutgers to determine Licensees progress in fulfilling its obligations under all pertinent Articles or Sections of this Agreement. A progress report form is provided in Exhibit D for convenience of Licensee.
8.3 Licensee shall have a continuing responsibility to keep Rutgers informed of the large/small entity status (as defined by the U.S. Patent and Trademark Office) of itself and its sublicensees.
8.4 Licensee shall report to Rutgers the date of First Commercial Sale of each Licensed Product in each country within [* * *] days of such First Commercial Sale.
8.5 After the First Commercial Sale of a Licensed Product anywhere in the world, Licensee will make annual Running Royalties reports to Rutgers on or before each February 28, of each year concurrently with Running Royalties payments due on the same date. Each such Running Royalties report will cover Licensees most recently completed calendar year and will show (i) unit sales, gross sales and Net Sales of each type of Licensed Product sold by Licensee, its Affiliates and sublicenses listed by country on which Running Royalties have not been paid, including a clear indication of how Net Sales were calculated; (ii) the Running Royalties payable hereunder, including a breakdown, where more than one patent is licensed hereunder, of how Running Royalties income is allocated among the patents; (iii) the method used to calculate the Running Royalties; (iv) the exchange rates used, if any; and (v) any other information relating to the foregoing reasonably requested by Rutgers. Any late payments are subject to interest charges described herein.
8.6 If no sales of Licensed Products have been made during any reporting period, a written statement to this effect shall be made by Licensee.
8.7 With each Running Royalties report, Licensee shall also include a written statement setting forth any additional payment or other consideration due to Rutgers during the applicable calendar quarter pursuant to the terms of this Agreement and setting forth in reasonable detail the basis for the payment and the manner in which the payment was calculated.
8.8 Licensee acknowledges that Rutgers considers the reports required as well as the timely delivery thereof to Rutgers to be of material value and importance to Rutgers, and in the event of a termination of the Agreement, Licensee will provide Rutgers with a final progress report within [* * *] days of the termination date.
9. BOOKS AND RECORDS
9.1 Licensee shall keep and cause its Affiliates and sublicensees to keep books and records in accordance with generally accepted accounting principles, consistently and accurately showing all transactions and information relating to this Agreement. Such books and records shall be preserved for at least [* * *] years from the date of the entry to which they pertain and shall be open to inspection by representatives or agents of Rutgers at reasonable times.
9.2 The fees and expenses of Rutgers representatives performing such an examination shall be borne by Rutgers. However, if an error in any payment of more than [* * *] percent ([* * *]%) of such payment due is discovered, or if as a result of the examination it is determined that Licensee is in material breach of any of its
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
obligations under this Agreement, then the fees and expenses of these representatives shall be borne by Licensee, and Licensee shall promptly reimburse Rutgers for reasonably documented audit expenses as well as all overdue payment and interest charges.
10. TERM OF THE AGREEMENT
10.1 Unless otherwise terminated by operation of law or by acts of the Parties in accordance with the provisions of this Agreement, this Agreement shall be in force from the Effective Date and shall remain in effect in each country of the Territory until the expiration of the last-to-expire patent licensed under this Agreement in such country or ten (10) years from the date of First Commercial Sale of a Licensed Product in such country, whichever is later.
10.2 Any termination or expiration of this Agreement shall not affect the rights and obligations set forth in the following Articles and/or Sections:
Article 5- |
RUNNING ROYALTIES (with the exception of Section 5.4 Minimum Annual (Running) Royalties payments) |
Article 9- |
BOOKS AND RECORDS |
Article 11- |
TERMINATION FOR CAUSE BY EITHER PARTY |
Article 12- |
VOLUNTARYTERMINATION BY LICENSEE |
Article 13- |
DISPOSITION OF LICENSED PRODUCTS AND INFORMATION ON HAND UPON TERMINATION OR EXPIRATION |
Article 14- |
USE OF NAMES AND TRADEMARKS |
Article 15- |
LIMITED WARRANTY, DISCLAIMERS AND LICENSEE REPRESENTATIONS |
Article 17- |
INDEMNIFICATION AND INSURANCE |
Article 18- |
NOTICES |
Article 20 |
LATE PAYMENTS |
Article 22- |
GOVERNING LAW AND DISPUTE RESOLUTION |
Article 25- |
CONFIDENTIALITY |
Section 2.2- |
(Licensee effort to invalidate patent) |
Section 3.5- |
(survival of sublicense after Agreement termination) |
Section 3.6- |
(liability of Licensee for sublicensee breaches) |
Section 8.5- |
(quarterly royalty reports) |
Section 8.7- |
(report of other consideration due Rutgers) |
Section 8.8- |
(final progress report after Agreement termination) |
Section 10.2- |
(surviving Agreement provisions) |
Section 10.3- |
(no rescinding of actions or release of liability upon Agreement termination) |
Section 16.6- |
(compliance with patent marking laws) |
Section 26.6- |
(reformation of invalid Agreement provisions) |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
10.3 Any termination or expiration under this Agreement shall not relieve either Party of any obligation or liability accrued hereunder prior to such termination or expiration or impair any accrued rights of either Party. In addition, any termination or expiration shall not rescind anything done by Licensee or any payments made to Rutgers hereunder prior to the time such termination or expiration becomes effective or affect in any manner any Rights of Rutgers arising prior to such termination or expiration.
11. TERMINATION FOR CAUSE BY EITHER PARTY
11.1 If one Party should breach or fail to perform any provision of this Agreement, then the other Party may give written notice of such default (Notice of Default) to the breaching Party. If the breaching Party should fail to cure such default within [* * *] days of notice thereof, the non-breaching Party shall have the right to terminate this Agreement and the licenses herein by a second written notice (Notice of Termination) to the breaching Party unless there is a good faith dispute about whether the other Party is in default. If a Notice of Termination is sent to breaching Party, this Agreement shall automatically terminate on the effective date of such notice. By way of illustration but not limitation, terminable breaches shall include the following: (i) failure to make any payment when due, (ii) breaches of any warranties, (iii) breaches of confidentiality obligations, (iv) breach of diligence obligations, and (v) failure to provide reports in an accurate and timely manner.
12. VOLUNTARY TERMINATION BY LICENSEE
12.1 Licensee shall have the right at any time to terminate this Agreement in its entirety by giving ninety (90) days advance notice thereof in writing to Rutgers. If such termination is within the first two (2) years of this Agreement, Licensee shall pay Rutgers an early termination fee of five thousand dollars ($5,000).
13. DISPOSITION OF LICENSED PRODUCTS AND INFORMATION ON HAND UPON TERMINATION OR EXPIRATION
13.1 Upon termination of this Agreement by either Party (i) Licensee shall have the privilege of disposing of all previously made or partially made Licensed Products (Licensee may complete partially made Licensed Products) within a period of [* * *] days after the initial Notice of Termination given pursuant to paragraph 11.1 or 12.1 hereunder, provided, however, that the disposition of such Licensed Products shall be subject to the terms of this Agreement including, but not limited to, the payment of Running Royalties at the rate and at the time provided herein and the rendering of reports thereon, and (ii) Licensee shall promptly return, and shall cause its Affiliates and sublicensees to return, to Rutgers all property belonging to Rutgers including without limitation Rutgers Technology, if any, that has been provided to Licensee or its Affiliates or sublicensees hereunder, and all copies and facsimiles thereof and derivatives therefrom (except that Licensee may retain one copy of written material for record purposes only, provided such material is not used by Licensee for any other purpose and is not disclosed to others). Upon termination by either Party of this Agreement, Licensee agrees, at the request of Rutgers, to negotiate in good faith and on commercially reasonable terms a grant of license rights in the Licensed Field, with right of sublicense, to Rutgers or Rutgers designee of all information, know-how, trade secrets, patents and invention, relating to License Products, including without limitation, any changes or additions to Licensed Products or new methods for making or new uses for Licensed Products, to the extent that any of the foregoing are owned or controlled by Licensee or its Affiliates.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
14. USE OF NAMES AND TRADEMARKS
14.1 Nothing contained in this Agreement shall be construed as granting any right to Licensee, its Affiliates or sublicensees to use in advertising, publicity, or other promotional activities or otherwise any name, trade name, trademark, or other designation of Rutgers or any of its units (including contraction, abbreviation or adaption of any of the foregoing). Unless required by law or consented to in advance in writing by Rutgers, the use by Licensee of the name, Rutgers, The State University of New Jersey or any campus or unit of Rutgers is expressly prohibited.
15. LIMITED WARRANTY AND DISCLAIMERS AND LICENSEE REPRESENTATIONS
15.1 Rutgers warrants to Licensee that it has the lawful right to grant this license.
15.2 This license and the associated Invention, Patent Rights and Rutgers Technology are provided AS IS and, except as provided in Section 15.1 herein, WITHOUT WARRANTY OF PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND WITHOUT ANY OTHER WARRANTY WHETHER EXPRESS OR IMPLIED. RUTGERS MAKES NO REPRESENTATION AND DISCLAIMS ANY WARRANTY, WHETHER EXPRESS OR IMPLIED, THAT THE LICENSED PRODUCTS OR ANY OTHER USE OF THE RUTGERS PATENT RIGHTS AND/OR RUTGERS TECHNOLOGY WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.
15.3 IN NO EVENT SHALL RUTGERS BE LIABLE FOR ANY INCIDENTAL, DIRECT, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS, RESULTING FROM EXERCISE OF THIS LICENSE BY OR ON BEHALF OF LICENSEE, ITS AFFILIATES OR SUBLICENSEES OR MANUFACTURE, SALE, OR USE OF THE INVENTION, LICENSED PRODUCTS, RUTGERS PATENT RIGHTS OR RUTGERS TECHNOLOGY LICENSED HEREUNDER.
15.4 Nothing in this Agreement shall be construed as:
15.4.1 a warranty or representation by Rutgers as to the validity or scope of any Rutgers Patent Rights; or
15.4.2 a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents or other intellectual property rights; or
15.4.3 an obligation to bring or prosecute actions or suits against third parties except as provided in Article 16 herein; or
15.4.4 conferring by implication, estoppel or otherwise any license or rights under any patents or other intellectual property of Rutgers other than Rutgers Patent Rights and Rutgers Technology, regardless of whether such patents are dominant or subordinate to Rutgers Patent Rights; or
15.4.5 an obligation to furnish any know-how not provided in Rutgers Technology licensed hereunder.
15.4.6 a warranty or representation of the freedom to operate and the validity, scope and territorial extent of the Rutgers Patent Rights.
15.5 By execution of this Agreement, Licensee represents and covenants that (i) Licensee has been given an opportunity to conduct sufficient due diligence with respect to all items and issues pertaining to this Agreement and (ii) Licensee has adequate knowledge and expertise, or has utilized knowledgeable consultants, to adequately conduct the due diligence. Licensee further represents and covenants that it is a duly organized,
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
valid entity of the form indicated in the preamble to this Agreement, and is in good standing under the laws of its jurisdiction of organization as indicated in the preamble of this Agreement, and has all necessary corporate or other appropriate power and authority to execute and perform its obligations hereunder.
16. INFRINGEMENT AND PATENT MARKING
16.1 Rutgers and Licensee are responsible for notifying each other promptly of any infringement of Rutgers Patent Rights that may come to their attention. The Parties shall consult one another in a timely manner concerning any appropriate response thereto.
16.2 Licensee shall have the right, but not the obligation to prosecute such infringement at its own expense, and, if it elects to prosecute, shall begin such prosecution within a reasonable time after aforesaid consultation between the Parties. Licensee shall not settle or compromise any such suit in a manner that imposes any obligations or restrictions on Rutgers without Rutgers written permission. Financial recoveries from any such litigation will first be applied to reimburse Licensee for its litigation expenditures with the balance being split [* * *] percent ([* * *]%) to Licensee and [* * *] percent ([* * *]%) to Rutgers.
16.3 Licensees rights in Section 16.2 shall be subject to the continuing right of Rutgers to intervene at Rutgers own expense and join Licensee in any claim or suit for infringement of the Rutgers Patent Rights. Any consideration received by Licensee in settlement of any claim or suit shall be shared between Rutgers and Licensee in proportion with their share of the litigation expenses in such infringement action, but Rutgers shall in no event receive less than the percentage share it is entitled to under Section 16.2.
16.4 If Licensee fails to prosecute such infringement, Rutgers shall have the right, but not the obligation, to prosecute such infringement at its own expense. In such event, financial recoveries from any such litigation will first be applied to reimburse Rutgers and Licensee for its litigation expenditures with the balance being split [* * *] percent ([* * *]%) to Rutgers and [* * *] percent ([* * *]%) to Licensee.
16.5 Each Party agrees to cooperate with the other in litigation proceedings instituted hereunder but at the expense of the Party on account of whom suit is brought for out-of-pocket expenses.
16.6 Licensee its Affiliates and its sublicensees shall comply with all U.S. and foreign laws with respect to patent marking of Licensed Products.
16.7 If in a suit initiated by Licensee, Rutgers is involuntarily joined other than by Licensee, then Licensee will pay any costs incurred by Rutgers arising out of such suit, including any legal fees of counsel that Rutgers selects and retains to represent it in the suit.
16.8 If Rutgers is subjected to third party discovery related to the Rutgers Patent Rights or Licensed Products licensed to Licensee hereunder arising out of actions by Licensee, Licensee will pay Rutgers documented out of pocket expenses with respect to same.
17. INDEMNIFICATION AND INSURANCE
17.1 To the maximum extent permitted by applicable law, none of Rutgers, its governors, trustees, officers, employees, students, agents and the Inventor(s) (each an Indemnified Person) shall have any liability or responsibility whatsoever to Licensee and any sublicensee or any other person or Entity for or on account of (and Licensee agrees and covenants, and agrees to cause each of its sublicensees to agree and covenant not to
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
sue any Indemnified Person in connection with) any injury, loss, or damage of any kind or nature, sustained by, or any damage assessed or asserted against, or any other liability incurred by or imposed upon, Licensee, any of its sublicensees or any other person or Entity, whether direct, indirect, special, punitive, incidental, consequential or otherwise arising under any legal theory (and further excluding without limitation any existing or anticipated profits or opportunities for profits lost by Licensee or any sublicensee) arising out of or in connection with or resulting from (i) the production, use or sale of the Licensed Products by Licensee or sublicensees; (ii) the use of any Rutgers Patent Rights or Rutgers Technology by Licensee or any sublicensee; (iii) any advertising or other promotional activities with respect to either of the foregoing; or (iv) the production, use, or sale of any product, process or service, identified, characterized or otherwise developed by Licensee or any sublicensee with the aid or use of the Rutgers Patent Right or Rutgers Technology, unless such liability or responsibility is due to willful misconduct or gross negligence by an Indemnified Person. Licensee shall indemnify and hold each Indemnified Person harmless against all claims, demands, losses, damages or penalties (including, but not limited to, attorneys fees) made against any Indemnified Person with respect to items (i) through (iv) above, whether or not such claims are groundless or without merit or basis.
17.1 From and after the earlier date of dosing of Licensed Product in a clinical trial or First Commercial Sale of a Licensed Product, Licensee shall maintain commercially issued policies of insurance, or a program of self-insurance if such program is approved in advance in writing by an authorized representative of Rutgers, which provide coverage and limits as required by statute or as necessary to prudently insure the activities and operations of Licensee, including, but not limited to, its ability to satisfy its obligations pursuant to Section 17.1 herein. The commercial general liability insurance policy, or liability self-insurance program, shall protect the interests of Rutgers and provide coverage limits of not less than [* * *] dollars ($[* * *]) combined single limits as respects premises, operations, contractual liability and, if applicable, liability arising out of products and/or completed operations. Licensee shall provide Rutgers with certificates of insurance for commercially insured policies. Licensee shall ensure that its sublicensees maintain the same insurance coverage as Licensee is required to maintain hereunder.
It is expressly agreed that the insurance or self-insurance are minimum requirements which shall not in any way limit the liability of Licensee and shall be primary coverage. Any insurance or self-insurance program maintained by Rutgers shall be excess and noncontributory.
17.2 Rutgers shall promptly notify Licensee in writing of any claim or suit brought against Rutgers in respect of which Rutgers intends to invoke the provisions of Article 17. Licensee shall keep Rutgers informed on a current basis of its defense of any claims pursuant to Article 17.
18. NOTICES
18.1 Any notice or payment required to be given to either Party shall be deemed to have been properly given and to be effective (i) on the date of delivery if delivered in person, (ii) five (5) days after mailing if mailed by first-class certified mail, postage paid and deposited in the U.S. mail, to the respective addresses given below, or to such other address as it shall designate by written notice given to the other Party, (iii) on the date of delivery if delivered by express delivery service or (iv) or as otherwise agreed upon in writing by the Parties.
In the case of Licensee: Biohaven Pharmaceutical Holding Company, Ltd.
c/o Maples Corporate Services (BVI) Limited
P.O. Box 173
Kingston Chambers
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Road Town
Tortola, British Virgin Islands
Attn: Vladimir Coric, CEO
In the case of Rutgers: Rutgers, The State University of New Jersey
Office of Research Commercialization
Attention: Executive Director
33 Knightsbridge Road - 2 East, Piscataway, NJ 08854
Email: as at the Rutgers website https://otc.rutgers.edu/about/staff-listing
Either Party may change its official address upon written notice to the other Party.
19. ASSIGNABILITY
19.1 This Agreement is binding upon and shall inure to the benefit of Rutgers, its successors and assigns, but shall be personal to Licensee and assignable by Licensee only with the written consent of Rutgers, except a sale of all of the assets of Licensee related to this Agreement shall not be deemed an assignment.
20. LATE PAYMENTS
20.1 In the event any amounts due Rutgers hereunder, including but not limited to Running Royalties payments and patent cost reimbursements, are not received when due, Licensee shall pay to Rutgers interest charges at a rate of [* * *] percent per annum, compounded monthly, or the highest rate permitted by law, if less than [* * *] percent. Such interest shall be calculated from the date payment was due until actually received by Rutgers.
21. WAIVER
21.1 A waiver by a Party of a breach or violation of any provision of this Agreement by the other Party shall not be deemed a waiver of any subsequent breach or default of that provision by the other Party.
22. GOVERNING LAWS AND DISPUTE RESOLUTION
22.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS, but the scope and validity of any patent or patent application shall be governed by the applicable laws of the country of such patent or patent application.
22.2 The Parties to this Agreement agree to work toward resolution of any disputes in a cooperative manner beginning on the earlier of (i) the date of notice of request by one Party to the other for such dispute resolution or (ii) the effective date of the notice of breach of the terms of the Agreement given by one Party to the other Party. In the event that a resolution to a dispute cannot be reached within forty days (40) after the initial notice of request, a mutually agreed upon third party will be asked to review the dispute and recommend a non-binding opinion. In the event the Parties cannot agree on such third party after at least ten (10) days of good faith negotiations, they shall have the right to seek appointment of a neutral and independent third party arbitrator by a nationally-recognized non-profit dispute resolution organization such as the International Institute for Conflict Prevention and Resolution or the American Arbitration Association, or by any court of competent jurisdiction in accordance with the courts power to appoint arbitrators. Each Party shall pay one
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
half of any arbitrator or court fess. Neither Party shall be bound to accept any recommended non-binding opinion. In addition, neither Party shall be bound under the terms of this section for more than one hundred twenty (120) days after the earlier to occur of the effective date of the initial notice of request for dispute resolution or the effective date of notice of breach of the Agreement by one Party to the other Party, except as may be agreed to in writing by the Parties.
22.3 The Parties hereby submit to the exclusive jurisdiction of and venue in the courts located in the State of New Jersey with respect to any and all disputes concerning the subject of this Agreement that are litigated.
23. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION
23.1 If this Agreement, any associated transaction, or any Licensed Product is required by the law of any nation to be either approved or registered with any governmental agency, Licensee shall assume all legal obligations to do so and the costs in connection therewith.
24. EXPORT CONTROL LAWS
24.1 Licensee shall observe all applicable U.S. and foreign laws with respect to the transfer of Licensed Products and related technical data to foreign countries, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.
25. CONFIDENTIALITY
25.1 Licensee (i) shall not use any Confidential Information except for the sole purpose of performing this Agreement, (ii) shall safeguard the same against disclosure to others with the same degree of care as it exercises with its own information of a similar nature, and (iii) shall not disclose or permit the disclosure of Confidential Information to others (except to its employees, agents or consultants who are bound to Licensee and Rutgers by a like obligation of confidentiality) without the express written permission of Rutgers, except that Licensee shall not be prevented from using or disclosing any Confidential Information:
· which Licensee can demonstrate by written records was previously known to it; or
· which is now, or becomes in the future, information generally available to the public in the form supplied, other than through acts or omissions of Licensee; or
· which is lawfully obtained by Licensee from sources independent of Rutgers who were entitled to provide such information to Licensee; or
· which is required by law to be disclosed; or
· which is Rutgers Technology and which is necessary or useful in order for Licensee to develop, make, use and sell Licensed Products as intended by the Parties, provided Licensee exercises best efforts to make any such disclosures under a confidentiality agreement to the extent feasible.
The obligations of Licensee under this Section 25 shall remain in effect during the term of this Agreement and for [* * *] years from the date of termination or expiration of this Agreement.
26. MISCELLANEOUS
26.1 The headings of the articles are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
26.2 This Agreement will not be binding upon the Parties until it has been signed below on behalf of each Party by a duly authorized representative.
26.3 No amendment or modification hereof shall be valid or binding upon the Parties unless made in writing and signed on behalf of each Party by a duly authorized representative.
26.4 This Agreement embodies the entire understanding of the Parties and shall supersede all previous and contemporaneous communications, representations or understandings, either oral or written, between the Parties relating to the subject matter hereof.
26.5 Licensee shall not enter into any agreements relating to this Agreement with the Inventors or other Rutgers employees or students in contravention of the legal rights or policies of Rutgers.
26.6 In case any of the provisions contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, (i) such invalidity, illegality or unenforceability shall not affect any other provisions hereof, (ii) the particular provision, to the extent permitted by law, shall be reasonably construed and equitably reformed to be valid and enforceable and if the provision at issue is a commercial term, it shall be equitably reformed so as to maintain the overall economic benefits of the Agreement as originally agreed upon by the Parties, and (iii) this Agreement shall be construed as if such invalid or illegal or unenforceable provisions had never been contained herein.
26.7 Rutgers shall have the right to terminate this Agreement forthwith by giving written notice of termination to Licensee at any time upon or after (i) the filing by Licensee of a petition of bankruptcy or insolvency, or (ii) any adjudication that Licensee is bankrupt or insolvent, or (iii) the filing by Licensee of any petition or answer seeking judicial reorganization, readjustment or arrangement of the business of Licensee under any law relating to bankruptcy or insolvency, or (iv) the appointment of a receiver for all or substantially all of the property of Licensee, or (v) the making of any assignment or attempted assignment for the benefit of creditors, or (vi) the institution of any proceeding or passage of any resolution for the liquidation or winding up of Licensees business or for termination of its corporate life.
26.8 Neither Licensee nor its Affiliates or sublicensees shall originate any publicity, news release or other public announcement, written or oral, relating to this Agreement or the existence of an arrangement between the Parties, except as required by law, without the prior written approval of Rutgers, which approval shall not be unreasonably withheld.
26.9 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Electronic and facsimile versions of this Agreement, including the signatures thereon, are acceptable for execution and record purposes and shall bind the Parties.
26.10 Nothing herein shall be deemed to constitute one Party as the agent or representative of the other Party or both Parties as joint ventures or partners. Each Party is an independent contractor.
27. INFRINGEMENT UNDER DRUG PRICE COMPETITION ACT
27.1 In the event either Party receives notice pertaining to any patent included within Rutgers Patent Rights pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984 (Public Law 98-417, hereinafter, the Act), as amended, including but not necessarily limited to notices pursuant to Sections 101
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
and 103 of the Act from persons who have filed an Abbreviated New Drug Application (ANDA) or a paper New Drug Application (paper NDA), or in the case of an infringement of Rutgers Patent Rights as defined in Section 271(e) of Title 35 of the United States Code, such Party shall notify the other Party promptly but in no event later than ten (10) days after receipt of such notice.
27.2 If Licensee wishes action to be taken against such infringement, as provided in the Act, Licensee shall request such action by written notice to Rutgers. Within thirty (30) days of receiving said request, Rutgers will give written notice to Licensee of its election to commence suit on its own account or refuse to commence such suit. Licensee may thereafter bring suit for patent infringement as provided by the Act if and only if Rutgers refuses to commence suit and if the infringement occurred during the period that Licensee had exclusive rights in the United States under this Agreement. However, in the event Licensee elects to bring suit in accordance with this paragraph, Rutgers may thereafter join such suit at its own expense.
27.3 The relevant provisions of Article 16 shall likewise apply to any legal action brought under this Article 27.
27.4 Rutgers hereby authorizes Licensee to include in any NDA for a Licensed Product a list of patents included within Rutgers Patent Rights identifying Rutgers as patent owner.
IN WITNESS WHEREOF, both Rutgers and Licensee have executed this Agreement by their duly authorized representative effective as of the date written above.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Biohaven Pharmaceutical |
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/s/ Vladimir Coric |
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Vladimir Coric |
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S. David Kimball, Ph.D. |
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Office of Research Commercialization |
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September 7, 2016 |
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September 1, 2016 |
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Signature page for: |
Exclusive License Agreement |
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT A
1. Rutgers Patent Rights
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT B
Progress Report Template
General Progress Report
1. Summary of work completed, including key scientific results, market analysis
2. Summary of work in progress, including product development and testing and progress in obtaining government approvals
3. Current schedule of anticipated key events or milestones.
4. Market plans for introduction of Licensed Products in the Territory
5. Summary of resources (dollar value) spent in the reporting period for research, development, and marketing of Licensed Products
6. Activities in obtaining sublicensees and activities of sublicensees where applicable
7. Financial statements as of the end of the previous calendar quarter
8. Any other information that may be useful to Rutgers and our relationship
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Exhibit C
Client and Billing Agreement
Rutgers, the State University of New Jersey, a specially chartered New Jersey Educational Institution, with offices at 33 Knightsbridge Road - 2 East, Piscataway, NJ 08854 (RUTGERS) and Biohaven Pharmaceutical Holding Co. Ltd, a corporation having a principal place of business at an address of c/o Maples Corporate Services (BVI) Limited, P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands, ( COMPANY), have agreed to use the law firm of Fox Rothschild, with offices at 997 Lenox Drive Bldg 3, Lawrenceville, NJ 08648 (FIRM) to prepare, file and prosecute the patent applications listed in Exhibit A attached hereto and to maintain the Rutgers Patent Rights that issue thereon (Rutgers Patent Rights).
WHEREAS, COMPANY is the licensee of RUTGERS interest in the Rutgers Patent Rights; and
WHEREAS, RUTGERS and COMPANY desire to have the FIRM perform the legal services related to obtaining and maintaining the Rutgers Patent Rights in accordance with this Agreement; and
WHEREAS, FIRM desires to perform the legal services related to obtaining and maintaining the Rutgers Patent Rights; and
NOW THEREFORE, in consideration of the premises and the faithful performance of the covenants herein contained, the parties hereto agree as follows:
1. RUTGERS shall, at all times hereunder, remain the client of record of the FIRM. FIRM shall interact directly with COMPANY on all patent prosecution matters related to the Rutgers Patent Rights and will copy RUTGERS on all correspondence. COMPANY or the FIRM shall supply Rutgers with a copy of all patent filings and provide Rutgers with a reasonable opportunity to comment and advise on all communications received from and all submissions to any government patent office with respect to any patent application or patent within the Rutgers Patent Rights and give all due consideration to such comments and advice received from Rutgers. RUTGERS will be notified by the FIRM prior to the FIRM taking any substantive actions with regard to the Rutgers Patent Rights and RUTGERS will have final approval on proceeding with such actions including the right to countermand. RUTGERS shall have [* * *] from the date of receipt of notice from the FIRM to provide or decline its approval of such actions or to provide comments thereon. If RUTGERS does not respond to the FIRM within such [* * *] period, the FIRM may proceed based on comments from the COMPANY. In addition, as prosecution proceeds, FIRM will promptly notify RUTGERS if there is any change in inventorship from the originally filed application. COMPANY shall follow the termination provisions of the license agreement between COMPANY and RUTGERS prior to allowing the abandonment or lapse of any of the Rutgers Patent Rights.
2. RUTGERS understands and acknowledges that this agreement allows FIRM to disclose to COMPANY information otherwise protected by the attorney-client and/or work product privileges, which privileges shall be maintained and protected under the common interest doctrine. RUTGERS agrees that FIRM may make such disclosures to COMPANY in discharge of its obligations herein.
3. In addition, COMPANY agrees that to the extent it decides to terminate or withdraw from this agreement as to any patent within Rutgers Patent Rights, FIRM may continue to represent RUTGERS in the efforts to secure and maintain the Rutgers Patent Rights, including taking positions that may be adverse to COMPANY, without bringing affirmative claims against COMPANY.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4. COMPANY is responsible for the payment of all charges and fees incurred by FIRM related to the prosecution and maintenance of the Rutgers Patent Rights, including but not limited to, patent maintenance fees. FIRM will invoice COMPANY and COMPANY shall pay FIRM directly for all charges. RUTGERS will be copied on all invoices and payments. COMPANY will be responsible for paying all invoices from the FIRM within [* * *] days of receipt. Failure to pay the FIRM within [* * *] days shall result in the COMPANY being Delinquent on such payments. FIRM must inform RUTGERS within [* * *] days if the licensee is Delinquent on payment. Otherwise, RUTGERS will not be responsible for payment of Delinquent charges and fees for which timely notice was not received.
5. This agreement represents the complete understanding of each of the undersigned parties as to the client and billing arrangements defined herein. All additions or deletions of individual Rutgers Patent Rights or applications filed in the U.S. or foreign counterparts thereof are considered to be within the terms of this client and billing agreement.
6. Notices and copies of all correspondence should be sent either by e-mail or in writing to the following:
To COMPANY:
Biohaven Pharmaceutical Holding Company, Ltd.
c/o Maples Corporate Services (BVI) Limited
P.O. Box 173
Kingston Chambers Road Town
Tortola, British Virgin Islands
e-mail address: [* * *]
To RUTGERS:
Rutgers, the State University of New Jersey
Office of the Vice President for Research and Economic Development
33 Knightsbridge Road - 2 East, Piscataway, NJ 08854
e-mail address: http://orc,rutgers.edu/about/staff-listing
To FIRM:
Attorney Name: Peter Butch
Law Firm Address: 997 Lenox Dr, Bldg 3, Lawrenceville NJ 08648
e-mail address: Butch, Peter J. (PButch@foxrothschild.com)
7. The parties to this document agree that a copy of the original signature (including an electronic copy) may be used for any and all purposes for which the original signature may have been used. The parties further waive any right to challenge the admissibility of authenticity of this document in a court of law based solely on the absence of an original signature.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ACCEPTED AND AGREED TO: |
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RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY |
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S. David Kimball, Ph.D. |
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Assoc. VP, Office of Research Commercialization |
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COMPANY |
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Biohaven Pharmaceutical Holding Co. Ltd |
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Vlad Coric; M.D. |
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CEO |
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LAW FIRM: |
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For Rothschild |
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Peter Butch, J.D. |
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Signature page for Client & Billing Exhibit B for Exec. Licenses
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Exhibit 10.11
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
2017 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: April 6, 2017
APPROVED BY THE SHAREHOLDERS: , 2017
IPO DATE: , 2017
1. GENERAL.
(a) Successor to and Continuation of Prior Plan. The Plan is intended as the successor to and continuation of the Biohaven Pharmaceutical Holding Company Ltd. 2014 Equity Incentive Plan (the Prior Plan ). From and after 12:01 a.m. Eastern time on the IPO Date, no additional stock awards will be granted under the Prior Plan. All Awards granted on or after 12:01 a.m. Eastern Time on the IPO Date will be granted under this Plan. All share awards granted under the Prior Plan will remain subject to the terms of the Prior Plan.
(i) Any shares that would otherwise remain available for future grants under the Prior Plan as of 12:01 a.m. Eastern Time on the IPO Date (the Prior Plans Available Reserve ) will cease to be available under the Prior Plan at such time. Instead, that number of Common Shares equal to the Prior Plans Available Reserve will be added to the Share Reserve (as further described in Section 3(a) below) and will be immediately available for grants and issuance pursuant to Share Awards hereunder, up to the maximum number set forth in Section 3(a) below.
(ii) In addition, from and after 12:01 a.m. Eastern time on the IPO Date, any shares subject, at such time, to outstanding share awards granted under the Prior Plan that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a share award (such shares the Returning Shares ) will immediately be added to the Share Reserve (as further described in Section 3(a) below) as and when such shares become Returning Shares, up to the maximum number set forth in Section 3(a) below.
(b) Eligible Award Recipients. Employees, Directors and Consultants are eligible to receive Awards.
(c) Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Share Options, (ii) Nonstatutory Share Options, (iii) Share Appreciation Rights, (iv) Restricted Share Awards, (v) Restricted Share Unit Awards, (vi) Performance Share Awards, (vii) Performance Cash Awards, and (viii) Other Share Awards.
(d) Purpose. The Plan, through the grant of Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and provide
a means by which the eligible recipients may benefit from increases in value of the Common Shares.
2. ADMINISTRATION.
(a) Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Shares under the Award; (E) the number of Common Shares subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Share Award.
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.
(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or the time at which cash or Common Shares may be issued in settlement thereof).
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a Participants rights under the Participants then-outstanding Award without the Participants written consent, except as provided in subsection (viii) below.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Share Options and certain nonqualified deferred compensation under Section 409A of the Code and/or bringing the Plan or Awards granted under the Plan into compliance with the requirements for Incentive Share Options or ensuring that they are exempt from, or compliant with, the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. If required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek shareholder approval of any amendment of the Plan that (A) materially increases the number of Common Shares available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which Common
Shares may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan. Except as otherwise provided in the Plan or an Award Agreement, no amendment of the Plan will materially impair a Participants rights under an outstanding Award without the Participants written consent.
(vii) To submit any amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding incentive stock options or (C) Rule 16b-3.
(viii) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that a Participants rights under any Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participants rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participants rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participants consent (A) to maintain the qualified status of the Award as an Incentive Share Option under Section 422 of the Code; (B) to change the terms of an Incentive Share Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Share Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; or (D) to comply with other applicable laws or listing requirements.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
(xi) To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Share Award; (B) the cancellation of any outstanding Share Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted Share Award, (3) Restricted Share Unit Award, (4) Other Share Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of Common Shares as the cancelled Share Award and (y) granted under the Plan or another equity
or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Section 162(m) and Rule 16b-3 Compliance. The Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors in accordance with Rule 16b-3.
(d) Delegation to an Officer. The Board may delegate to one (1) or more Officers the authority to do one or both of the following (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Share Awards) and, to the extent permitted by applicable law, the terms of such Awards, and (ii) determine the number of Common Shares to be subject to such Share Awards granted to such Employees; provided, however , that the Board resolutions regarding such delegation will specify the total number of Common Shares that may be subject to the Share Awards granted by such Officer and that such Officer may not grant a Share Award to himself or herself. Any such Share Awards will be granted on the form of Share Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority. The Board may not delegate authority to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market Value pursuant to Section 13(x)(iii) below.
(e) Effect of Boards Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
3. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to Section 9(a) relating to Capitalization Adjustments, and the following sentence regarding the annual increase, the aggregate number of Common Shares that may be issued pursuant to Share Awards will not exceed 7,611,971 shares (the
Share Reserve ), which number is the sum of (i) 2,712,741 new shares, plus (ii) the number of shares subject to the Prior Plans Available Reserve, plus (iii) the number of shares that are Returning Shares, as such shares become available from time to time.
In addition, the Share Reserve may be increased by the Board on January 1 st of each year, for a period of not more than ten years, commencing on January 1 st of the year following the year in which the IPO Date occurs and ending on (and including) January 1, 2027, by a number of Common Shares determined by the Board in an amount not to exceed 4% of the total number of Capital Shares outstanding on December 31 st of the preceding calendar year.
For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of Common Shares that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Share Awards except as provided in Section 7(a). Shares may be issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.
(b) Reversion of Shares to the Share Reserve. If a Share Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Share Award having been issued or (ii) is settled in cash ( i.e. , the Participant receives cash rather than shares), such expiration, termination or settlement will not reduce (or otherwise offset) the number of Common Shares that may be available for issuance under the Plan. If any Common Shares issued pursuant to a Share Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan. Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Share Award or as consideration for the exercise or purchase price of a Share Award will again become available for issuance under the Plan.
(c) Incentive Share Option Limit. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of Common Shares that may be issued pursuant to the exercise of Incentive Share Options will be 15,223,942 Common Shares.
(d) Section 162(m) Limitations . Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, the following limitations shall apply.
(i) A maximum of 3,000,000 Common Shares subject to Options, SARs and Other Share Awards whose value is determined by reference to an increase over an exercise or
strike price of at least 100% of the Fair Market Value on the date the Share Award is granted may be granted to any one Participant during any one calendar year. Notwithstanding the foregoing, if any additional Options, SARs or Other Share Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date the Share Award are granted to any Participant during any calendar year, compensation attributable to the exercise of such additional Share Awards will not satisfy the requirements to be considered qualified performance-based compensation under Section 162(m) of the Code unless such additional Share Award is approved by the Companys shareholders.
(ii) A maximum of 3,000,000 Common Shares subject to Performance Share Awards may be granted to any one Participant during any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance Period of the Performance Goals).
(iii) A maximum of $3,000,000 may be granted as a Performance Cash Award to any one Participant during any one calendar year.
(e) Limitation on Grants to Non-Employee Directors. The maximum number of Common Shares subject to Share Awards granted under the Plan or otherwise during any one calendar year to any Non-Employee Director, taken together with any cash fees paid by the Company to such Non-Employee Director during such calendar year for service on the Board, will not exceed $1,000,000 in total value (calculating the value of any such Share Awards based on the grant date fair value of such Share Awards for financial reporting purposes).
(f) Source of Shares. The shares issuable under the Plan will be shares of authorized but unissued or reacquired Common Shares, including shares repurchased by the Company on the open market or otherwise.
4. ELIGIBILITY.
(a) Eligibility for Specific Share Awards . Incentive Share Options may be granted only to employees of the Company or a parent corporation or subsidiary corporation thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Share Awards other than Incentive Share Options may be granted to Employees, Directors and Consultants; provided, however , that Share Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any parent of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the shares underlying such Share Awards is treated as service recipient stock under Section 409A of the Code (for example, because the Share Awards are granted pursuant to a corporate transaction such as a spin off transaction), (ii) the Company, in consultation with its legal counsel, has determined that such Share Awards are otherwise exempt from Section 409A of the Code, or (iii) the Company, in consultation with its legal counsel, has determined that such Share Awards comply with the distribution requirements of Section 409A of the Code.
(b) Ten Percent Shareholders. A Ten Percent Shareholder will not be granted an Incentive Share Option unless the exercise price of such Option is at least 110% of the Fair
Market Value on the date of grant and the Option is not exercisable after the expiration of five years from the date of grant.
5. PROVISIONS RELATING TO OPTIONS AND SHARE APPRECIATION RIGHTS.
Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Share Options or Nonstatutory Share Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for Common Shares purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Share Option, or if an Option is designated as an Incentive Share Option but some portion or all of the Option fails to qualify as an Incentive Share Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Share Option. The provisions of separate Options or SARs need not be identical; provided, however , that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Shareholders, no Option or SAR will be exercisable after the expiration of ten years from the date of its grant or such shorter period specified in the Award Agreement.
(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Shareholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Shares subject to the Option or SAR on the date the Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Shares subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or share appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in Common Shares equivalents.
(c) Purchase Price for Options. The purchase price of Common Shares acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The permitted methods of payment are as follows:
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the shares subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of Common Shares;
(iv) if an Option is a Nonstatutory Share Option, by a net exercise arrangement pursuant to which the Company will reduce the number of Common Shares issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Common Shares will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the net exercise, (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.
(d) Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Share Appreciation Right Agreement evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of Common Shares equal to the number of Common Share equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of the number of Common Share equivalents with respect to which the Participant is exercising the SAR on such date. The appreciation distribution may be paid in Common Shares, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Award Agreement evidencing such SAR.
(e) Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:
(i) Restrictions on Transfer. An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulations Section 1.421-1(b)(2). If an Option is an Incentive Share Option, such Option may be deemed to be a Nonstatutory Share Option as a result of such transfer.
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Shares or other consideration resulting from such exercise. In the absence of such a designation, upon the death of the Participant, the executor or administrator of the Participants estate will be entitled to exercise the Option or SAR and receive the Common Shares or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
(f) Vesting Generally. The total number of Common Shares subject to an Option or SAR may vest and become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of Common Shares as to which an Option or SAR may be exercised.
(g) Termination of Continuous Service. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participants Continuous Service terminates (other than upon the Participants death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date that is three months following the termination of the Participants Continuous Service (or such longer or shorter period specified in the applicable Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.
(h) Extension of Termination Date. If the exercise of an Option or SAR following the termination of the Participants Continuous Service (other than upon the Participants death or Disability) would be prohibited at any time solely because the issuance of Common Shares would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post termination exercise period after the termination of the Participants Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement. In addition, unless otherwise provided in a Participants Award Agreement, if the sale of any Common Shares received on exercise of an Option or SAR following the termination of the Participants Continuous Service would violate the Companys insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of a period of months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participants Continuous Service during which the sale of the Common Shares received upon exercise of the Option or SAR would not be
in violation of the Companys insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.
(i) Disability of Participant. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participants Continuous Service terminates as a result of the Participants Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
(j) Death of Participant. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if (i) a Participants Continuous Service terminates as a result of the Participants death, or (ii) the Participant dies within the period (if any) specified in the Award Agreement for exercisability after the termination of the Participants Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participants estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participants death, but only within the period ending on the earlier of (i) the date 18 months following the date of death (or such longer or shorter period specified in the Award Agreement), and (ii) the expiration of the term of such Option or SAR as set forth in the Award Agreement. If, after the Participants death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.
(k) Non-Exempt Employees . If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any Common Shares until at least six months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participants retirement (as such term may be defined in the Participants Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Companys then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Share Award will be exempt from the employees regular rate of pay, the provisions of this Section 5(k) will apply to all Share Awards and are hereby incorporated by reference into such Share Award Agreements.
6. PROVISIONS OF SHARE AWARDS OTHER THAN OPTIONS AND SARS.
(a) Restricted Share Awards. Each Restricted Share Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. To the extent consistent with the Companys bylaws, at the Boards election, Common Shares may be (x) held in book entry form subject to the Companys instructions until any restrictions relating to the Restricted Share Award lapse; or (y) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and conditions of Restricted Share Award Agreements may change from time to time, and the terms and conditions of separate Restricted Share Award Agreements need not be identical. Each Restricted Share Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A Restricted Share Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past or future services to the Company or an Affiliate, or (C) any other form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii) Vesting. Common Shares awarded under the Restricted Share Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participants Continuous Service. If a Participants Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right any or all of the Common Shares held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Share Award Agreement.
(iv) Transferability. Rights to acquire Common Shares under the Restricted Share Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Share Award Agreement, as the Board will determine in its sole discretion, so long as Common Shares awarded under the Restricted Share Award Agreement remain subject to the terms of the Restricted Share Award Agreement.
(v) Dividends. A Restricted Share Award Agreement may provide that any dividends paid on Restricted Share will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Share Award to which they relate.
(b) Restricted Share Unit Awards. Each Restricted Share Unit Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. The terms and conditions of Restricted Share Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Share Unit Award Agreements need not be identical. Each Restricted Share Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. At the time of grant of a Restricted Share Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of
each Common Share subject to the Restricted Share Unit Award. The consideration to be paid (if any) by the Participant for each Common Share subject to a Restricted Share Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii) Vesting. At the time of the grant of a Restricted Share Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Share Unit Award as it, in its sole discretion, deems appropriate.
(iii) Payment . A Restricted Share Unit Award may be settled by the delivery of Common Shares, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Share Unit Award Agreement.
(iv) Additional Restrictions. At the time of the grant of a Restricted Share Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the Common Shares (or their cash equivalent) subject to a Restricted Share Unit Award to a time after the vesting of such Restricted Share Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of Common Shares covered by a Restricted Share Unit Award, as determined by the Board and contained in the Restricted Share Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional Common Shares covered by the Restricted Share Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Share Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Share Unit Award Agreement to which they relate.
(vi) Termination of Participants Continuous Service. Except as otherwise provided in the applicable Restricted Share Unit Award Agreement, such portion of the Restricted Share Unit Award that has not vested will be forfeited upon the Participants termination of Continuous Service.
(c) Performance Awards .
(i) Performance Share Awards . A Performance Share Award is a Share Award (covering a number of shares not in excess of that set forth in Section 3(d) above) that is payable (including that may be granted, may vest or may be exercised) contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Share Award may, but need not, require the Participants completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Share Awards.
(ii) Performance Cash Awards . A Performance Cash Award is a cash award (for a dollar value not in excess of that set forth in Section 3(d) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion. The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.
(iii) Board Discretion . The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Share Award Agreement or the written terms of a Performance Cash Award.
(iv) Section 162(m) Compliance . Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with respect to an Award intended to qualify as performance-based compensation thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier of (a) the date 90 days after the commencement of the applicable Performance Period, and (b) the date on which 25% of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as performance-based compensation under Section 162(m) of the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such Performance Goals relate solely to the increase in the value of the Common Shares). Notwithstanding satisfaction of, or completion of any Performance Goals, the number of Common Shares, Options, cash or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.
(d) Other Share Awards . Other forms of Share Awards valued in whole or in part by reference to, or otherwise based on, Common Shares, including the appreciation in value thereof (e.g., options or share rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Shares at the time of grant) may be granted either alone or in addition to Share Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Share Awards will be granted, the number of Common Shares (or the cash equivalent thereof) to be granted pursuant to such Other Share Awards and all other terms and conditions of such Other Share Awards.
7. COVENANTS OF THE COMPANY.
(a) Availability of Shares. The Company will keep available at all times the number of Common Shares reasonably required to satisfy then-outstanding Awards.
(b) Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Share Awards and to issue and sell Common Shares upon exercise or vesting of the Share Awards; provided, however , that this undertaking will not require the Company to register under the Securities Act or other securities or applicable laws, the Plan, any Share Award or any Common Shares issued or issuable pursuant to any such Share Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary or advisable for the lawful issuance and sale of Common Shares under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Shares upon exercise or vesting of such Share Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Shares pursuant to the Award if such grant or issuance would be in violation of any applicable law.
(c) No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the tax treatment or time or manner of exercising such Share Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award.
8. MISCELLANEOUS.
(a) Use of Proceeds from Sales of Common Shares. Proceeds from the sale of Common Shares pursuant to Awards will constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the papering of the Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or related grant documents.
(c) Shareholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Common Shares subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance
of Common Shares under, the Award pursuant to its terms, and (ii) the issuance of the Common Shares subject to such Award has been entered into the books and records of the Company.
(d) No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultants agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state or foreign jurisdiction in which the Company or the Affiliate is domiciled or incorporated, as the case may be.
(e) Change in Time Commitment. In the event a Participants regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.
(f) Incentive Share Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Shares with respect to which Incentive Share Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Share Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Share Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
(g) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Shares under any Award, (i) to give written assurances satisfactory to the Company as to the Participants knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that such Participant is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Shares subject to the Award for the Participants own account and not with any present intention of selling or otherwise distributing the Common Shares. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or
acquisition of Common Shares under the Award has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on share certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Shares.
(h) Withholding Obligations. Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding Common Shares from the Common Shares issued or otherwise issuable to the Participant in connection with the Award; provided, however, that no Common Shares are withheld with a value exceeding the maximum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Share Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.
(i) Electronic Delivery . Any reference herein to a written agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Companys intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
(j) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Shares or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participants termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
(k) Compliance with Section 409A of the Code. Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to the contrary in this Plan (and
unless the Award Agreement specifically provides otherwise), if the Common Shares are publicly traded, and if a Participant holding an Award that constitutes deferred compensation under Section 409A of the Code is a specified employee for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a separation from service (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participants separation from service (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participants death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.
(l) Clawback/Recovery . All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Companys securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.
9. ADJUSTMENTS UPON CHANGES IN COMMON SHARES; OTHER CORPORATE EVENTS.
(a) Capitalization Adjustments . In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Share Options pursuant to Section 3(c), (iv) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 3(d), and (v) the class(es) and number of securities and price per share of share subject to outstanding Share Awards. The Board will make such adjustments, and its determination will be final, binding and conclusive.
(b) Dissolution . Except as otherwise provided in the Share Award Agreement, in the event of a Dissolution of the Company, all outstanding Share Awards (other than Share Awards consisting of vested and outstanding Common Shares not subject to a forfeiture condition or the Companys right of repurchase) will terminate immediately prior to the completion of such Dissolution, and the Common Shares subject to the Companys repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Share Award is providing Continuous Service; provided, however , that the Board may, in its sole discretion, cause some or all Share Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Share Awards have not previously expired or terminated) before the Dissolution is completed but contingent on its completion.
(c) Transaction. The following provisions shall apply to Share Awards in the event of a Transaction unless otherwise provided in the instrument evidencing the Share Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Share Award. In the event of
a Transaction, then, notwithstanding any other provision of the Plan, the Board shall take one or more of the following actions with respect to Share Awards, contingent upon the closing or completion of the Transaction:
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporations parent company) to assume or continue the Share Award or to substitute a similar share award for the Share Award (including, but not limited to, an award to acquire the same consideration paid to the shareholders of the Company pursuant to the Transaction);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Shares issued pursuant to the Share Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporations parent company);
(iii) accelerate the vesting, in whole or in part, of the Share Award (and, if applicable, the time at which the Share Award may be exercised) to a date prior to the effective time of such Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five days prior to the effective date of the Transaction) and communicate such date in writing or electronically to affected Participants, with such Share Award terminating if not exercised (if applicable) at or prior to the effective time of the Transaction;
(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Share Award;
(v) cancel or arrange for the cancellation of the Share Award, to the extent not vested or not exercised prior to the effective time of the Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Share Award immediately prior to the effective time of the Transaction, over (B) any exercise price payable by such holder in connection with such exercise. For clarity, this payment may be zero ($0) if the value of the property is equal to or less than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of Common Shares in connection with the Transaction is delayed as a result of escrows, earn outs, holdbacks or other contingencies.
The Board need not take the same action or actions with respect to all Share Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Share Award.
(d) Change in Control. In the event that the surviving corporation or successor corporation (or its parent company) in a Change in Control does not assume or substitute for any outstanding Share Award (or portion thereof) held by any Participant whose Continuous Service has not terminated prior to the effective time of the Change in Control, then contingent upon the effectiveness of the Change in Control, such Participant will fully vest in and, to the extent applicable, have the right to exercise all of his or her outstanding Share Awards, including
Common Shares as to which such Share Awards would not otherwise be vested or exercisable, all restrictions on Share Awards will lapse, and, with respect to any Share Award with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met and, unless otherwise determined by the Board, the Company will notify the Participant in writing or electronically that any such Share Award held by the Participant that is an Option or SAR will be exercisable for a period of time determined by the Board in its sole discretion, and the Option or SAR will terminate upon the expiration of such period, unless otherwise determined by the Board. A Share Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Share Award Agreement for such Share Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.
10. PLAN TERM; EARLIER TERMINATION OR SUSPENSION OF THE PLAN.
The Board may suspend or terminate the Plan at any time. No Incentive Share Options may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board (the Adoption Date ), or (ii) the date the Plan is approved by the shareholders of the Company. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated. Suspension or termination of the Plan will not impair rights and obligations under any Award granted while the Plan is in effect, except with the written consent of the affected Participant or as otherwise permitted in the Plan.
11. EXISTENCE OF THE PLAN; TIMING OF FIRST GRANT OR EXERCISE.
The Plan will come into existence on the Adoption Date; provided, however , that no Share Award may be granted prior to the IPO Date. In addition, no Share Award will be exercised (or, in the case of a Restricted Share Award, Restricted Share Unit Award, Performance Share Award, or Other Share Award, no Share Award will be granted) and no Performance Cash Award will be settled unless and until the Plan has been approved by the shareholders of the Company, which approval will be within 12 months after the date the Plan is adopted by the Board.
12. CHOICE OF LAW.
The law of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that states conflict of laws rules.
13. DEFINITIONS. As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) Affiliate means, at the time of determination, any parent or subsidiary of the Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine the time or times at which parent or subsidiary status is determined within the foregoing definition.
(b) Award means a Share Award or a Performance Cash Award.
(c) Award Agreement means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award.
(d) Board means the Board of Directors of the Company.
(e) Capital Shares means each and every class of common shares of the Company, regardless of the number of votes per share.
(f) Capitalization Adjustment means any change that is made in, or other events that occur with respect to, the Common Shares subject to the Plan or subject to any Share Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, share dividend, dividend in property other than cash, large nonrecurring cash dividend, share split, reverse share split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(g) Cause shall have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) such Participants commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participants attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participants intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participants unauthorized use or disclosure of the Companys confidential information or trade secrets; or (v) such Participants gross misconduct. The determination that a termination of the Participants Continuous Service is either for Cause or without Cause shall be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.
(h) Change in Control means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Companys then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Companys securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, (C) on account of the acquisition of securities
of the Company by any individual who is, on the IPO Date, either an executive officer or a Director (either, an IPO Investor ) and/or any entity in which an IPO Investor has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital contributions) of more than 50% (collectively, the IPO Entities ) or on account of the IPO Entities continuing to hold shares that come to represent more than 50% of the combined voting power of the Companys then outstanding securities as a result of the conversion of any class of the Companys securities into another class of the Companys securities having a different number of votes per share pursuant to the conversion provisions set forth in the Companys Amended and Restated Certificate of Incorporation; or (D) solely because the level of Ownership held by any Exchange Act Person (the Subject Person ) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the shareholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; provided, however , that a merger, consolidation or similar transaction will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the surviving Entity or its parent are owned by the IPO Entities;
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by shareholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; provided, however , that a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO Entities;
(iv) the shareholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company will otherwise occur, except for a liquidation into a parent corporation; or
(v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the Incumbent Board ) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding the foregoing definition or any other provision of the Plan, the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company and the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however , that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.
(i) Code means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(j) Committee means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).
(k) Common Share means, as of the IPO Date, the common shares of the Company, having one vote per share.
(l) Company means Biohaven Pharmaceutical Holding Company Ltd., a BVI business company.
(m) Consultant means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a Consultant for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Companys securities to such person.
(n) Continuous Service means that the Participants service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participants service with the Company or an Affiliate, will not terminate a Participants Continuous Service; provided, however , that if the Entity for which a Participant is rendering services ceases to
qualify as an Affiliate, as determined by the Board, in its sole discretion, such Participants Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that partys sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Companys leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
(o) Corporate Transaction means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of more than 50% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the Common Shares outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
(p) Covered Employee will have the meaning provided in Section 162(m)(3) of the Code.
(q) Director means a member of the Board.
(r) Disability means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(s) Dissolution means when the Company, after having executed a certificate of dissolution with the State of Delaware (or other applicable state), has completely wound up its affairs. Conversion of the Company into a Limited Liability Company (or any other pass-through entity) will not be considered a Dissolution for purposes of the Plan.
(t) Employee means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an Employee for purposes of the Plan.
(u) Entity means a corporation, partnership, limited liability company or other entity.
(v) Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(w) Exchange Act Person means any natural person, Entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that Exchange Act Person will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their Ownership of shares of the Company; or (v) any natural person, Entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the IPO Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Companys then outstanding securities.
(x) Fair Market Value means, as of any date, the value of the a Common Share determined as follows:
(i) If the Common Share is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Share will be, unless otherwise determined by the Board, the closing sales price for such share as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Shares) on the date of determination, as reported in a source the Board deems reliable.
(ii) Unless otherwise provided by the Board, if there is no closing sales price for a Common Share on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Shares, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
(y) Incentive Share Option means an option granted pursuant to Section 5 of the Plan that is intended to be, and qualifies as, an incentive stock option within the meaning of Section 422 of the Code.
(z) IPO Date means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Shares, pursuant to which a Common Share is priced for the initial public offering.
(aa) Non-Employee Director means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ( Regulation S-K )), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a non-employee director for purposes of Rule 16b-3.
(bb) Nonstatutory Share Option means any Option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Share Option.
(cc) Officer means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.
(dd) Option means an Incentive Share Option or a Nonstatutory Share Option to purchase Common Shares granted pursuant to the Plan.
(ee) Option Agreement means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.
(ff) Optionholder means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(gg) Other Share Award means an award based in whole or in part by reference to Common Shares which is granted pursuant to the terms and conditions of Section 6(d).
(hh) Other Share Award Agreement means a written agreement between the Company and a holder of an Other Share Award evidencing the terms and conditions of an Other Share Award grant. Each Other Share Award Agreement will be subject to the terms and conditions of the Plan.
(ii) Outside Director means a Director who either (i) is not a current employee of the Company or an affiliated corporation (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an affiliated corporation who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an affiliated corporation, and does not receive remuneration from the Company or an affiliated corporation, either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an outside director for purposes of Section 162(m) of the Code.
(jj) Own, Owned, Owner, Ownership means a person or Entity will be deemed to Own, to have Owned, to be the Owner of, or to have acquired Ownership of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(kk) Participant means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Share Award.
(ll) Performance Cash Award means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii).
(mm) Performance Criteria means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest and taxes; (iii) earnings before interest, taxes and depreciation; (iv) earnings before interest, taxes, depreciation and/or amortization; (v) earnings before interest, taxes, depreciation, amortization and legal settlements; (vi) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (vii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and share-based compensation; (viii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), share-based compensation and changes in deferred revenue; (ix) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), share-based compensation, other non-cash expenses and changes in deferred revenue; (x) total shareholder return; (xi) return on equity or average shareholders equity; (xii) return on assets, investment, or capital employed; (xiii) return on operating revenue; (xiv) margin (including gross margin); (xv) income (before or after taxes); (xvi) operating income (before or after taxes); (xvii) operating income after taxes; (xviii) operating income before interest and taxes; (xix) operating income before interest, taxes, depreciation and amortization; (xx) pre-tax profit; (xxi) operating cash flow; (xxii) sales or revenue targets; (xxiii) increases in revenue or product revenue; (xxiv) improvement in or attainment of working capital levels; (xxv) economic value added (or an equivalent metric); (xxvi) cash flow; (xxvii) cash flow per share; (xxviii) cash balance; (xxix) cash burn; (xxx) cash collections; (xxxi) debt reduction; (xxxii) implementation or completion of projects or processes (including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, and product supply); (xxxiii) shareholders equity; (xxxiv) capital expenditures; (xxxv) debt levels; (xxxvi) operating profit or net operating profit; (xxxvii) workforce diversity; (xxxviii) net income or growth of net income or operating income; (xxxix) billings; (xl) bookings; (xli) employee retention; (xlii) initiation of studies by specific dates; (xliii) budget management; (xliv) submission to, or approval by, a regulatory body (including, but not limited to the U.S. Food and Drug Administration) of an applicable filing or a product; (xlv) regulatory milestones; (xlvi) safety performance; (xlvii) sustainability or environmental performance; (xlviii) progress of internal research or development programs; (xlix) acquisition of new customers; (l) customer retention and/or repeat order rate; (li) improvements in sample and test processing times; (lii) progress of partnered programs; (liii) partner satisfaction; (liv) timely completion of clinical trials; (lv) submission of 510(k)s or pre-market approvals and other regulatory achievements; (lvi) milestones related to research development (including, but not limited to, preclinical and clinical studies), product development and manufacturing or new product innovation; (lvii) expansion of sales in additional geographies or markets; (lviii) research progress, including the development of programs; (lix) strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; (lx)
strategic corporate objectives relating to: increase in revenue with certain customers, customer groups, or customer types; (lxi) financings; (lxii) brand recognition or acceptance; (lxiii) share price; (lxiv) share price performance; (lxv) market share; (lxvi) expenses and cost reduction goals and (lxvii) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board.
(nn) Performance Goals means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any items that are unusual in nature or occur infrequently as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common share of the Company by reason of any share dividend or split, share repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (9) to exclude the effects of share based compensation and the award of bonuses under the Companys bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item; and (13) to exclude the effects of the timing of acceptance for review and/or approval of submissions to the U.S. Food and Drug Administration or any other regulatory body. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Share Award Agreement or the written terms of a Performance Cash Award.
(oo) Performance Period means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants right to and the payment of a Share Award or a Performance Cash Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.
(pp) Performance Share Award means a Share Award granted under the terms and conditions of Section 6(c)(i).
(qq) Plan means this Biohaven Pharmaceutical Holding Company Ltd. 2017 Equity Incentive Plan.
(rr) Restricted Share Award means an award of Common Shares which is granted pursuant to the terms and conditions of Section 6(a).
(ss) Restricted Share Award Agreement means a written agreement between the Company and a holder of a Restricted Share Award evidencing the terms and conditions of a Restricted Share Award grant. Each Restricted Share Award Agreement will be subject to the terms and conditions of the Plan.
(tt) Restricted Share Unit Award means a right to receive Common Shares which is granted pursuant to the terms and conditions of Section 6(b).
(uu) Restricted Share Unit Award Agreement means a written agreement between the Company and a holder of a Restricted Share Unit Award evidencing the terms and conditions of a Restricted Share Unit Award grant. Each Restricted Share Unit Award Agreement will be subject to the terms and conditions of the Plan.
(vv) Rule 16b-3 means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(ww) Securities Act means the Securities Act of 1933, as amended.
(xx) Share Appreciation Right or SAR means a right to receive the appreciation on Common Shares that is granted pursuant to the terms and conditions of Section 5.
(yy) Share Appreciation Right Agreement means a written agreement between the Company and a holder of a Share Appreciation Right evidencing the terms and conditions of a Share Appreciation Right grant. Each Share Appreciation Right Agreement will be subject to the terms and conditions of the Plan.
(zz) Share Award means any right to receive Common Shares granted under the Plan, including an Incentive Share Option, a Nonstatutory Share Option, a Restricted Share Award, a Restricted Share Unit Award, a Share Appreciation Right, a Performance Share Award or any Other Share Award.
(aaa) Share Award Agreement means a written agreement between the Company and a Participant evidencing the terms and conditions of a Share Award grant. Each Share Award Agreement will be subject to the terms and conditions of the Plan.
(bbb) Subsidiary means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital shares having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, shares of any other class or classes of such corporation will have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
(ccc) Ten Percent Shareholder means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or any Affiliate.
(ddd) Transaction means a Corporate Transaction or a Change in Control.
Exhibit 10.12
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
SHARE OPTION GRANT NOTICE
(2017 EQUITY INCENTIVE PLAN)
Biohaven Pharmaceutical Holding Company Ltd. (the Company ), pursuant to its 2017 Equity Incentive Plan (the Plan ), hereby grants to Optionholder an option to purchase the number of the Companys Common Shares set forth below. This option is subject to all of the terms and conditions as set forth in this Share Option Grant Notice, in the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option Agreement. If there is any conflict between the terms in this Share Option Grant Notice and the Plan, the terms of the Plan will control.
Optionholder: |
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Date of Grant: |
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Vesting Commencement Date: |
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Number of Shares Subject to Option: |
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Exercise Price (Per Share): |
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Total Exercise Price: |
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Expiration Date: |
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Type of Grant: |
¨ Incentive Stock Option(1) |
¨ Nonstatutory Stock Option |
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Exercise Schedule : |
Same as Vesting Schedule |
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Vesting Schedule : |
[ , subject to Optionholders Continuous Service as of each such date ] |
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Payment: |
By one or a combination of the following items (described in the Option Agreement): |
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By cash, check, bank draft or money order payable to the Company |
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Pursuant to a Regulation T Program if the shares are publicly traded |
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By delivery of already-owned shares if the shares are publicly traded |
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If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Companys consent at the time of exercise, by a net exercise arrangement |
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(1) If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.
Additional Terms/Acknowledgements: Optionholder acknowledges receipt of, and understands and agrees to, this Share Option Grant Notice, the Option Agreement and the Plan. Optionholder acknowledges and agrees that this Share Option Grant Notice and the Option Agreement may not be modified, amended or revised except as provided in the Plan. Optionholder further acknowledges that as of the Date of Grant, this Share Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of, if applicable, (i) equity awards previously granted and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written employment agreement, severance agreement, offer letter or other written agreement entered into between the Company and Participant specifying the terms that should govern this specific option. By accepting this option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD. |
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ATTACHMENTS : Option Agreement, 2017 Equity Incentive Plan and Notice of Exercise
ATTACHMENT I
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
OPTION AGREEMENT
(2017 EQUITY INCENTIVE PLAN)
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)
Pursuant to your Share Option Grant Notice ( Grant Notice ) and this Option Agreement, Biohaven Pharmaceutical Holding Company Ltd. (the Company ) has granted you an option under its 2017 Equity Incentive Plan (the Plan ) to purchase the number of the Companys Common Shares indicated in your Grant Notice at the exercise price indicated in your Grant Notice. The option is granted to you effective as of the date of grant set forth in the Grant Notice (the Date of Grant ). If there is any conflict between the terms in this Option Agreement and the Plan, the terms of the Plan will control. Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.
The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1. VESTING. Subject to the provisions contained herein, your option will vest as provided in your Grant Notice. Vesting will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of Common Shares subject to your option and your exercise price per share in your Grant Notice will be adjusted for Capitalization Adjustments.
3. EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES. If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a Non-Exempt Employee ), and except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant, even if you have already been an employee for more than six (6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your option is not assumed, continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your retirement (as defined in the Companys benefit plans).
4. METHOD OF PAYMENT. You must pay the full amount of the exercise price for the shares you wish to exercise. You may pay the exercise price in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one or more of the following:
(a) Provided that at the time of exercise the Common Shares are publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Shares, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a broker-assisted exercise, same day sale, or sell to cover.
(b) Provided that at the time of exercise the Common Shares are publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned Common Shares that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. Delivery for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the Company of your attestation of ownership of such Common Shares in a form approved by the Company. You may not exercise your option by delivery to the Company of Common Shares if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Companys shares.
(c) If this option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a net exercise arrangement pursuant to which the Company will reduce the number of Common Shares issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price. You must pay any remaining balance of the aggregate exercise price not satisfied by the net exercise in cash or other permitted form of payment. Common Shares will no longer be outstanding under your option and will not be exercisable thereafter if those shares (i) are used to pay the exercise price pursuant to the net exercise, (ii) are delivered to you as a result of such exercise, and (iii) are withheld to satisfy your tax withholding obligations.
5. WHOLE SHARES. You may exercise your option only for whole Common Shares.
6. SECURITIES LAW COMPLIANCE. In no event may you exercise your option unless the Common Shares issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with all other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
7. TERM. You may not exercise your option before the Date of Grant or after the expiration of the options term. The term of your option expires, subject to the provisions of Section 5(h) of the Plan, upon the earliest of the following:
(a) three (3) months after the termination of your Continuous Service for any reason other than your Disability or your death (except as otherwise provided in Section 8(d) below); provided, however, that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in the section above regarding Securities Law Compliance, your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service; provided further, if during any part of such three (3) month period, the sale of any Common Shares received upon exercise of your option would violate the Companys insider trading policy, then your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service during which the sale of the Common Shares received upon exercise of your option would not be in violation of the Companys insider trading policy. Notwithstanding the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six (6) months after the Date of Grant, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option will not expire until the earlier of (x) the later of (A) the date that is seven (7) months after the Date of Grant, and (B) the date that is three (3) months after the termination of your Continuous Service, and (y) the Expiration Date;
(b) twelve (12) months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 7(d)) below;
(c) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of Grant.
If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant and ending on the day three (3) months before the date of your options exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Companys Secretary, share plan administrator, or such other person as the Company may designate, together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to which the Common Shares are subject at the time of exercise, or (iii) the disposition of Common Shares acquired upon such exercise.
(c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the Common Shares issued upon exercise of your option that occurs within two (2) years after the Date of Grant or within one (1) year after such Common Shares are transferred upon exercise of your option.
9. TRANSFERABILITY. Except as otherwise provided in this Section 9, your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.
(a) Certain Trusts. Upon receiving written permission from the Board or its duly authorized designee, you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust. You and the trustee must enter into transfer and other agreements required by the Company.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement agreement. If this option is an Incentive Stock Option, this option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(c) Beneficiary Designation. Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to exercise this option and receive the Common Shares or other consideration resulting from such exercise. In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on behalf of your estate, the Common Shares or other consideration resulting from such exercise.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a same day sale pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.
(b) If this option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested Common Shares otherwise issuable to you upon the exercise of your option a number of whole Common Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the maximum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes). Notwithstanding the filing of such election, Common Shares shall be withheld solely from fully vested Common Shares determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a
certificate for such Common Shares or release such Common Shares from any escrow provided for herein, if applicable, unless such obligations are satisfied.
12. TAX CONSEQUENCES . You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the fair market value per Common Shares on the Date of Grant and there is no other impermissible deferral of compensation associated with the option.
13. NOTICES. Any notices provided for in your option or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
14. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. If there is any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control. In addition, your option (and any compensation paid or shares issued under your option) is subject to recoupment in accordance with The DoddFrank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.
15. OTHER DOCUMENTS. You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Companys policy permitting certain individuals to sell shares only during certain window periods and the Companys insider trading policy, in effect from time to time.
16. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of this option will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Companys or any Affiliates employee benefit plans.
17. VOTING RIGHTS. You will not have voting or any other rights as a shareholder of the Company with respect to the shares to be issued pursuant to this option until such shares are issued to you. Upon such issuance, you will obtain full voting and other rights as a shareholder of the Company. Nothing contained in this option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
18. SEVERABILITY. If all or any part of this Option Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not
invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Option Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
19. MISCELLANEOUS .
(a) The rights and obligations of the Company under your option will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Companys successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your option.
(c) You acknowledge and agree that you have reviewed your option in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your option, and fully understand all provisions of your option.
(d) This Option Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Option Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
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This Option Agreement will be deemed to be signed by you upon the signing by you of the Share Option Grant Notice to which it is attached.
ATTACHMENT III
NOTICE OF EXERCISE
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD. |
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c/o Biohaven Pharmaceuticals, Inc. |
Date of Exercise: |
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234 Church Street |
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New Haven, Connecticut 06510 |
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This constitutes notice to Biohaven Pharmaceutical Holding Company Ltd. (the Company ) under my share option that I elect to purchase the below number of Common Shares of the Company (the Shares ) for the price set forth below.
(1) Shares must meet the public trading requirements set forth in the option. Shares must be valued in accordance with the terms of the option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate.
(2) The option must be a Nonstatutory Stock Option, and the Company must have established net exercise procedures at the time of exercise, in order to utilize this payment method.
(3) Shares must meet the public trading requirements set forth in the option.
By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Biohaven Pharmaceutical Holding Company Ltd. 2017 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the Shares issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such Shares are issued upon exercise of this option.
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Very truly yours, |
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Exhibit 10.13
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
RESTRICTED SHARE UNIT GRANT NOTICE
(2017 EQUITY INCENTIVE PLAN)
Biohaven Pharmaceutical Holding Company Ltd. (the Company ), pursuant to its 2017 Equity Incentive Plan (the Plan ), hereby awards to Participant a Restricted Share Unit Award for the number of the Companys Common Shares ( Restricted Share Units ) set forth below (the Award ). The Award is subject to all of the terms and conditions as set forth in this notice of grant (this Restricted Share Unit Grant Notice ), and in the Plan and the Restricted Share Unit Award Agreement (the Award Agreement ), both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined herein shall have the meanings set forth in the Plan or the Award Agreement. In the event of any conflict between the terms in this Restricted Share Unit Grant Notice or the Award Agreement and the Plan, the terms of the Plan shall control.
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Subject to any Capitalization Adjustment, one Common Share (or its cash equivalent, at the discretion of the Company) will be issued for each Restricted Share Unit that vests at the time set forth in Section 6 of the Award Agreement. |
Additional Terms/Acknowledgements: Participant acknowledges receipt of, and understands and agrees to, this Restricted Share Unit Grant Notice, the Award Agreement and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Share Unit Grant Notice, the Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of the Common Shares pursuant to the Award specified above and supersede all prior oral and written agreements on the terms of this Award, with the exception, if applicable, of (i) restricted share unit awards or options previously granted and delivered to Participant, (ii) the written employment agreement, offer letter or other written agreement entered into between the Company and Participant specifying the terms that should govern this specific Award, and (iii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law.
By accepting this Award, Participant acknowledges having received and read the Restricted Share Unit Grant Notice, the Award Agreement and the Plan and agrees to all of the terms and conditions set forth in these documents. Participant consents to receive Plan documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
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ATTACHMENTS : Award Agreement and 2017 Equity Incentive Plan
ATTACHMENT I
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
2017 EQUITY INCENTIVE PLAN
RESTRICTED SHARE UNIT AWARD AGREEMENT
Pursuant to the Restricted Share Unit Grant Notice (the Grant Notice ) and this Restricted Share Unit Award Agreement (the Agreement ), Biohaven Pharmaceutical Holding Company Ltd. (the Company ) has awarded you ( Participant ) a Restricted Share Unit Award (the Award ) pursuant to Section 6(b) of the Companys 2017 Equity Incentive Plan (the Plan ) for the number of Restricted Share Units/shares indicated in the Grant Notice. Capitalized terms not explicitly defined in this Agreement or the Grant Notice shall have the same meanings given to them in the Plan. The terms of your Award, in addition to those set forth in the Grant Notice, are as follows.
1. GRANT OF THE AWARD. This Award represents the right to be issued on a future date one (1) Common Share for each Restricted Share Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the Account ) the number of Restricted Share Units/Common Shares subject to the Award. Notwithstanding the foregoing, the Company reserves the right to issue you the cash equivalent of Common Shares, in part or in full satisfaction of the delivery of Common Shares in connection with the vesting of the Restricted Share Units, and, to the extent applicable, references in this Agreement and the Grant Notice to Common Shares issuable in connection with your Restricted Share Units will include the potential issuance of its cash equivalent pursuant to such right. This Award was granted in consideration of your services to the Company.
2. VESTING. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice. Vesting will cease upon the termination of your Continuous Service and the Restricted Share Units credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such Award or the Common Shares to be issued in respect of such portion of the Award.
3. NUMBER OF SHARES. The number of Restricted Share Units subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. Any additional Restricted Share Units, shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Share Units and shares covered by your Award. Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional Common Shares shall be created pursuant to this Section 3. Any fraction of a share will be rounded down to the nearest whole share.
4. SECURITIES LAW COMPLIANCE . You may not be issued any Common Shares under your Award unless the Common Shares underlying the Restricted Share Units are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulations governing the Award, and you shall not receive such Common Shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
5. TRANSFER RESTRICTIONS . Prior to the time that Common Shares have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5. For example, you may not use shares that may be issued in respect of your Restricted Share Units as security for a loan. The restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of your vested Restricted Share Units.
(a) Death . Your Award is transferable by will and by the laws of descent and distribution. At your death, vesting of your Award will cease and your executor or administrator of your estate shall be entitled to receive, on behalf of your estate, any Common Shares or other consideration that vested but was not issued before your death.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your right to receive the distribution of Common Shares or other consideration hereunder, pursuant to a domestic relations order, marital settlement agreement or other divorce or separation instrument as permitted by applicable law that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this Award with the Company General Counsel prior to finalizing the domestic relations order or marital settlement agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or marital settlement agreement.
6. DATE OF ISSUANCE.
(a) The issuance of shares in respect of the Restricted Share Units is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the Withholding Obligation set forth in Section 11 of this Agreement, in the event one or more Restricted Share Units vests, the Company shall issue to you one (1) Common Share for each Restricted Share Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 above). Each issuance date determined by this paragraph is referred to as an Original Issuance Date .
(b) If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the next following business day. In addition, if:
(i) the Original Issuance Date does not occur (1) during an open window period applicable to you, as determined by the Company in accordance with the Companys then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell Common Shares on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Companys policies (a 10b5-1 Arrangement )), and
(ii) either (1) a Withholding Obligation does not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Withholding Obligation by withholding Common Shares from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to then effect a sale of Common Shares under a 10b5-1 Arrangement to satisfy the Withholding Obligation, if applicable, and (C) not to permit you to pay your Withholding Obligation in cash,
then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling the Companys Common Shares in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the Common Shares under this Award are no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulations Section 1.409A-1(d).
(c) The form of delivery ( e.g. , a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.
7. DIVIDENDS. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, share dividend or other distribution that does not result from a Capitalization Adjustment; provided, however, that this sentence will not apply with respect to any Common Shares that are delivered to you in connection with your Award after such shares have been delivered to you.
8. RESTRICTIVE LEGENDS. The Common Shares issued in respect of your Award shall be endorsed with appropriate legends as determined by the Company.
9. EXECUTION OF DOCUMENTS. You hereby acknowledge and agree that the manner selected by the Company by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing your execution of any documents to be executed in the future in connection with your Award.
10. AWARD NOT A SERVICE CONTRACT .
(a) Nothing in this Agreement (including, but not limited to, the vesting of your Award or the issuance of the shares in respect of your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan shall: (i) confer upon you any right to continue in the employ or service of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.
(b) By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to the vesting schedule provided in the Grant Notice may not be earned unless (in addition to any other conditions described in the Grant Notice and this Agreement) you continue as an employee, director or consultant at the will of the Company and affiliate, as applicable (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a reorganization ). You acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that
may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with the Companys right to terminate your Continuous Service at any time, with or without your cause or notice, or to conduct a reorganization.
11. WITHHOLDING OBLIGATION.
(a) On each vesting date, and on or before the time you receive a distribution of the Common Shares in respect of your Restricted Share Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you hereby authorize any required withholding from the Common Shares issuable to you and/or otherwise agree to make adequate provision, including in cash, for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the Withholding Obligation ).
(b) By accepting this Award, you acknowledge and agree that the Company or any Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Obligation relating to your Restricted Share Units by any of the following means or by a combination of such means: (i) causing you to pay any portion of the Withholding Obligation in cash; (ii) withholding from any compensation otherwise payable to you by the Company; (iii) withholding Common Shares from the Common Shares issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date Common Shares are issued pursuant to Section 6) equal to the amount of such Withholding Obligation; provided, however, that the number of such Common Shares so withheld will not exceed the amount necessary to satisfy the Withholding Obligation using the maximum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided , further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Board or the Companys Compensation Committee; and/or (iv) permitting or requiring you to enter into a same day sale commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a FINRA Dealer ) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Restricted Share Units to satisfy the Withholding Obligation and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Obligation directly to the Company and/or its Affiliates. Unless the Withholding Obligation is satisfied, the Company shall have no obligation to deliver to you any Common Shares or any other consideration pursuant to this Award.
(c) In the event the Withholding Obligation arises prior to the delivery to you of Common Shares or it is determined after the delivery of Common Shares to you that the amount of the Withholding Obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.
12. TAX CONSEQUENCES. The Company has no duty or obligation to minimize the tax consequences to you of this Award and shall not be liable to you for any adverse tax consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so. You understand that you (and not the Company) shall be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
13. UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the Company with respect to the Companys obligation,
if any, to issue shares or other property pursuant to this Agreement. You shall not have voting or any other rights as a shareholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a shareholder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
14. NOTICES . Any notice or request required or permitted hereunder shall be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Award, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
15. HEADINGS . The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.
16. MISCELLANEOUS .
(a) The rights and obligations of the Company under your Award shall be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by, the Companys successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
(d) This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
17. GOVERNING PLAN DOCUMENT . Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The DoddFrank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a
resignation for good reason, or for a constructive termination or any similar term under any plan of or agreement with the Company.
18. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.
19. SEVERABILITY . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
20. OTHER DOCUMENTS . You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act. In addition, you acknowledge receipt of the Companys policy permitting certain individuals to sell shares only during certain window periods and the Companys insider trading policy, in effect from time to time.
21. AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment materially adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the Award as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
22. COMPLIANCE WITH SECTION 409A OF THE CODE . This Award is intended to be exempt from the application of Section 409A of the Code, including but not limited to by reason of complying with the short-term deferral rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and any ambiguities herein shall be interpreted accordingly. Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt from, and determined to be deferred compensation subject to Section 409A of the Code, this Award shall comply with Section 409A to the extent necessary to avoid adverse personal tax consequences and any ambiguities herein shall be interpreted accordingly. If it is determined that the Award is deferred compensation subject to Section 409A and you are a Specified Employee (within the meaning set forth in Section 409A(a)(2)(B)(i) of the Code) as of the date of your Separation from Service, then the issuance of any shares that would otherwise be made upon the date of your Separation from Service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the Separation from Service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of adverse taxation on you in respect of the shares under
Section 409A of the Code. Each installment of shares that vests is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
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This Restricted Share Unit Award Agreement shall be deemed to be signed by the Company and the Participant upon the signing by the Participant of the Restricted Share Unit Grant Notice to which it is attached.
ATTACHMENT II
2017 EQUITY INCENTIVE PLAN
Exhibit 10.14
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
2017 EMPLOYEE SHARE PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: APRIL 6, 2017
APPROVED BY THE SHAREHOLDERS: [ ]
1. GENERAL; PURPOSE.
(a) The Plan provides a means by which Eligible Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase Common Shares. The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Share Purchase Plan.
(b) The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.
2. ADMINISTRATION.
(a) The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).
(ii) To designate from time to time which Related Corporations of the Company will be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.
(iv) To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.
(v) To suspend or terminate the Plan at any time as provided in Section 12.
(vi) To amend the Plan at any time as provided in Section 12.
(vii) Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Share Purchase Plan.
(viii) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.
(c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.
(d) All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
3. COMMON SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of Common Shares that may be issued under the Plan will not exceed 339,139 Common Shares, plus the number of Common Shares that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO Date and ending on (and including) January 1, 2027, in an amount equal to the lesser of (i) 1% of the total number of shares of Capital Stock outstanding on December 31st of the preceding calendar year, and (ii) 600,000 Common Shares. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1 st increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of Common Shares than would otherwise occur pursuant to the preceding sentence.
(b) If any Purchase Right granted under the Plan terminates without having been exercised in full, the Common Share not purchased under such Purchase Right will again become available for issuance under the Plan.
(c) The shares purchasable under the Plan will be shares of authorized but unissued or reacquired Common Shares, including shares repurchased by the Company on the open market.
4. GRANT OF PURCHASE RIGHTS; OFFERING.
(a) The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering will be in such form
and will contain such terms and conditions as the Board will deem appropriate, and will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.
(b) If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in forms delivered to the Company: (i) each form will apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.
(c) The Board will have the discretion to structure an Offering so that if the Fair Market Value of a Common Share on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a Common Share on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.
5. ELIGIBILITY.
(a) Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation. Except as provided in Section 5(b), an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event will the required period of continuous employment be equal to or greater than two years. In addition, the Board may provide that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employees customary employment with the Company or the Related Corporation is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.
(b) The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering. Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:
(i) the date on which such Purchase Right is granted will be the Offering Date of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;
(ii) the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she will not receive any Purchase Right under that Offering.
(c) No Employee will be eligible for the grant of any Purchase Rights if, immediately after any such Purchase Rights are granted, such Employee owns shares possessing five percent or more of the total combined voting power or value of all classes of shares of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the share ownership of any Employee, and shares which such Employee may purchase under all outstanding Purchase Rights and options will be treated as shares owned by such Employee.
(d) As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Share Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employees rights to purchase shares of the Company or any Related Corporation to accrue at a rate which exceeds $25,000 of Fair Market Value of such shares (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.
(e) Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.
6. PURCHASE RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of Common Shares purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 15% of such Employees earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.
(b) The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and Common Shares will be purchased in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of Common Shares that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of Common Shares that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of Common Shares that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of Common Shares issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participants accumulated Contributions) allocation of the Common Shares available will be made in as nearly a uniform manner as will be practicable and equitable.
(d) The purchase price of Common Shares acquired pursuant to Purchase Rights will be not less than the lesser of:
(i) an amount equal to 85% of the Fair Market Value of the Common Shares on the Offering Date; or
(ii) an amount equal to 85% of the Fair Market Value of the Common Shares on the applicable Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing and delivering to the Company, within the time specified in the Offering, an enrollment form provided by the Company. The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participants Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party. If permitted in the Offering, a Participant may begin such Contributions with the first payroll occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering). If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions. If specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to a Purchase Date.
(b) During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a withdrawal form provided by the Company. The Company may impose a deadline before a Purchase Date for withdrawing. Upon such withdrawal, such Participants Purchase Right in that Offering will immediately terminate and the Company will distribute to such Participant all of his or her accumulated but unused Contributions and such Participants Purchase Right in that Offering shall thereupon terminate. A Participants withdrawal from that Offering will have no effect upon his or her eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.
(c) Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or (ii) is otherwise no longer eligible to participate. The Company will distribute to such individual all of his or her accumulated but unused Contributions.
(d) During a Participants lifetime, Purchase Rights will be exercisable only by such Participant. Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.
(e) Unless otherwise specified in the Offering, the Company will have no obligation to pay interest on Contributions.
8. EXERCISE OF PURCHASE RIGHTS.
(a) On each Purchase Date, each Participants accumulated Contributions will be applied to the purchase of Common Shares, up to the maximum number of Common Shares permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares will be issued unless specifically provided for in the Offering.
(b) If any amount of accumulated Contributions remains in a Participants account after the purchase of Common Shares and such remaining amount is less than the amount required to purchase one Common Share on the final Purchase Date of an Offering, then such remaining amount will be held in such Participants account for the purchase of Common Shares under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such Offering, in which case such amount will be distributed to such Participant after the final Purchase Date, without interest. If the amount of Contributions remaining in a Participants account after the purchase of Common Shares is at least equal to the amount required to purchase one whole Common Share on the final Purchase Date of an Offering, then such remaining amount will not roll over to the next Offering and will instead be distributed in full to such Participant after the final Purchase Date of such Offering without interest.
(c) No Purchase Rights may be exercised to any extent unless the Common Shares to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan. If on a Purchase Date the Common Shares are not so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the Common Shares are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 6 months from the Offering Date. If, on the Purchase Date, as delayed to the maximum extent permissible, the Common Share are not registered and the Plan is not in material compliance with all applicable laws, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest.
9. COVENANTS OF THE COMPANY.
The Company will seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell Common Shares thereunder. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Shares under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Shares upon exercise of such Purchase Rights.
10. DESIGNATION OF BENEFICIARY.
(a) The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any Common Shares and/or Contributions from the Participants account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant. The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.
(b) If a Participant dies, and in the absence of a valid beneficiary designation, the Company will deliver any Common Shares and/or Contributions to the executor or administrator of the estate of the Participant. If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such Common Shares and/or Contributions to the Participants spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
11. ADJUSTMENTS UPON CHANGES IN COMMON SHARES; CORPORATE TRANSACTIONS.
(a) In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering. The Board will make these adjustments, and its determination will be final, binding and conclusive.
(b) In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporations parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the shareholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants accumulated Contributions will be used to purchase Common Shares within ten business days prior to the Corporate Transaction under the
outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.
12. AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may amend the Plan at any time in any respect the Board deems necessary or advisable. However, except as provided in Section 11(a) relating to Capitalization Adjustments, shareholder approval will be required for any amendment of the Plan for which shareholder approval is required by applicable law or listing requirements, including any amendment that either (i) materially increases the number of Common Shares available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which Common Shares may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent shareholder approval is required by applicable law or listing requirements.
(b) The Board may suspend or terminate the Plan at any time. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.
(c) Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Share Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participants consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code.
13. EFFECTIVE DATE OF PLAN.
The Plan will become effective immediately prior to and contingent upon the IPO Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the shareholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
14. MISCELLANEOUS PROVISIONS.
(a) Proceeds from the sale of Common Shares pursuant to Purchase Rights will constitute general funds of the Company.
(b) A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, Common Shares subject to Purchase Rights unless and until the
Participants Common Shares acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).
(c) The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering will in any way alter the at will nature of a Participants employment or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.
(d) The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that states conflicts of laws rules.
15. DEFINITIONS.
As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) Board means the Board of Directors of the Company.
(b) Capital Stock means each and every class of common shares of the Company, regardless of the number of votes per share.
(c) Capitalization Adjustment means any change that is made in, or other events that occur with respect to, the Common Shares subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, share dividend, dividend in property other than cash, large nonrecurring cash dividend, share split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(d) Code means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder .
(e) Committee means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).
(f) Common Shares means, as of the IPO Date, the common shares of the Company, having 1 vote per share.
(g) Company means Biohaven Pharmaceutical Holding Company Ltd.
(h) Contributions means the payroll deductions and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if
specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.
(i) Corporate Transaction means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of more than 50% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the Common Shares outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
(j) Director means a member of the Board.
(k) Eligible Employee means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.
(l) Employee means any person, including an Officer or Director, who is employed for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an Employee for purposes of the Plan.
(m) Employee Share Purchase Plan means a plan that grants Purchase Rights intended to be options issued under an employee stock purchase plan, as that term is defined in Section 423(b) of the Code.
(n) Exchange Act means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
(o) Fair Market Value means, as of any date, the value of the Common Shares determined as follows:
(i) If the Common Shares are listed on any established stock exchange or traded on any established market, the Fair Market Value of a Common Share will be, unless otherwise determined by the Board, the closing sales price for such shares as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Shares) on the date of determination , as reported in such source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the
Common Shares on the date of determination, then the Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.
(ii) In the absence of such markets for the Common Shares, the Fair Market Value will be determined by the Board in good faith in compliance with applicable laws and in a manner that complies with Sections 409A of the Code.
(iii) Notwithstanding the foregoing, for any Offering that commences on the IPO Date, the Fair Market Value of the Common Shares on the Offering Date will be the price per share at which shares are first sold to the public in the Companys initial public offering as specified in the final prospectus for that initial public offering.
(p) IPO Date means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Shares, pursuant to which the Common Shares are priced for the initial public offering.
(q) Offering means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the Offering Document approved by the Board for that Offering.
(r) Offering Date means a date selected by the Board for an Offering to commence.
(s) Officer means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.
(t) Participant means an Eligible Employee who holds an outstanding Purchase Right.
(u) Plan means this Biohaven Pharmaceutical Holding Company Ltd. 2017 Employee Share Purchase Plan.
(v) Purchase Date means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of Common Shares will be carried out in accordance with such Offering.
(w) Purchase Period means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.
(x) Purchase Right means an option to purchase Common Shares granted pursuant to the Plan.
(y) Related Corporation means any parent corporation or subsidiary corporation of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
(z) Securities Act means the Securities Act of 1933, as amended.
(aa) Trading Day means any day on which the exchange(s) or market(s) on which Common Shares are listed, including but not limited to the NYSE, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Amendment No. 1 to the Registration Statement on Form S-1 of Biohaven Pharmaceutical Holding Company Ltd. of our report dated April 3, 2017 relating to the financial statements, which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Hartford,
Connecticut
April 24, 2017